Leo Lithium Ltd (ASX: LLL) shares won't be going anywhere on Tuesday.
That's because the lithium developer requested a trading halt prior to the market open this morning.
Why is the Leo Lithium share price out of action?
This morning, Leo Lithium requested that its shares be placed in a trading halt until either the release of an announcement or the commencement of trade on Thursday.
Unfortunately, at this stage, it is unclear whether the announcement in question will be good news or bad news.
However, the wording of the request is somewhat ominous, so shareholders can be forgiven for feeling a little nervous right now. Leo Lithium's request states:
The Company seeks the trading halt pending an announcement in relation to correspondence from the government of Mali relating to plans to produce Direct Shipped Ore.
What is direct shipped ore?
Last month, Leo Lithium revealed that it had produced its first direct shipped ore (DSO) at the Goulamina Lithium Project in Mali.
DSO is essentially a precursor to the production of lithium. While it may not be as lucrative as lithium spodumene, there is demand for the ore and it is expected to support Leo Lithium's working capital over the next 12 months. It will also allow the company to optimise its logistics solution and de-risk project development. Management commented last month:
First revenue from DSO is on track to be received during Q4 2023, and Leo Lithium anticipates the export of DSO ore for 6 to 9 months in advance of spodumene production. On an annualised basis, the Company is targeting 185,000 tonnes of DSO exports until spodumene production commences.
What's going on?
It's possible that today's halt could be an indication that the Mali government is wanting a slice of any of the proceeds from the DSO.
Alternatively, it is worth highlighting recent reports that a new mining law could come into force in Mali in the very near future. Reuters states:
The draft, dated June 17 and verified by three sources close to the talks, shows the government aims to take a direct 10% stake in mining projects once a permit has been issued, entitling it to 10% of dividend payments. It would give the state the option to buy an additional 20% within the first two years of commercial production, possibly through a newly created state mining entity.
In a couple of days, all will be clear. But whatever happens, this is a clear demonstration of the risks that investors are exposed to when investing in miners operating outside Australia.
