Update on Gold Financing and Gold Portfolio

Certain information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as amended by Market Abuse (Amendment) (EU Exit) Regulations 2019/310. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Kodal Minerals Plc / Index: AIM / Epic: KOD / Sector: Mining

 5 March 2021

Kodal Minerals plc ('Kodal Minerals', 'Kodal' or the 'Company')

Update on Gold Financing, Gold Portfolio and Gold Exploration Campaign

Kodal Minerals, the mineral exploration and development company focused on its Bougouni Lithium Project and gold in West Africa, is pleased to provide an update on the Company's gold projects in Mali and Côte d'Ivoire and preparations for the planned exploration campaign. 

The Company also provides an update on the proposed funding of up to US$2.5m (the 'Funding Proposal') from Riverfort Global Capital Ltd and its designees (together the 'Investor').  Following negotiations between Kodal and the Investor, the terms of the previous term sheet for the Funding Proposal as announced on 17 December 2020 have been revised and it is anticipated that the final binding agreement will be ready for execution shortly.  The focus of the funding remains the advancement of the exploration and resource definition activities at the Company's gold projects in Mali and Côte d'Ivoire.  Key details of the updated, and currently non-binding, proposed terms of the Funding Proposal are highlighted below and a summary is provided towards the end of this announcement.

Overview

·    Kodal now retains a 100% interest in the Nielle, Tiebissou and M'Bahiakro (application) gold concessions after termination of Corvette JV with Resolute Mining Limited ('Resolute', ASX:RSG) following decision by Kodal to refuse extension request.

·    Kodal has now built a portfolio of eight gold projects in West Africa: Nielle, Tiebissou, M'Bahiakro, Dabakala and Korhogo in Cote d'Ivoire and Fatou, Nangalasso and SLAM in Mali.

·    Kodal geologists are undertaking a field visit to the Nielle project located in northern Cote d'Ivoire to confirm historic drilling, geological setting and confirm planning for the new drilling campaign.

·    Kodal's exploration priorities are:

i.      Definition drilling at the Fatou project in Mali;

ii.     Exploration drilling at the Nielle project in Cote d'Ivoire; and

iii.    Infill geochemical sampling to define zones for reconnaissance drilling at the Dabakala project in Cote d'Ivoire.

·    The Funding Proposal is to fund the development of the Company's gold assets and is for up to US$2.5m, including the $0.3m already advanced with the additional funds to be drawndown in two equal tranches of $1.1m (the second of which will be subject to approval by the Investor).

·    The Funding Proposal is for a 24-month secured convertible loan note (the 'CLN') with no repayments before 18 months, and a 10% per annum interest, rolled up and payable on maturity, and an implementation fee of 5% of each tranche advanced.

·    Each tranche of the CLN may be converted by the Investor into new Ordinary Shares of Kodal.

·    The Investor retains the right, but not the obligation, to convert all or part of any outstanding balance of the CLN, up to a maximum of US$1.25m for a 20% shareholding of the Company's subsidiary that will hold all of the Company's gold assets.

Bernard Aylward, CEO of Kodal Minerals, commented: "By progressing the Funding Proposal with the Investor we are moving towards being fully funded to complete our focussed programme at our advanced Fatou and Nielle projects, including an exploration drilling campaign designed to delineate Mineral Resources.  We are excited to commence these drilling campaigns, following which we plan to continue advancing the Dabakala project where our early-stage exploration continues to deliver excellent results.

"As our shareholders are aware, Kodal's gold portfolio is located within the highly prospective Birimian sequence of West Africa.  The Funding Proposal, once executed, will provide the Company with an opportunity to demonstrate the high quality of the assets through exploration and definition drilling campaigns.  The increasing interest in West African gold projects and the already strong market interest in well advanced projects highlight the potential of our gold portfolio, for which we anticipate the ability to achieve a significant valuation in a potential future monetising event.

"We plan to complete a significant amount of field exploration in this current dry season while we await the granting of the Mining Licence application for the Company's flagship asset, the Bougouni Lithium Project.  Kodal maintains regular communications with the Mali Transition Government and we look forward to working with the Government on the development of a new lithium mine in Mali in due course."

FURTHER INFORMATION

Gold Projects - Exploration Update

Kodal has maintained a suite of gold assets in Mali and Cote d'Ivoire that are well located in the highly prospective Birimian sequence of West Africa.  Kodal has maintained the concessions in good standing, with licences extended or renewed where appropriate and has maintained access to all areas.  Kodal has also had the Corvette JV projects of Nielle, Tiebissou and M'Bahiakro returned 100% to the Company following the termination of the Resolute JV.  A large geological database has been received and is being assessed for future exploration, however, the immediate priority is the further exploration at the Nielle project where exploration activity by Resolute has defined a new zone of gold mineralisation.

The Company has reviewed its gold portfolio and defined priority targets based on the potential to define JORC compliant mineral resources quickly, as well as projects that have potential to host large scale gold mineralisation.  The priority exploration targets for this exploration campaign are:

·    Fatou project in Mali, with drilling commencing at Fatou Main prospect where historic exploration defined a NI43-101 Mineral Resource estimate exceeding 350,000oz gold.  The drilling will aim to confirm and expand the known gold mineralisation and provide data to support data for a JORC compliant Mineral Resource estimate to be completed. 

·    Nielle project in Cote d'Ivoire, where exploration completed by Resolute has defined an extensive zone of gold mineralisation with positive initial drilling results.  The mineralised zone remains open along strike and at depth and Kodal's initial programme is designed to confirm and extend the mineralised zone and provide confidence in the geological interpretation prior to undertaking a maiden mineral resource assessment.

·    Dabakala project in Cote d'Ivoire, where exploration activity completed by Kodal continues to confirm a major surface geochemical anomaly with assay results up to 6.14g/t gold returned.  This new anomaly has never been previously drill tested and Kodal will focus on infill geochemical sampling to define the key targets for reconnaissance drill testing.

The exploration campaign is planned to commence upon the first drawdown of the Funding Proposal, once executed.

Funding Term Sheet - summary of updated terms of the proposal

The terms of the Funding Proposal, details of which were announced on 17 December 2020, have been updated following further discussions with the Investor and replaced with a new non-binding term sheet.  The next steps are for a formal contract to be agreed and executed by the parties, which is expected to be ready shortly. The Funding Proposal will, once executed, provide Kodal with funding of up to US$2,500,000 (the 'Funding Amount') to advance Kodal's gold assets, defined as the Nangalasso project, the SLAM project and the Fatou project in Mali, and the Dabakala, Korhogo, Boundiali (application), Nielle, Tiebissou (subject to renewal) and M'Bahiakro (application) concessions in Cote d'Ivoire (the 'Gold Assets').

The Funding Proposal is structured as a secured convertible loan note, with Kodal providing security over the shares of its subsidiary company, Jigsaw Resources CIV Bermuda ('Jigsaw'), that will hold the Gold Assets. The shares in Jigsaw will pledged by the Company in favour of the Investor pursuant to a Bermudan law share pledge agreement.

The Funding Amount will be drawn down in two tranches of US$1.1m at the discretion of the Company and with the drawdown of the second tranche being subject to the consent of the Investor. In addition to the first drawdown of US$1.1m, an additional US$0.3m will be deemed to have been advanced on the date of the first drawdown representing the amount previously funded by the Investor to Kodal, as detailed in the Company's announcement of 17 December 2020 (i.e. a total of USD$1.4m will be outstanding under the CLN on the date of the first drawdown with the original $0.3m advance considered repaid).

The CLN is for 24 months from drawdown of the first tranche (the 'Repayment Term'), with the principal outstanding after 18 months to be repaid over the next six months in six equal amounts.  Interest of 10% per annum will be rolled up and payable 24 months from drawdown of the first tranche. Such interest will not be payable on any amounts which are converted by the Investor into shares in Jigsaw. A 5% implementation fee will be charged on each drawdown of US$1.1m. The Company can repay the CLN in cash early with the Investor's consent subject to an additional 10% fee.

The Company's objective in the exploration and development of the Gold Assets is to realise a significant valuation of the Gold Assets through a 'Monetising Event'.  A Monetising Event is defined to include:

a)    an IPO, or admission of the shares of Jigsaw (and including any holding company of that entity) to trading on a relevant exchange, or

b)    completion of a reverse takeover resulting in the shares of Jigsaw (and including any holding company of that entity) being admitted to trading on a relevant exchange, or

c)    any commercial arrangements designed to extract economic value for a material portion of the Gold Assets (including, without limitation, a disposal to a third party on arm's length terms or a joint venture), a material portion being defined as 25% or more.

The Investor retains the right, but not the obligation, to convert part or whole of the outstanding balance of the Funding Amount drawn down, up to a maximum of US$1.25m, into new shares of Jigsaw prior to completion of a first Monetising Event, for a maximum interest of 20% in Jigsaw. This option will expire if not exercised at the earlier of (i) the Investor refusing a draw down request for the second tranche; and (ii) immediately prior to completion of a first Monetising Event. 

Each tranche of the CLN will be convertible at the election of the Investor into new Ordinary Shares of Kodal at any time, in whole or part, during the Repayment Term, except in certain circumstances as set out below. The conversion price will be set as 130 per cent. of the Company's 5-day VWAP (volume weighted average price) immediately preceding the date of drawdown of each tranche ('Closing Price'). Such conversions cannot be made:

a)    while a balance of the pre-existing convertible loan note remains due to YA II PN and RiverFort Global Opportunities PCC Limited, as announced 15 July 2020 and updated 27 October 2020, of which $600,000 of convertible loan notes currently remain outstanding; and

b)    during first 12 months of the Repayment Term unless on the date of conversion the closing prices of the Company's ordinary shares in the immediately preceding three trading days has been equal to or greater than two times the relevant Closing Price.

The Investor has confirmed that their due diligence has been completed and the parties are now proceeding to finalise a binding agreement and the security arrangements as soon as possible.   Accordingly, until binding agreements are executed, there can be no guarantee on the outcome of discussions with the Investor and that ultimately the Funding Amount will be provided.  If a contract for the Funding Amount is not ultimately agreed, Kodal will consider alternative options to fund the exploration budgets, including potentially utilising Kodal's own cash resources. Further, the proposed terms are that the drawdown of the second tranche of the Funding Amount is subject to consent of the Investor and accordingly, there can be no guarantee on the provision of the second tranche of the funding if the Funding Proposal proceeds.  If a drawdown request for the second tranche of the Funding Amount is not agreed by the Investor, Kodal will consider alternative options to fund the remainder of the exploration budgets, including utilising Kodal's own cash resources.

For the avoidance of doubt, the above terms replace those set out in the Company's announcement of 17 December 2020.

**ENDS**

For further information, please visit www.kodalminerals.com or contact the following:

The exploration results and activity reported in this announcement have been reviewed by Mr Bernard Aylward who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Aylward has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Qualified Person as defined in the AIM Note for Mining and Oil & Gas Companies dated June 2009. Mr Aylward consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.