AVZ’s Klaus Eckhof addresses the fuss over that North America cash raising
AVZ Minerals boss Klaus Eckhof has revealed to Stockhead his reasons for going to the market for more money and why he chose a North American investor.
The lithium explorer (ASX:AVZ) revealed on Monday it is raising $15 million to fund its aggressive exploration push at its promising Manono lithium project in the Democratic Republic of Congo.
But investors showed their disapproval by forcing down the share price by as much as 13.3 per cent to 26c. AVZ shares ended Monday down 10 per cent at 27c and closed Tuesday at 25c.
“We are basically down to $10 million and that will last us probably another four months and we can’t run down to zero,” chairman Klaus Eckhof told Stockhead from Monaco.
“Then also if you look at the usual capital raising time is March/April and after that the window closes until September/October.
“We looked at it around Christmas and then we looked at it four or five weeks ago, but with the Dow volatility it became extremely difficult to actually agree on pricing.”
The placement to a client of Cantor Fitzgerald Canada Corporation will comprise the issue of 60 million shares at 25 cents per share, along with 30 million options exercisable at 30.5 cents within two years.
This will give the investor a 3.2 per cent stake in AVZ.
Can’t go ‘belly up’
AVZ is running five drill rigs at its Manono project, which is costing it around $2 million a month.
Mr Eckhof has described Manono as hosting one of the “longest pegmatite intercepts ever reported”. Pegmatites are rocks formed from lava or magma that are the primary source of lithium.
“Without money you can’t explore,” Mr Eckhof said. “You can’t expose the company to go belly up basically just because some people don’t like it.
“We want to always have enough money in the bank.
“There’s some cash payments, then there’s licence fees, so within two months we would be down to $5 million and then everybody would say why haven’t I raised any money?
“Especially if the Dow has another 15 per cent correction, then it will be virtually impossible to get any interest anywhere, neither Australia nor North America.”
AVZ chose North America to raise the cash because it is looking to gain greater exposure in that part of the world.
“We thought we’ve got a lot of Australian investors, why not do it with some North American institutions?” Mr Eckhof explained.
“There’s some interest there from North America too because nobody when I went to Toronto has ever heard about AVZ before and also in the US nobody knew about it.”
AVZ has witnessed massive growth in the past year, with shares soaring as much as 1750 per cent to a 52-week high of 37c in mid-January.
The company is working quickly to advance the development of the Manono project, which the company believes will be the largest lithium project in the world.
“We will have 300-400 million tonnes at around 1.5-1.6 per cent lithium oxide within the next four or five months, which will then be the biggest on the planet by three times more than Pilbara Minerals,” Mr Eckhof said.
“The potential is still there to go to 1 billion or 2 billion, but we probably don’t need to do that because people will be comfortable that it’s there, and then we probably can move the project forward with possibly some big Chinese investors down the track.”
AVZ recently hit nearly 300m of pegmatite in the first phase of drilling — its best result yet — and Mr Eckhof told Stockhead he is “pretty sure the next several holes will be copycat deals”.