Kodal Minerals shares have sunk since the lithium miner announced the completion of the funding from their Chinese financing partner.
The recent sell-off was a classic ‘buy the rumour, sell the fact’ trade and is typical of mining companies securing financing and entering a phase of no news and little development.
Kodal Minerals lacks any catalysts for a meaningful re-rate in the short and medium term. Financing has been secured, and the mine will be built.
All Kodal investors really have to look forward to over the next year is possible announcements on issues and challenges with mine construction. This should be expected, and shares will react accordingly.
Those investors with a propensity for higher-risk junior mining exploration companies have plenty of other companies on AIM to choose from that have announced promising early-stage results and are further evaluating their assets. Kodal investors are jumping ship to pursue these opportunities.
In addition, the current circa £100m valuation seems fair given the value attributed to their Bougouni project and the work required to bring it into production.
The $100m acquisition of a 51% stake in the newly incorporated UK subsidiary holding the Bougouni lithium project naturally infers Kodal’s stake is worth a little under $100m.
Of course, this will change should lithium be produced as planned.
Kodal does have other mining assets, but these are of little value.
Looking to the future and to comparisons with peers producing lithium at meaningful volumes, there is plenty of opportunity for the Kodal share price to increase to match peer group valuations.
However, there is a long road ahead to achieving material production from the Bougouni project. Only at this point will Kodal be attributed the valuation other junior lithium miners command.