AVZ flirts with Chinese investors; jumps 14pc on battery deal
Mining
Mining
AVZ Minerals is doing nothing to stop speculation among shareholders that it’s a Chinese takeover target, today signing a potential investment agreement with Shanghai Greatpower Industry.
The news sent shares up 14.3 per cent in morning trade to 12c.
Shanghai Greatpower is a trader of cobalt and lithium focused on China’s battery and aerospace industries.
The memorandum of understanding covers potential investment and future sales of AVZ’s Manono lithium project in the Democratic Republic of Congo (DRC).
AVZ did not give details on when talks might produce concrete results.
AVZ recently announced it had found what could be the world’s largest deposit, days after its chairman Klaus Eckhof sold a quarter of his shares.
AVZ already has one Chinese investor, Huayou Cobalt Group, which owns 11.2 per cent of the company.
The Greatpower MoU comes as AVZ courts a number of Chinese partners.
The company said it had been talking to “several multi-billion dollar Chinese entities” about investment and sales deals.
And although AVZ has signed a deal with Greatpower it’s still shopping the Manono project around to other groups.
“The level of interest we are seeing in the company following the recent drill results confirms once again that the Manono Lithium Project is world-class and unique,” Mr Eckhof said.
“The DRC is a mining friendly jurisdiction with numerous successful tier-one operations in the Katanga region and is seen very favourably by Chinese and European groups as great place to invest.”
Doubts over China takeover
Investors have recently speculated on the ASX Hot Copper forum about a bidding war for AVZ among Chinese investors, or even a takeover.
But that outcome was not immediately likely, said Platinum Gate’s Robert Swarbrick, who has extensive experience launching and running mines in Asia.
The fact that the potential deal was with a trading company rather than a state-owned business or blue-chip miner was a red flag, he said.
Mr Eckhof does have a history of delivering for shareholders though, selling a gold mine in 2009 to AngloGold Ashanti.
It was also unlikely mine development could start as early as next year, Mr Swarbrick said.
“At best they are three years away from production. It’s impossible it will start next year because they haven’t even started doing feasibility studies,” he told Stockhead.
The fact that the project is in the DRC was also a challenge.
Major tech companies such Apple have indicated they don’t want to buy lithium or cobalt from Africa, preferring “safe jurisdictions”, he said.
Mr Swarbrick says it’s unlikely a project in the Congo would be able to secure the kind of funding new lithium mines require. In a safe country like Australia lithium mine development financing runs into the hundreds of millions of dollars.
All of which made a takeover an unlikely outcome, he said.