Capital raising to put AVZ on the fast track to lithium production
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Special Report: AVZ Minerals has positioned itself to accelerate development of its giant Manono lithium and tin project in the Democratic Republic of Congo after launching a major capital raising structured to favour existing investors.
The share purchase plan announced by AVZ last week will raise up to $10 million, with Perth-based stockbroker Patersons Securities Limited providing underwriting support to a maximum of $5 million.
Patersons can also undertake an offer of new AVZ shares to sophisticated investors on the same terms as the SPP to raise an additional $5 million.
Funds raised through the SPP have been earmarked for fast-tracking pre-development activity at Manono, which is 60 per cent-owned by AVZ and stands as the largest hard rock lithium resource in the world.
AVZ managing director Nigel Ferguson said bringing forward activities such as hydrogeological testwork, environmental studies and pit dewatering would have major benefits in the long run.
“Not only will this raising accelerate the delivery of the project on the whole but by doing so it will put us in a stronger negotiating position with strategic partners,” he said.
“We will have a more advanced, and thus more valuable, asset from which to form the basis of negotiations.”
The company (ASX:AVZ) believed an SPP was the most appropriate form of capital raising based on previous feedback from shareholders and the relative speed with which it can be executed.
“The consistent message from shareholders that have expressed a view to the AVZ board and management in the past has been their desire to be given an opportunity to participate in raisings,” Ferguson said.
“Furthermore, we have chosen an SPP over a rights issue as it is a speedier transaction and does not involve the extra time and expense required to draft a prospectus.”
The SPP will be priced at a 20 per cent discount to the five-day volume weighted average price before 25 February, 2019, the scheduled date for the issue of new shares.
Not only does Manono have size on its side, it also has quality, with the resource of 400.4 million at 1.6 per cent lithium oxide ranking as the highest grade for a hard rock lithium deposit owned by an ASX-listed company.
And because of the low level of impurities found in Manono ore, the company expects to produce a spodumene concentrate of at least 5.8 per cent Li02 and potentially as high as 6.5 per cent Li02 from the project.
Based on this, AVZ should be able to attract a material premium above the standard 5 per cent spodumene concentrate price for its product.
A definitive feasibility study on Manono is due for completion towards the middle of 2019, with the company confident of having approvals and funding in place to commence construction towards the end of the year.