At first thought I was a little thrown off by this announcement. Because it can seem like it's saying "We've suspended the court case whilst we sort out further litigation funding"... So I thought about it whilst I slept and have now decided my first impression was wrong.
The Manono project is not AVZ. AVZ is a party to the project.
What does funding really mean here? Funding is about
project funding. The DRC government is party to the project and also wont be contributing to any
funding. CATH are potentially an indirect party to the project according to the revised TIA, in which AVZ has the option to either self fund capital or have CATH fund it. With the later meaning CATH would loan AVZ the capital required and would be paid back through the project revenue. In the scenario where AVZ were to be funded by a loan from CATH, CATH would have rights over 100% of the offtake.
The conditions of the TIA are as follows:
- the Mining Licence being granted to Dathcom;
- the transfer of certain service entities to GLH;
- the CAPEX Funding Agreement is entered into by CATH and GLH;
- a shareholders agreement in respect of GLH is entered into between AVZ, CATH and GLH;
- a revised offtake agreement is entered into between Dathcom and CATH;
- all regulatory approvals and third-party consents required under all applicable laws (including those of the Democratic Republic of Congo and the People's Republic of China) and contractual arrangements having been obtained;
- no material adverse change having occurred.
Now let's just read the latest announcement again.
I am going to have a crack at translating this:
We are currently in discussions with several parties in respects to the sale of AVZ's portion of the project. The other parties recognise the importance of diversifying critical mineral supply chains away from China. I.e., one of these parties has interests in western supply chains, i.e., OEM and/or Government interests.
The next sentence is a bit weird, is it a threat to the western parties to say this is also on the table for Chinese players? Or, are they saying we're assuming that there will be legal obligations to our cornerstone investors (CATH) and these need to be considered in a sale. i.e., the TIA completion is assumed due to expected ML assignment to AVZ from DRC government as part of
settlement discussions and therefore any purchaser needs to keep these conditions in mind. Are AVZ trying to encourage pre settlement acquisition which has been theorised about before?
IMO DRC and AVZ have somewhat come to a settlement agreement assuming the offer is right from the party taking over AVZ's portion of the project. The incentives for the DRC government need to be correct... Probably $ for a portion of their project share and a significant funding commitment. The additional consideration is how the negotiation is going with CATH. They want supply, they're going to want to keep as much of that as possible. For them to step aside and let someone else come in to fund the project and take the supply, the price would have to be right or they would need to be out maneuverer through the contracts. I doubt the funding party would only be contributing capital, the acquisition will be about securing western supply, and that will be with the blessing and potential financial backing from US Gov. So many unknowns throughout this...
The summary is that this is a very positive announcement and that they're essentially saying "a resolution is fairly progressed in which we, jointly with the DRC and US Government, can put forward a proposal to candidate purchasers, these purchasers have been presented and are engaged in negations, and now it's a matter of time before the negotiations have progressed to execution".
I easily could be interpreting this all completely wrong.. there's not a great deal to go off tbh
