Considering how dire the situation is, according to the recent...

Considering how dire the situation is, according to the recent announcements, we could have easily lost everything and been forced down a path of legal arbitration against the Mali Government with no certainty about the time or cost required to fight it, or what the outcome would have been.

Given the changing political landscape and the issues that other established producers are facing in the country, I'm not sure we could have been entirely certain that we would have been insulated from further issues even with Ganfeng's partnership. As much as we aren't happy with the outcome, this may have been the best (and only) option available.

Furthermore, one could argue that Ganfeng has been a "reasonable" partner given:

(1) Increased Government Stake Reduced Ganfeng's Ownership: As the Mali government's ownership grew from 20% to 35%, Ganfeng's fully diluted ownership stake also decreased (from 48% to 39%).

(2) Somewhat Consistent Cost per Ownership Percentage: Correct me if I'm mistaken, but the initial purchase price value per ownership percentage seems somewhat consistent (noting a big caveat for how it is being paid out via tranches + gross revenue royalty) with the latest proposal considering Mali Government's ownership has increased to 35%. Think about it from the asset level (considering Mali's stake) instead of the Joint Venture structure. If anything, given how dire the situation has become, one would expect it to be significantly worse...

• Initial Deal: US$65 million for 5% JV stake (US$13m per 1% ownership in JV) OR US$16.25 million per 1% ownership at asset level
• Recent Deal: US$342.7 million for Leo Lithium's remaining 26% ownership at the asset level (same as remaining 40% in JV structure) translates to roughly $US13.18m per 1% ownership at asset level. The "difference" of US$79.8m I imagine is made up via the TPSF (NPV of US$83 million assuming US$1500/T)

Additionally, it's important to keep in mind that Leo Lithium has a fairly weak negotiation position given the issues stemming from Firefinch, Mali Government's resolve, and worsening political situation. The company has limited capital available, which wouldn't have factored in complex or lengthy arbitration negotiations (a protracted legal battle could have been financially draining for Leo Lithium). Furthermore, there might not have been many other viable options available. Withdrawing completely could have meant losing their entire investment.

Do I agree or am I happy with the commercial structure of this transaction? No, but we aren't privy to all information or involved in the discussions. Furthermore, I don't know what the other realistic alternatives would have been...


Including additional info below on how the equity structure evolved over the last year:

Phase 0: Initial Agreement

• Mali government held 20% ownership.
• This resulted in:
  • Mali: 20% ownership
  • Ganfeng: 44% fully diluted (based on 55% ownership in the Leo Lithium-Ganfeng joint venture)
  • Leo Lithium: 36% fully diluted (based on 45% in the joint venture)

Phase 1: 5% Sell Down for Settlement

• Mali government held 20% ownership.
• Ganfeng purchased 5% of Leo Lithium's stake for US$65 million, translating to US$13 million per 1% ownership in the JV.
• This resulted in:
  • Mali: 20% ownership
  • Ganfeng: 48% fully diluted (based on 60% ownership in the Leo Lithium-Ganfeng joint venture)
  • Leo Lithium: 32% fully diluted (based on 40% in the joint venture)

Phase 2: Increased Government Ownership

• Mali government ownership increased to 35%.
• Equity restructuring occurred.
• This resulted in:
  • Mali: 35% ownership
  • Ganfeng: 39% fully diluted (still based on 60% ownership in the joint venture)
  • Leo Lithium: 26% fully diluted (still based on 40% in the joint venture)

Phase 3: Current Situation

• Mali government retained 35% ownership.
• Ganfeng proposes purchasing Leo Lithium's remaining 40% stake in Joint Venture or 26% of Project for for US$342.7 million.
• Ganfeng agrees to a 1.5% royalty fee on future project revenue for 20 years (NPV of US$83 million assuming US$1500/tonne lithium price).
• This will result in:
  • Mali: 35% ownership
  • Ganfeng: 65% fully diluted (100% ownership in the joint venture)
  • Leo Lithium: 0% fully diluted (no ownership in the joint venture)