Ground Breakers: Zijin presses further on Manono claim, AVZ remains in halt

AVZ says Jin Cheng claim ‘a material breach of the pre-emptive rights’
AVZ’s stake in Manono could drop from 75% to as low as 36%
WHO says China lockdowns ‘not sustainable’

The Chinese gold miner which has publicly claimed the rights to 15% of the giant Manono lithium project in the DRC wants to take its claim against ASX 200 listed majority owner AVZ Minerals (ASX:AVZ) to international arbitration.

AVZ issued a statement today saying it had received a request from Jin Cheng Mining and correspondence regarding the proposed commencement of arbitration proceedings before the International Chamber of Commerce in Paris.

Jin Cheng, revealed in a media release from Zijin this week to be linked to the Chinese gold major, claims it purchased a 15% stake in the US$545 million Manono mine from state-owned Congolese minerals company Cominiere.

AVZ says the transfer would be a material breach of the pre-emptive rights in the existing Shareholders Agreement for Dathcom, the holding company for Manono.

“The Company is considering the request for arbitration and related correspondence and will continue to take all necessary actions to resist Jin Cheng’s vexatious and meritless claims and to protect Dathcom’s and its interests,” AVZ said in a statement.

“The Company notes the confidentiality obligations imposed on parties to ICC proceedings but will nonetheless keep the market informed in accordance with its continuous disclosure obligations.”

AVZ remains in a suspension after extending a trading halt today. Zijin claimed to have arranged the transfer of the Dathcom stake from Cominiere in September last year and that it had been in dispute with AVZ over the deal since November.

First whiff

The first whiff shareholders got of claims to equity in Manono appeared to come in a report by subscription news service Africa Intelligence in late April before AVZ notified the market in a release on May 4.

In that release it called those claims “spurious and immaterial”.

We asked AVZ’s media contact yesterday why disclosure was not made earlier but haven’t heard back yet.

AVZ has long claimed to hold 75% of Manono but intends to trade 24% to Chinese battery company Suzhou CATH Energy Technologies in a US$240 million deal.

It is facing a separate claim from former Dathcom shareholder Dathomir Mining SARL that it has reneged on the sale of a 15% stake in Dathcom to AVZ.

Zijin claimed in its media release this week AVZ’s stake in Manono could drop to as low as 36%. A powerpoint presentation from the 121 Conference in Cape Town and released to the ASX by AVZ yesterday showed it had planned to negotiate with Cominiere to take the $2.75 billion ASX company’s share in Manono to 66%.

The proposed mine looms as a major strategic asset in the supply of lithium to supply the booming electric vehicle sector.

One of the world’s largest lithium bearing pegmatites, it boasts an ore reserve of 131.7Mt at 1.63% lithium oxide, enough to support the production of 700,000t of spodumene annually over a 29.5 year mine life.

AVZ Minerals (ASX:AVZ) share price today:

Investors ease off on resources bloodbath as commodities dip again

Mining stocks have borne the brunt of investor jitters in recent days as commodity prices have been threatened by China’s Covid lockdowns.

Finally the handbrake has been applied, with some big mining stocks looking attractive to shareholders after consecutive days of significant losses.

Rio Tinto (ASX:RIO) and Fortescue Metals Group (ASX:FMG) are back in the green this morning despite iron ore prices dropping below US$130/t.

Singapore futures posted a rebound of 3.05% this morning to US$130.30/t. The WHO has weighed in on the lockdowns that have been causing so much damage to China’s economy and metals demand, saying they are “not sustainable”.

Whether China’s purported second half economic growth plans are enough to turn the tide in metals markets remains to be seen, with news of more property developers potentially defaulting on bond payments (this time fourth largest real estate developer Sunac) emerging yesterday.

“While Chinese authorities have pledged to take steps to prop up growth, little detail has been provided,” ANZ Research’s David Plank said.

“Even if it comes, the market is increasingly concerned it won’t be enough to offset the losses seen recently.

“Growth concerns also weighed on sentiment in the base metals sector.

“Copper was among the metals that erased gains to close lower on the LME as investors worry about the economic fallout from strict COVID-19 lockdowns in China.”