Response to report published by Hainan

Kodal Minerals Plc (AIM:KOD) has recently acknowledged a report from its operating partner, Hainan Mining Co. Ltd, which claims a substantial increase in the reserves assessment for the Bougouni Lithium Project. Hainan has indicated an additional 15.47 million tons of spodumene resources, a figure that, if validated, could significantly enhance the project's value proposition. However, Kodal has clarified that it has not yet completed a review of this internal estimate and is unaware if it has undergone an independent audit to confirm compliance with the JORC (Joint Ore Reserves Committee) standards. The company has stated that any JORC-compliant change in the mineral resource estimate will be communicated through the London Stock Exchange's Regulatory News Service (RNS) when available, although this is not expected in the short term.

The Bougouni Lithium Project, located in Southern Mali, covers an area of 350 square kilometers within the Birimian geological terrain, known for its rich mineral deposits. Kodal holds a 49% stake in KMUK Limited, which in turn has a 65% interest in the project, while Hainan Mining owns the remaining 51%. The recent performance report from Hainan references previously announced drill results from December 2025, which indicated potential growth at the Boumou prospect, the key area of interest within the project. However, the geological interpretation remains ongoing, and the results require independent validation before any increase in the mineral resource estimate can be officially declared.

Financially, Kodal Minerals is navigating a landscape where funding sufficiency and dilution risk are critical considerations. The company has not disclosed its current cash balance or any recent capital raises, which raises questions about its ability to finance ongoing operational and development activities, particularly in light of the potential for increased resource estimates. Without a clear understanding of its financial position, investors may be concerned about the company's capacity to fund further exploration or development efforts at Bougouni, especially as it awaits independent verification of the reported resource increase.

In terms of valuation, Kodal's current market capitalisation stands at GBP 67.3 million. Comparatively, ASC (LSE:ASC), a larger player in the lithium sector, has a market cap of GBP 287.8 million. Given the early-stage nature of Kodal's operations, a direct peer comparison is essential to gauge its relative valuation. For instance, if we consider the potential increase in resources, the valuation metrics could shift significantly. However, as it stands, Kodal's valuation must be assessed against its peers based on metrics such as enterprise value per resource ton. While specific figures for ASC's resource valuation are not disclosed, the disparity in market capitalisation suggests that Kodal may be undervalued relative to its larger counterpart, assuming successful validation of the resource increase.

Kodal's execution track record has been mixed, with the company historically announcing drill results and resource estimates without immediate follow-through on independent audits or compliance confirmations. This pattern raises concerns about the reliability of its operational disclosures. The ongoing geological interpretation and the need for independent validation of resource estimates could further delay any positive developments, impacting investor sentiment and confidence in the company's management.

One specific risk highlighted by this announcement is the potential for a funding gap if the company fails to secure additional financing to support its operational needs while awaiting the outcome of the resource validation process. The reliance on Hainan's internal estimates without independent verification could also pose a reputational risk if the reported figures do not materialize as expected. Additionally, the timeline for the JORC-compliant resource estimate remains uncertain, which could hinder Kodal's ability to attract further investment or partnerships.

Looking ahead, the next measurable catalyst for Kodal will be the anticipated announcement of the independent audit results and any subsequent updates regarding the mineral resource estimate for the Bougouni Lithium Project. However, Kodal has indicated that this is not expected in the short term, which could prolong investor uncertainty and impact the stock's performance in the interim.

In conclusion, while the announcement regarding the increased reserves assessment from Hainan Mining presents a potentially positive development for Kodal Minerals, the lack of independent verification and the uncertainty surrounding the timeline for JORC compliance introduce significant risks. As such, this announcement can be classified as moderate in terms of materiality, as it does not yet change the intrinsic value of the company but highlights both the potential for growth and the risks associated with operational execution and funding sufficiency.

Key insights

• ●Kodal has not verified Hainan's resource claims yet.
• ●Independent audit for JORC compliance is pending.
• ●Funding sufficiency remains a concern amid operational uncertainties.

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