A Chinese mining giant has taken a slice of aspiring lithium miner AVZ Minerals in a firm sign the company’s flagship project in the Democratic Republic of Congo has enormous potential.

The Perth-based company has inked a deal with Huayou International Mining which will invest $13.02 million for an 11 per cent slice of the company.

Huayou International is a subsidiary of the goliath Huayou Cobalt Group, which is listed on the Shanghai Stock Exchange.

AVZ (ASX:AVZ) will also seek to raise up to a further $1.98 million from institutional and sophisticated investors by issuing up to 28.29 million shares at a 7c issue price.

Funds will be used for the planned drilling and initial metallurgical testwork programs at its 60 per cent-owned Manono project in southern Democratic Republic of Congo (DRC) as well as for working capital.

AVZ is planning a significant diamond and reverse circulation drilling program beginning late in the current quarter and early in the December quarter to define a JORC 2012 mineral resource by early 2018.

AVZ executive chairman Mr Klaus Eckhof said Huayou Cobalt had a proven track record in operating in the DRC, and in developing and financing mines.

“We look forward to working with Huayou to bring the Manono Project into production on the fastest possible timeline,” he said.

Huayou CEO Mr Hongliang Chen said the company looked forward to building a strong relationship with AVZ and to work together to develop the exciting Manono Project.

“We believe the strong demand for lithium will continue to grow in the years ahead and Huayou can assist to realise the significant potential of the Manono Project during this growth phase,” he said.

Huayou Cobalt, which has a market capitalisation of approximately Y38 billion (about $US5.8 billion), is the largest cobalt chemicals producer at present in China. Its products are used for Li-ion battery cathode material, high temperature and cemented carbide, frits and glazes, rubber adhesive and petrochemical catalysts.

Today’s news comes hot on the heels of AVZ announcing the first drill hole assay from its initial seven-hole drill program at Manono returned a spectacular 202.8 metres at 1.57 per cent lithium.

Manono is 60 per cent owned by AVZ, while state-owned enterprise La Congolaise D’exploitation Miniere SA owns 30 per cent and privately owned company Dathomir Mining Ressources SARL owns the remaining 10 per cent.

The project lies 500km due north of Lubumbashi in the south of the DRC in central Africa. The project area can be accessed from Lubumbashi by a 1.5 hour flight or by road.

AVZ is responsible for funding expenditure to completion of a feasibility study.

The company’s board has had significant experience in the DRC. Mr Eckhof previously founded Moto Goldmines in 2003 which acquired the Moto Gold Project in DRC which was then sold to Randgold Resources who poured first gold in September 2013.

Shares in AVZ closed almost 5 per cent higher at 9.2c on Thursday.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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