Battery Metals
August 23, 2021

AVZ Minerals (ASX: AVZ)

Is Sitting On One Of The World’s Largest Undeveloped Hard Rock Pegmatite Deposit, Drc

AVZ Minerals (ASX: AVZ) is an Australian-listed junior mining company focused on developing the world-class Manono Project, which hosts lithium-rich LCT (lithium, caesium, tantalum) pegmatites with a strike length of 13km+ centred on an historical Tin mining operation. Located in the DRC, Manono is 500km from the city of Lubumbashi which has a population of 2.4M+.

The company’s initial success came during a drill program in2017 which intercepted stellar holes, indicating a potential of a large tonnage lithium deposit:

  • 235m @ 1.66% Li2O,
  • 202.8m @ 1.57% Li2O and
  • 250.9m @ 1.48% Li2O.

Prior to the initial program (January 2017), AVZ shares could be had at AUD$0.01, a year later AVZ Minerals (ASX: AVZ) peaked at AUD$0.33 giving it a market cap at the time of AUD$650M.

Fast forward to August 2021, the company is fresh off a heavily over-subscribed $40M placement led by institutions from Australia, North America and includes a European-based physical energy commodities merchant. AVZ Minerals (ASX: AVZ) now sits at a ~ $750M market cap and currently has some of the most known battery players as stakeholders, or in discussions with various parties on potential synergies.

Currently, AVZ Minerals (ASX: AVZ) largest shareholder - Yibin Tianyi Lithium owns 7.38%. AVZ secured a strategic, long-term offtake partnership agreement with the lithium giant for the supply of spodumene concentrate (SC6) from the Manono Lithium and Tin Project.

Yibin Tianyi is a leading global battery materials producer that is continuing to expand its lithium hydroxide production as a key participant in the supply chain of Contemporary Amperex Technology (CATL), the world’s largest lithium-ion battery maker, which is a minority shareholder.

It is set to become one of the largest lithium hydroxide producers in China, with initial production capacity of up to 20,000 tonnes of lithium hydroxide per annum and with future staged expansions expected to increase production to around 100,000 tonnes per annum (by 2024 +150Ktpa LCE).

Based on 100Ktpa, Yibin Tianyi will require around 700,000 tonnes per annum of SC6 to satisfy its internal demand after commissioning its planned hydroxide plant expansions.

AVZ Minerals (ASX: AVZ) now has more than 80% of annual SC6 production from the Manono Project committed under long-term binding offtake agreements. This is a major milestone that satisfies an important investment decision for prospective project financiers:

  • Ganfeng, 160ktpa SC6, initial 5-year term
  • Chengxin, 180ktpa SC6, initial 3-year term
  • Yibin Tianyi, 200ktpa, SC6, initial 3-year term
  • First tin offtake in place; 600tpa with Kalon Resources (subsidiary of the Noble Group).

Proceeds from the placement will increase AVZ Minerals (ASX: AVZ) cash reserves allowing it to:

  • Increase AVZ’s interest in the Manono Project from 60% to 75% by exercising the options to purchase Dathomir’s minority shareholding of 15% equity in Dathcom Mining for US$20 million (~AUD$27M).
  • Negotiate project financing with an enhanced balance sheet position, assisted with the addition of a supportive, larger nonretail shareholder base
  • Assist to establish a working capital and contingency cost buffer during project development and enhance AVZ’s limited early capital works program before FID
AVZ’s Managing Director, Nigel Ferguson, stated “The capital raising marks an important milestone in our journey to develop the Manono Project, providing AVZ with the required funds to increase the Company’s stake in the Project and secures the necessary working capital to commence the early capital works program.
“Increasing AVZ’s equity stake to 75% of the Manono Project adds significant value to AVZ shareholders, including the possible option to attract strategic cornerstone equity partners at the project level, which will assist to de-risk and potentially accelerate Manono’s development.
“The placement also assists our financing discussions, providing capital for up-front debt finance establishment costs, ensuring minimum liquidity requirements are met, whilst providing debt financiers with confidence from seeing a transition to a larger, supportive non-retail shareholder base, providing AVZ with a solid foundation from which to negotiate favorable terms.”

Manono Resources and Reserves

Currently, Manono (Roche Dure) has Mineral Resources of 400 million tonnes grading 1.65% Li2O, 715ppm Sn, 34ppm Ta.

In April 2020, AVZ Minerals (ASX: AVZ) delivered a robust DFS (All Pre-Tax figures):

  • US2.35B NPV,
  • IRR of 53%,
  • Payback Period of 1.5 years,
  • 20+ year mine life based on a 4.5 Mt/a operation producing 700,000 tonnes per annum high grade of SC6 lithium3 and 45,375 tonnes per annum of Primary Lithium Sulphate,
  • CAPEX of US$545.5 M includes a contingency of US$49.59 M (10%), and  
  • US$380 M average annual EBITDA for LOM

Last month, AVZ Minerals (ASX: AVZ) announced an increase in JORC Ore Reserves by 41.6%. The JORC Proved and Probable Ore Reserves now estimated at 131.7Mt – an increase of 38.7Mt from the 93Mt reported in April 2020 DFS.

Highlights also include:

  • Average lithium grade increased by 3.1% from 1.58% to 1.63% Li2O while tin grade of 990 ppm remains the same but reports a 41% increase in contained tin metal to 130.3kt.
  • Ore Reserve estimate contains 65.0Mt of Proved Category and 66.6Mt of Probable Category Ore Reserves
  • Life of Mine extended to 29.5 years based on a 4.5Mtpa operation underpinned by the Ore Reserves - an increase of 47.5% from April 2020 DFS
  • The Roche Dure ore deposit continues to impress as potentially the largest standalone global hard rock lithium asset based on Proved and Probable Ore Reserves

Management Team

AVZ Minerals (ASX: AVZ) is run by a team of highly successful mining executives that hold collectively 200+ years of experience in the natural resource space:

JOHN CLARKE Non-Executive Chairman

Mr Clarke brings considerable experience in mine management, mineral exploration, corporate acquisition and mine development in the mining sector in Africa. He has worked both in Smelting and Mining operations during his career and has been a Director of several companies which have had exploration, development and mining activities in Africa. Having joined Ashanti Goldfields in 1982, Mr Clarke held a succession of mine management, strategic and corporate planning roles before becoming the Executive Director in charge of Business development. He contributed to establishing Ashanti's gold exploration program throughout sub-Saharan Africa. In 1997 Mr Clarke joined Nevsun Resources as President and CEO, taking the Company in to Eritrea and the discovery the Bisha Mine. Bisha started production as a high grade gold deposit overlaying a high grade copper supergene, and is now a substantial copper/zinc operation. Mr Clarke has been involved in acquisition, exploration, development and mine management in the DRC for 25 years.

Mr Clarke holds a B.Sc. in metallurgy from University College Cardiff, a Ph.D. in metallurgy from Cambridge University and an MBA from Middlesex Polytechnic.

NIGEL FERGUSON Managing Director (BSc Geology, FAusIMM, MAIG)

Mr Ferguson is a geologist with 32 years of experience who has worked in senior management positions for the past 20 years in a variety of locations. He has experience in the discovery and definition of precious and base metal mineral resources throughout the world, including DRC, Zambia, Tanzania, Saudi Arabia, South East Asia and Central America. He has been active in the DRC since 2004 in gold and base metals exploration and resource development.

Mr Ferguson was founding director of Burey Gold Ltd, Ethan Minerals Ltd and has been associated with several other IPO’s on the ASX and TSXV exchanges.

Mr Ferguson is also a Director of Okapi Resources Ltd (ASX: OKR) and Director of AJN Resources Corp.

RHETT BRANS Non-Executive Director (Dip. Engineering (Civil))

Mr Brans is an experienced director and civil engineer with over 45 years’ experience in project developments. He is currently a Non-Executive Director of Australian Potash Limited and Carnavale Resources Ltd. Previously, Mr Brans was a founding director of Perseus Mining Limited and served on the boards of Syrah Resources Limited, Tiger Resources Limited and Monument Mining Limited.

Throughout his career, Mr Brans has been involved in the management of feasibility studies and the design and construction of mineral treatment plants across a range of commodities and geographies including for gold in Ghana, copper in the DRC and graphite in Mozambique. He has extensive experience as an owner’s representative for several successful mine feasibility studies and project developments.

GRAEME JOHNSTON Technical Director (BSc MSc DIC)

Mr Johnston is a geologist with over 30 years’ experience in Australia, the Middle East, Romania, Malaysia and the DRC.  Mr Johnston worked on various gold projects before joining Rio Tinto and then with Midwest Corporation where he was the Principal Geologist during its sale to Sinosteel Corporation for US$1.4 billion.  Following this, Mr Johnston was a funding director of Goldstar Resources and then Ferrowest Limited where he was Technical Director for nine years and contributed to the successful completion of the Feasibility Study for the Yalgoo Pig Iron Project.  

Mr Johnston’s technical experience is focused on the transition between orebody delineation and mine opening and has worked on over five projects that resulted in new mines being commissioned.  Mr Johnston initially joined the AVZ team in May 2017 as Project Manager for the Manono Project before stepping into the role of Techical Director.

PETER HULJICH Non-Executive Director (BCom/LLB, GD-AppFin, GAICD)

Mr Huljich has over 25 years’ experience in the legal, natural resources and banking sectors with a particular expertise in capital markets, mining, commodities, and African related matters.  He has worked in London for several prestigious investment banks, including Goldman Sachs, Barclays Capital, Lehman Brothers and Macquarie Bank with a focus on Commodities and Equity and Debt Capital Markets and has extensive on-the-ground African mining, oil and gas and infrastructure experience as the Senior Negotiator and Advisor for Power, Mining and Infrastructure at Industrial Promotion Services, the global infrastructure development arm of the Aga Khan Fund for Economic Development (AKFED) whilst resident in Nairobi, Kenya.  Mr Huljich holds Bachelor of Commerce and an LLB from the University of Western Australian and is a Graduate of the Securities Institute of Australia with National Prizes in Applied Valuation and Financial Analysis. Mr Huljich is also a graduate of the AICD Company Directors Course. Mr Huljich is also an Independent Non-Executive Director of ASX listed Kogi Iron Limited (ASX:KFE).

Next Steps

AVZ Minerals (ASX: AVZ) is fully engaged with DRC Government on all permitting and license requirements for Manono. Once the mining license is awarded, AVZ will announce a bankable feasibility study and raise the necessary funds for the CAPEX. Discussions with potential financiers on project funding are progressing well.

AVZ’s Managing Director, Mr Nigel Ferguson, said: “The Company is executing its strategy on all fronts to maximize shareholder value, increasing its equity share in the Manono Project to 75% and receiving Ministry of Mines written approval for its final ESIA in relation to its Mining License submission for the Manono Project.”
“DPEM approval of the final ESIA which is executed by the President of the Evaluation Committee for the Ministry of Mines is a highly encouraging development and signifies the DRC Government’s wider support for the Manono Project.”
“All of the pending permit requirements, including the Mining License, Mpiana Mwanga Hydro-Electric Power Plant (“HEPP”) Agreement, Collaboration Development Agreement and the proposed Manono Special Economic Zone (“MSEZ”) is on track and the Company is rapidly progressing towards finalizing a Bankable Feasibility Study and securing project financing, with a Final Investment Decision expected in Q4 2021.”
Disclaimer: AVZ Minerals is a paid marketing client*