The Leo Lithium Ltd (ASX: LLL) share price has returned from its lengthy suspension and crashed deep into the red.
In early trade, the lithium developer's shares sank a whopping 48% to 59 cents.
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Why is the Leo Lithium share price being crushed?
Investors have been hitting the sell button in a panic today after the company finally revealed what its discussions with the Malian government entailed.
According to the release, the company received correspondence from the Malian Ministry of Mines on 17 July covering a number of topics. This includes direct shipping ore (DSO), the status of the Government free carry stake, and the overall status of progress at the Goulamina Lithium Project.
The Mali Government has formed a commission to examine these items, as well as issues surrounding the Morila Gold Mine in Mali, which is the subject of announcements by Leo Lithium's former parent, Firefinch Ltd (ASX: FFX).
DSO issue
The release notes that the Ministry of Mines has directed Lithium du Mali SA (A Malian incorporated company jointly owned by Leo Lithium and Ganfeng Lithium that holds the Goulamina Project) to suspend the DSO component of activities whilst discussions are pending.
Management stresses that the directive does not delay any other aspect of the project. Mining continues as per the pre-existing plan and mined ore is being stockpiled ahead of first spodumene concentrate production in the second quarter of 2024.
Government stake
Leo Lithium also revealed that it continues to progress the standard Malian requirement for a 10% project free carry for the Mali Government in the Goulamina Project.
However, the government has the right to acquire up to a 20% interest in the company that holds the project.
Initial documents have been provided to the Government to effect the 10% project free carry stake. As part of this, the Government can appoint two directors to the project's board, with Leo Lithium and Ganfeng appointing up to three representatives each.
Taxes
Also weighing on the Leo Lithium share price is news that the government has not made the company exempt from certain taxes, as expected.
The company is attempting to resolve this matter. However, so far, the project has paid approximately US$4 million in import duties and taxes since mid-July. And if the matter is not resolved, it expects to pay a further US$16.1 million this quarter.
After which, total exposure in the capital phase of the project for unplanned import duties and taxes is US$45 million to US$50 million.
New mining code
The release also highlights that a new Mining Code Act was announced on 29 August by the President of the Transition and President of the Republic of Mali.
The company has commenced a review of the code and will advise of any impact on the project in due course.
Management commentary
Leo Lithium's Managing Director, Simon Hay, commented:
Goulamina remains a technically and financially robust world-class lithium project and continues to represent the next lithium project of significant scale to enter production globally, without the addition of early DSO product.
While Leo Lithium had a preference to bring Goulamina DSO product to market in advance of our expected spodumene concentrate production in the first half of 2024, it is not necessary for a successful project, and we did not consider a DSO opportunity in our feasibility studies.
We will continue to engage with the Ministry of Mines and advance our world-class spodumene project. We anticipate further positive developments with the latest Mineral Resource setting the foundation for an updated Ore Reserve estimate later this month.
All in all, quite a messy situation for Leo Lithium and another reason why investing in mining shares outside tier-1 jurisdictions carries a lot of risk.
