AVZ stays on target, closes in on $10.6m cash injection from strategic partner
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Special Report: AVZ is closing in on a revised multi-million-dollar cash injection from its strategic partner, Yibin Tianyi Lithium Industry Co, which is not subject to Australian regulatory approval.
Yibin Tianyi, which is tipped to be one of the largest lithium hydroxide producers in China, will acquire 237.5 million shares in the company priced at 4.5 cents each, for a total of $10.6m.
This will give Yibin Tianyi a 9 per cent interest in AVZ Minerals (ASX:AVZ), below the 10 per cent mark that would have required the approval of Australia’s Foreign Investment Review Board.
Proceeds from the placement will allow the company to repay a $US1m ($1.56m) convertible loan, undertake early development works for its Manono lithium and tin project in the Democratic Republic of Congo and provide ongoing working capital.
Both parties are continuing negotiations for a binding offtake agreement for lithium products from Manono.
Separately, AVZ has also executed an underwriting agreement with Canaccord Genuity for the exercise of $5.3m in listed options exercisable at 3 cents each that expire on 24 May 2020.
The options were issued as part of a capital raising undertaken by the company in May 2017.
Under the agreement, Canaccord agrees to underwrite the exercise of any of the outstanding options that are not exercised by option holders prior to their expiry.
“Yibin Tianyi has remained committed to becoming an investor in AVZ and its intention of becoming one of the largest hydroxide suppliers in China is complementary to our vision of bringing our world-class Manono project into production,” managing director Nigel Ferguson said.
“Funding from both the offer and placement strengthens AVZ’s balance sheet and together with existing cash, ensures that AVZ is well positioned with A$19.6 million, before costs, available to advance the development of its flagship Manono project – one of the world’s largest and highest grade undeveloped hard rock lithium projects.”
In its definitive feasibility study, AVZ expects the Manono project to generate post-tax net present value (NPV) of just over $US1bn ($1.58bn) and internal rate of return (IRR) of 33 per cent despite taking a conservative approach.
Both NPV and IRR are measures of a project’s anticipated profitability.
AVZ also estimated net profit after tax at $US3.8bn and a post-tax payback period of 2.25 years from the project.
Late last month, test work on ‘alluvial’ samples produced high-grade, low-impurity casserite (tin ore), tantalum and niobium.