Ivanhoe investment shows China has no issue with the Congo
Special report: As AVZ Minerals prepares to unveil its scoping study on the world’s largest hard-rock lithium deposit, the Manono Project in the Democratic Republic of Congo, two major Chinese investors have given the country’s mining industry a timely vote of confidence.
In early September, CITIC Metals and Zijin Mining agreed to invest C$800 million collectively in Robert Friedland’s Ivanhoe Mines, which counts the Kamoa-Kakula copper-cobalt project and the Kipushi zinc-copper project in the DRC among its key assets.
Renowned resources investor Rick Rule, chief executive of Sprott Holdings, noted the investment in a LinkedIn post, saying: “$800,000,000 in fresh equity at a substantial premium to market, from two very successful investors.
“A testimony to the strength of the Ivanhoe team and the quality of the assets. An almost unbelievable show of faith in Congo and South Africa, in the face of local government head winds.”
The Ivanhoe investment comes as mining companies operating in the DRC come to grips with the country’s new mining code.
The code came into effect in June, bringing with it higher royalties and the loss of tax exemptions for mining projects.
With AVZ already possessing strong ties to China, Managing Director, Nigel Ferguson said it was pleasing to see that the likes of CITIC and Zijin hadn’t been spooked by the legislative changes.
“I think that’s a very positive sign particularly when you think there’s an election coming up in December,” Ferguson told Stockhead.
“You might have thought that with the election, most investors would have held off until that was sorted out.
“We have heard that Huayou, which is a major shareholder in AVZ, CITIC and others are looking to make assets in the DRC a primary focus, to build their presence in the DRC mining industry.”
The much-anticipated scoping study on Manono, which is 60%-owned by AVZ, is due for release as early as this week.
In August, the deposit was confirmed as the largest hard-rock lithium project in the world – and the second highest grade – with the announcement of a maiden Mineral Resource of 259.9 million tonnes grading 1.63% lithium oxide (spodumene), 844 parts per million (ppm) tin and 43ppm tantalum.
Drilling is continuing at Manono with an expected resource upgrade later in the year.
AVZ intends to move straight into a feasibility study after delivering the results of the scoping study and it is evident that Chinese interests will feature heavily in funding and offtake discussions.
Huayou International Mining – which is a wholly owned subsidiary of Shanghai Stock Exchange-listed Huayou Cobalt, a US$5.8 billion company – invested $13 million in AVZ in August last year for an 11 per cent stake.
The Perth-based company has also signed a number of preliminary agreements with other major Chinese groups about potential investment in exchange for securing supply from Manono, many of whom will visit site this year, while a Chinese government-backed firm is investing US$285 million in upgrading 466km of road between Luambo and Manono.
This special report is brought to you by AVZ Minerals.
This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.
If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.