24/06/2019 - 09:50

AVZ lifts stake in giant African lithium play

24/06/2019 - 09:50


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AVZ Minerals will control 65% of the Manono lithium-tin project in the south-eastern region of the DRC after paying USD$5.5m to private company Dathomir Mining Resources SARL for an additional 5% stake in the tier-1 deposit. The monies are payable to Dathomir within three years and the agreement will generate an additional NPV of USD$130m for the company based on recent scoping study results.

High-grade spodumene mineralisation (white crystals) from AVZ's Manono lithium-tin project in the DRC.

The stars seem to be aligning just nicely for AVZ Minerals, with the ASX-listed company securing a further 5% stake in the world-class Manono lithium-tin project in the Democratic Republic of the Congo, or “DRC”, for USD$5.5m from private company Dathomir Mining Resources SARL.

This deal takes the company’s equity interest in the project to 65%, while increasing net present value, or “NPV”, for the company by USD$130 million to about USD$1.68 billion.

Under the agreement, AVZ is required to pay an initial tranche of USD$0.5m, with the remaining balance of USD$5m payable at any time over the next three years.

This significant development for the company comes on top of a recent strategic alliance with major Chinese shareholder Zhejiang Huayou Cobalt Co. Ltd, one of the world’s largest manufacturers of cobalt chemicals for the emerging battery minerals sector.

The Chinese company has established mining and processing operations in the DRC and AVZ will leverage this in-country experience to help drive its definitive feasibility study, or “DFS”, for the Manono project.

Huayou can also provide AVZ with advice and assistance relating to project financing, offtake financing, strategic services and the cost-effective transport of products from the DRC to an external customer base.

AVZ Managing Director Nigel Ferguson said: “AVZ is pleased to be able to secure further equity interest in the Manono lithium and tin project, given its tier 1 status.”

“We are still in discussion with our main partner, La Congolaise D’Exploitation Miniere (“Cominiere”) to secure additional equity from them on similar terms. Cominiere, as with all parastatal entities in the DRC, are currently under a “suspension of signature authority” following the Presidential elections.”

“It is hoped that this will soon be lifted and a positive outcome to purchase further equity in the project, as discussed to date with Cominiere, can soon be achieved for AVZ.”

“The extra equity … will add significantly to the bottom line and Net Present Values and it is critical for project financing as AVZ continues discussions with potential financiers and off-takers.”

The company’s massive Manono lithium-tin project, located in the south-eastern part of the DRC, holds 400 million tonnes grading 1.65% lithium oxide and a very respectable 715 parts per million, or “ppm”, tin.

The pegmatite ore system is dominated by low contaminant, lithium spodumene mineralisation, which will potentially make the concentrated ore product sought-after globally by lithium-ion battery manufacturers.

Over 67% of AVZ’s lithium tonnes at Manono are classified at the more confident “measured and indicated” resource status, from which the company will initially optimise its maiden ore reserves from the flagship Roche Dure deposit.

AVZ has also produced an extraordinary exploration target for the district that totals between 1 billion to 1.2 billion tonnes ranging in grade from 1.25% lithium oxide to 1.5% lithium oxide.

The key outcomes of the recent 5 million tonne per annum scoping study for Manono, showed an initial mine life of 20 years, generating a pre-tax NPV of USD$2.63b at an IRR of 64%, with a CAPEX ranging between USD$380m and USD$400m, inclusive of a USD$78m contingency.

The scoping study revealed potentially enviable margins of USD$427 per tonne of dry spodumene concentrate produced, with an assumed sale price of USD$750 per tonne.

Based on these robust outcomes, AVZ has now accelerated its DFS for Manono, which is scheduled to hit the streets in the second quarter of 2020.

With its interest in the project increasing to 65% and a strong and knowledgeable strategic partner riding shotgun, the company is now well-placed to advance the development of its exciting tier-1 lithium asset in the DRC.


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