AVZ closes in on $14m cash injection from strategic partner
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Special Report: AVZ is very close to topping up its coffers with a fresh multi-million cash injection from its strategic partner Yibin Tianyi Lithium Industry Co, tipped to be one of the largest lithium hydroxide producers in China.
AVZ Minerals (ASX:AVZ) told investors today that Foreign Investment Review Board (FIRB) approval for the $14.1m deal is expected by the end of this month.
And in the meantime, the company has locked in binding commitments to raise $3.6m from existing strategic shareholder Lithium Plus and other investors, including a global institutional investor.
“While accommodating the extension requested for FIRB approval, we managed to secure short-term funding from existing strategic shareholder Lithium Plus and from sophisticated and professional investors including a new global institutional investor,” AVZ managing director Nigel Ferguson said.
“Lithium Plus has continued to show its support and faith in the Manono project, especially during recent market volatility.”
The Yibin Tianyi deal meanwhile, which was announced late last year, will see the Chinese lithium hydroxide producer pick up $14.1m worth of AVZ shares at 4.5c each, giving it a 12 per cent stake in the company.
The $3.6m placement to Lithium Plus is also being done at 4.5c per share.
AVZ and Yibin Tianyi will also negotiate a binding offtake agreement for products from AVZ’s Manono lithium and tin project in the Democratic Republic of the Congo (DRC).
Yibin Tianyi is backed by China’s largest electric vehicle battery manufacturer – Contemporary Amperex Technology (CATL).
It is currently constructing the first phase of its lithium hydroxide plant in China that is expected to be completed by the second quarter of 2020, while a second phase expansion is expected to be completed by 2023-2024.
Yibin Tianyi is targeting production of up to 25,000t of lithium hydroxide per annum, with
future staged expansions expected to increase production to about 100,000t per annum.
The company will require about 600,000t per annum of spodumene concentrate to satisfy its hydroxide plant when fully completed.
AVZ and Yibin Tianyi continue to progress the finalisation and execution of the binding offtake agreement for product from the Manono project.
“We are pleased with Yibin Tianyi’s commitment to finalise this strategic investment, as they understand it is the start of a long-term relationship with AVZ,” Ferguson said.
All other conditions precedent to the completion of the placement have been satisfied other than obtaining the necessary Australian foreign investment and Chinese Overseas Direct Investment approvals.
Once the FIRB approval lands, AVZ can then seek Chinese Overseas Direct Investment approval.
Meanwhile, AVZ is in the final stage of review and compiling the definitive feasibility study (DFS) for the Manono project.
“The company expects the results of the DFS to be released in the coming weeks,” Ferguson explained.
An extended scoping study has already shown that Manono has the potential to be a world-class, long-life mine with a net present value (NPV) of up to $US2.63 billion ($4.33 billion) before taking taxes and royalties into account.
And internal rate of return (IRR) was estimated at 64 per cent.
Both the NPV and IRR are used to estimate potential profitability, and the higher above zero they are, the better the prospective economics of the project.
And metallurgical test work being undertaken as part of the DFS has indicated AVZ could significantly reduce operating costs after successfully recovering both tin and tantalum.
Preliminary work achieved total tin recovery of 63 per cent from combined coarse plus fine fractions at a grade of 64.1 per cent tin oxide.
Ferguson said in late March the tin grades of more than 60 per cent from both size ranges made for highly saleable products that could contribute to reducing overall operating costs.
AVZ could also enjoy exemptions or reductions on corporate and duty taxes for the Manono project after it secured an agreement with the DRC government.
The importance of Manono to the DRC government has been clearly highlighted with the execution in February of a binding memorandum of understanding to place the project within a newly created Special Economic Zone (SEZ).
>> NOW WATCH: 90 Seconds With… Nigel Ferguson, AVZ Minerals