Kodal Minerals is looking for both gold and lithium in West Africa. As we’ve noted before looking for gold in Mali makes great sense. There’s nearly a millennium-long history of successful gold production in the country, so much so that the ruler was once considered the richest man ever. Given that prospecting and extraction technologies march on to greater efficiency looking at old workings with the modern techniques can often prove a winner. This is exactly what is being done, old artisanal workings are being re-examined.
The lithium prospect Kodal has is of course rather different. But given the EV revolution significant spodumene – that’s the hard rock resource of lithium – operations are of significant value.
The last update, a couple of days back, was information on how the varied projects and researches are proceeding. Today there are the Kodal interim results which are, if we’re honest, much as expected. Kodal has expenses and no revenues – entirely normal for an exploration miner at this stage – and there is capital available to continue operations.
That last is important, it’s akin to the burn rate that the tech bros talk about. How long can the company keep going before it has to come back for more capital? Or, more importantly, can it survive long enough to generate results before needing to do so?
Think on it, an exploration miner like Kodal needs to show there’s something worth mining at the prospects being investigated. But it also needs to survive long enough to exploit. Which means having the capital to do the proof of the prospects being worth exploiting. Capital raises for junior miners are really about keeping on the right side of this calculation.
Sensible companies raise enough to get to the next stage. But, and there’s always a but, events sometimes happen and costs balloon. There’s often a certain relief when results show that they haven’t – which might be what is happening here with Kodal.
There is progress on proving the mining projects. There is the capital available to keep that progress going. Costs of doing that proving haven’t got out of hand. That’s, by the standards of this sector, a good enough set of results. After all, we can’t judge a pre-revenue miner on their profits or cashflow now, can we?
We should probably expect Kodal to move in step with more information as it is fed out. The interims seem to show that there’s nothing wrong with activity. The varied updates to prospects, assay results and so on are the other pieces of information that we might expect to influence the price.
The next likely burst of information is the assay results sometime in January. This will provide more clarity on the prospects for that past-artisanal gold prospect in Mali. It’s unlikely to be definitive but it’ll be the next stage on showing that modern full-scale mining might be worth doing at that site.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.