PERTH (miningweekly.com) – The share price of ASX-listed Leo Lithium tanked on Monday after the government of Mali ordered the company to halt direct shipping ore (DSO) operations at its Goulamina lithium project.

The Mali government in July formed a commission to investigate a number of topics, including DSO, the status of the government’s free carry stake, and the overall status of the progress at Leo’s Goulamina mine, as well as the Morila gold mine, which is held by fellow listed Firefinch, which also held Goulamina prior to its spin-off.

Leo Lithium has been ordered to suspend the DSO component of activities at Goulamina while discussions with the Ministry of Mines is pending.

The company had been targeting the production of 185 000 t of DSO exports until spodumene production starts.

The ASX-listed company on Monday said that the DSO stop-order would not affect any other aspect of the project, and that mining would continue to plan, with the ore to be stockpiled ahead of the first spodumene concentrate production in the second quarter of next year.

“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,” said Leo MD Simon Hay.

The $318-million project was some 35% complete at the end of July, and progress is expected to accelerate in the coming months with the establishment of multiple delivery contractors to site. An intensive construction phase is planned for the second half of this year, with over 1 200 staff currently employed on site.

Leo Lithium has meanwhile finalised and executed its cooperation agreement with China’s largest lithium producer Ganfeng Investment, which covers several long-term strategic benefits, including raising the planned Stage 2 capacity to 500 000 t/y to lift the overall capacity at Goulamina to one-million tonnes a year, jointly studying the concept of co-investing in a downstream conversion facility in Europe, amending an offtake agreement for the Stage 2 project for the potential downstream conversion facility to produce lithium hydroxide, and establishing and jointly funding an exploration joint venture (JV) to focus on opportunities in Australia.

“We are pleased to execute the cooperation agreement with Ganfeng and revise the investment structure; this further demonstrates the positive working relationship between the JV partners and Ganfeng’s continuing support for the Goulamina project,” said Hay.

“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.”

Meanwhile, Leo also noted that since mid-July this year, actions by the government of Mali had not been consistent with the establishment agreement signed over the Goulamina project in 2016, which exempted Leo from paying duties and taxes on petroleum products used to produce energy for the extraction, transport and processing of ore, as well as a three-year exemption from import duties and taxes for the import of project equipment.

Leo did not receive any communications of changes, with the company saying it is attempting to resolve the matter.

So far, Leo has paid $4-million in import duties and taxes, and is expected to pay a further $16.1-million this quarter, if the issue is not resolved. Total exposure in the capital phase of the project for unplanned import duties and taxes could amount to between $45-million and $50-million, the company said.

Leo’s share price was trading at 56c a share on Monday, down from A$1.15 a share on July 17, when the company went into a trading halt.