Eight months ago, a former business journalist working from a modest London apartment on the south bank of the Thames, David Robertson, penned a three-page letter to the Australian Securities and Investments Commission and the Australian Securities Exchange.
Robertson’s target was a company run by a Tasmanian geologist named Nigel Ferguson. For three years, Robertson had tracked AVZ Minerals as it raised and spent $100 million for what Ferguson promised would be one of the world’s biggest lithium mines.
“We are calling on both ASIC and ASX to investigate AVZ Minerals over its apparent failure to disclose material information and potentially making false and misleading statements to investors,” Robertson wrote.
Now running a small corporate investigations service for hedge funds, Robertson had become obsessed with AVZ. Even though at its peak the Perth-based company was valued at $4.6 billion and was part of the S&P/ASX200, he was convinced it was worthless.
If he was correct, Ferguson could kiss goodbye to his $66 million fortune.
AVZ chief executive Nigel Ferguson (left) and DRC businessman Marius Mihigo seated next to President Felix Tshisekedi. AVZ, Twitter, Facebook
Ferguson isn’t well known in Australian business circles. But if he gets his huge mine built near the sleepy town of Manono in the Democratic Republic of the Congo – there is a still a chance he can pull it off, albeit a slim one – Ferguson could become as important a figure in the global mining industry as Andrew Forrest or Gina Rinehart.
First, though, he will have to beat the Chinese in Kinshasa.
Ferguson’s online biography states that he was educated at one of Hobart’s best private schools, Friends, where he played rugby and rowed. After a degree in geology from the University of Tasmania, he searched for minerals around the world. Africa became his speciality, and he led Ashanti Goldfields’ work in Tanzania, where it bought a gold mine that is now one of AngloGold Ashanti’s most profitable.
By 2018, the year after Ferguson became managing director, AVZ said it had discovered “the largest hard rock spodumene deposit” in the world near Manono, a town four days’ drive from the capital, Kinshasa.
In the years that followed, Ferguson worked hard on a plan to turn the deposit into a working mine. Lithium stocks would soon surge on demand for the mineral essential for the production of electric vehicle batteries. At the time, though, local investors had little appetite for high-risk lithium projects. AVZ had to find Chinese backers and retail speculators.
‘Largest undeveloped deposit’
In 2021, when AVZ raised $100 million from investors, Ferguson told reporters that Manono could become one of the most profitable lithium mines on the planet. “It is the largest, second-highest grade undeveloped deposit in the world,” he told Stockhead, a small-caps publication. “We will be in the bottom cost quartile for production. We are also in the bottom quartile for greenhouse gas emissions.”
The company’s geologists estimated there were 401 million tonnes of ore containing 1.65 per cent lithium oxide, which Ferguson predicted would generate $US380 million of operating profits a year.
He said AVZ would be one of the biggest lithium producers – a development that would place him, and the DRC, in the middle of a global struggle for a mineral essential to the renewable energy transition.
“We are talking potentially 10 to 15 per cent of the current market, and if we supersize ... we are probably looking at 25 per cent of the market,” Ferguson told 121 Mining TV, an online news site.
What the Manono lithium and tin mine would look like.
AVZ’s licence allowed it to drill to determine how much lithium there was in the deposit. The company didn’t have a permit to construct a mine, or the $US545 million to build it and provide infrastructure to transport the ore across Africa for shipment overseas.
In an interview that May with a website called Small Caps, Ferguson was asked about a mining licence. He said the company had translated an application into French for consideration by DRC’s mining ministry. Approval, he implied, was coming. The company even expected tax breaks.
“It’s a rubber stamp we need to have on that one yet,” he said. “The indication is it will probably take us six to eight weeks to have that formally awarded. We don’t think there’s going to be anything untoward there – and yes, you’re quite right. It’s a massive move forward. It’s a big tick.”
In May 2021, AVZ outlined plans to ship lithium by the start of 2023.
The location of the Manono project in the south-east of the DRC. Ownership rights to what could be the world’s largest untapped hard rock lithium deposit are under dispute. AVZ Minerals
AVZ said it owned 75 per cent of the corporate entity that controlled the exploration permit, Dathcom Mining, and had an agreement to buy 15 per cent more. In 2021, however, AVZ lost two separate challenges to its ownership, first to Chinese outfit Zijin Mining and another to a vehicle known as Dathomir, which Robertson says has historical links to the Kabila family, still powerful in the south-eastern part of the DRC.
These decisions were not disclosed to investors until May – AVZ never believed they had any merit – while the shares rose from 15¢ to $1.30.
Ferguson, writing in the company’s annual report, explained it this way: “Our success did not go unnoticed with other mining companies and ex-partners in Dathcom Mining suddenly wanting to again be part of the project but had no legal basis for acquiring new shares or had already sold their shares legally to AVZ. Claims from these companies are spurious of nature and hold no legal basis.”
As for Robertson’s allegation that investors weren’t kept up to date, Ferguson said on Friday: “The company treats such allegations seriously and confirms that it has and continues to comply with the company’s disclosure obligations under the Corporations Act and the ASX Listing Rules.”
Neither the ASX nor ASIC has taken any visible action over the allegations, and it is unclear whether they consider action to be justified or necessary.
Ferguson provided a four-page statement that presented AVZ’s case that it is the target of a campaign conducted through “through questionable and irregular means” to capture part of the lithium deposit.
Internally, the company felt under attack. After spending millions on geological surveys, Zijin Mining was using Congo’s courts to split control of the deposit, the board believed. The board’s views became public after its legal advice was leaked to the
Financial Review.
“It is well known to the Board that AVZ Minerals is the subject of a protracted campaign by various third parties to seize control of AVZ’s interest in the Manono project in the Democratic Republic of Congo,” the memo from law firm DLA Piper dated June 22 read.
The memo listed elements of the campaign: AVZ’s enemies had threatened staff in the Congo, cut off its access to Congolese government officials, tried to convince the government to block the project, and run a campaign to manipulate the AVZ share price.
Trading halt
By that time, it was no longer possible to influence AVZ shares. On May 9, last year, AVZ placed its shares in an ongoing trading halt.
To fight back against what they saw as a campaign to take their project, Ferguson and his chief financial officer, Jan de Jager, decided to hire a Congolese business consultant with political connections, Marius Mihigo.
Under the plan, a $US1 million cash fee was authorised. Another $US3 million in cash and $US2 million in AVZ shares would be paid as a success fee if Mihigo helped secure the mining licence.
Mihigo’s social media profile boasted of a Harvard and Oxford education and placed him in Sandton, one of Johannesburg’s wealthiest suburbs. AVZ’s investigations suggested he moved to Sandton in 2019, around the time left a job working for DRC President Felix Tshisekedi. He had run an Ivory Coast security company before establishing a company providing high-level consulting and lobbying services, according to the report.
The AVZ board became alarmed after it was informed of the plan to hire Mihigo. In June, it commissioned DLA Piper to conduct a review of its anti-corruption and anti-bribery policies. The law firm hired advisers to conduct background checks on Mihigo. They broadly cleared him, and DLA Piper ultimately gave AVZ the green light to engage Mihigo to assist with obtaining the licence.
When Robertson, in London, implied on Twitter this week that hiring Mihigo might not be appropriate, the African replied: “Your racist tweet is for the sole purpose of attacking my reputation and that of AVZ. Serious people know that AVZ does not engage in corrupt actions and that is the reason why corrupt people fight AVZ.”
“AVZ will be restored its rights,” he wrote. “The corrupt people who want to steal the AVZ project seek to create media confusion to distract President Tshisekedi, but I remain confident that no one will be able to deceive the president and that AVZ will be able to develop the project.”
On Monday, AVZ conceded the Manolo mining license had been revoked entirely. The disclosure was made after the
Financial Review asked the company why it had not yet told investors.
The board said it was seeking legal advice “whilst expediting discussions to clarify the intentions of the competent DRC authorities”.
From Cape Town, Ferguson said he wasn’t giving up: “Nothing will deter the board and I from pursuing a just outcome for our shareholders, which my executive team are working tirelessly to achieve and we will provide a further update to shareholders as soon as we are in a position to do so.”
In a phone interview from London this week, Robertson speculated that Ferguson had been outmanoeuvred by Chinese mining interests in the opaque world of Congolese politics and business.
“They thought it was a goer; they got the mining decree and it was all going well,” he said. “Clearly, more powerful forces – and I assume those were Chinese, of what faction I don’t know – had gone presumably to the president, who says: ‘No AVZ doesn’t get the licence.’ I suspect what the DRC government is doing is playing everyone off against each other and see who offers the best deal.”
AVZ has $36 million left in the bank. The company’s seven top executives and chairman were paid $13.5 million last year, even though the company lost $20.4 million. At $3.2 million, Ferguson was the best-paid employee.
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