Billions at stake for Aussie investors amid Congo election chaos
December 8, 2023 — 11.55am
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Unlocking the multibillion-dollar fortunes of 21,000 mostly Australian investors lies in the hands of voters more than 10,000 kilometres across the globe in the heart of Africa.
The volatile elections in the Democratic Republic of the Congo this month could determine whether the ASX-listed explorer AVZ Minerals still controls the country’s Manono deposit, one of the world’s biggest deposits of lithium – the magical metal that has soared in value as the crucial ingredient in batteries for powering the electric vehicle boom.
A digger gets ready to go into a mine shaft in Kawama, in the Democratic Republic of Congo.CREDIT:MICHAEL ROBINSON CHAVEZ/WASHINGTON POST
The Congo’s reigning president, Felix Tshisekedi – AVZ’s preferred candidate – is on track to win again on December 20 amid claims from rivals of vote-rigging.
“There’s always these prejudices about our countries — people always think that in Africa there’s cheating,” Tshisekedi told the
Financial Times this week.
“They’ve got him on a 70 per cent [approval] rating at the moment, which is incredible. I just don’t understand that,” AVZ managing director Nigel Ferguson says.
It’s all part of the rough and tumble of life in a country of roughly 100 million people, which is mineral-rich but racked by corruption, violence and poverty. Transparency International ranks the Democratic Republic of the Congo 166th out of 180 countries on its Corruption Perceptions Index.
Whoever wins, Ferguson needs the election dust to settle so AVZ can pursue a political solution to a host of battles that are working their way through the courts in the local capital Kinshasa and Paris.
AVZ is seeking relief under International Criminal Court rules to maintain and preserve the rights of Dathcom Mining SA, through which it owns the Manono project. The company has pending legal challenges against Cominiere and another unit of Zijin.
Seven years have now passed since AVZ signed up to acquire a 60 per cent stake in the Manono project from Chinese businessman and Congo veteran Cong Maohuai – who is known locally as Simon Cong and is reputed to have strong connections in Beijing and Kinshasa.
The other partner in this enterprise is the state-owned La Congolaise D’exploitation Miniere SA, which has a 25 per cent stake.
Democratic Republic of the Congo president Felix Tshisekedi Tshilombo, at the World Economic Forum in Davos this year.CREDIT:BLOOMBERG
AVZ subsequently agreed to buy out Cong – lifting its stake to 75 per cent – and agreed to sell 24 per cent of the project to a subsidiary of Chinese battery giant CATL in exchange for $US240 million ($364 million) to fund the mine’s development.
Everything was set to go, but the rise of lithium as a crucial component of the renewable energy boom created unwanted attention
.
Ferguson says the first signs of trouble emerged in 2019 when its first drilling results highlighted that Manono might become a significant presence on the lithium map. Calls from Chinese interests came flooding in.
But it was in April 2021 that trouble really started, when AVZ disclosed the results of its definitive feasibility study to the ASX – confirming the size and quality of the Manono deposit at about 400 million tonnes.
Over the next year, the stock soared more than 700 per cent – along with the price of lithium – to a high of $1.30, valuing the company at more than $4.5 billion.
This was when Cong developed a case of “seller’s remorse”, according to Ferguson, and attempted to cancel the share sale.
Meanwhile, in July 2021 Cominiere agreed to sell part of its stake in the project – 15 per cent to be exact – to Chinese group Zijin, despite AVZ having first right of refusal to the stake.
Cominiere also announced it would split the original Manono project in two, with AVZ retaining the current area under development while Cominiere and Zijin developed the northern area.
This has triggered an avalanche of litigation by AVZ – which signed up for $US20 million in funding last month for its legal battles over shareholder issues and to retain its rights to the project and commence development.
With all this going on, AVZ shareholders have been left in the lurch.
Ferguson has no doubt as to what is behind the chaos: China’s imperative to control the critical minerals needed for the renewable power boom.
Technically, they hold shares worth $2.7 billion, but the problem is, the stock hasn’t traded since May 2022.
That’s when AVZ was forced to call for a trading halt as doubts emerged over whether it was being muscled out of Manono by powerful interests.
Ferguson has no doubt as to what is behind the chaos: China’s imperative to control the critical minerals needed for the renewable power boom.
“[Chinese President] Xi Jinping has given the nod to everybody to go out and collect as many critical minerals as possible. And it’s just caused a feeding frenzy,” he says.
The fact that this has pitted AVZ partner CATL against Zijin and Cong is not of concern to China as long as its interests prevail.
“They’ve got the rare earth market dominated … the majority of the copper and cobalt production coming out of the DRC [Democratic Republic of the Congo] is Chinese,” Ferguson says.
Chinese interests also control lithium projects in Zimbabwe and Namibia.
“We’re the only one, at the moment, that isn’t [controlled by China]. And when you’re talking about a globally significant asset such as ours, that could potentially supply up to 40 per cent of the world’s requirements, they need it. They want it.”
He says AVZ’s troubles even stretched into its shareholder meeting late last month, when rebel investors attempted a board coup led by former AVZ director Peter Huljich.
The town of Manono in the Democratic Republic of Congo.CREDIT:WIKICOMMONS
The Congolese government was watching to see who would emerge victorious, according to AVZ. Ferguson and AVZ chairman John Clarke prevailed with a strong protest vote.
“On behalf of the board and management of AVZ Minerals Limited, thank you to our shareholders for your overwhelming vote to return the current board, and thank you for your endorsement of our strategy,” AVZ said after the meeting.
“We understand your concerns, and we share your desire to expedite the development of the globally significant Manono lithium and tin project and to reinstate AVZ securities for trading.”
Having seen off the AVZ rivals with the election victory in Perth, Ferguson holds out hope that a settled political environment in the Congo – following its elections – could help finalise the company’s future.
“We need to have our rights reinstated,” he says.
Tshisekedi, assuming he wins the election, is expected to help fix the problem – even if it ultimately requires concessions from AVZ.
“If he [Tshisekedi] feels like he needs to go ahead with some sort of a deal on the north with Zijin, then we’ll sit down and talk about it,” Ferguson says.
AVZ has resorted to desperate tactics in its attempt to retain control of Manono.
This publication revealed last month that AVZ controversially
offered to pay up to $US6 million ($9 million) to a middleman as part of a plan to win the backing of Tshisekedi and other high-ranking officials.
Ferguson defended wiring middleman Marius Mihigo a $US1 million upfront payment last year without board approval by explaining how Mihigo could impose “his will” on unnamed Congolese figures involved in the Australian company’s fight to retain control of the Manono tenement.
Leaked company files obtained by this masthead suggest Ferguson offered to pay Mihigo a total of up to $US6 million, including a $US5 million success fee, without adequate due diligence or anti-corruption controls.
The success fee was never paid after the AVZ board amended Mihigo’s deal on advice from lawyers that it could expose the company to potential breaches of corporations laws.
The company insisted it had conducted appropriate due diligence and reviews had identified no material probity issues.
Elections in the Democratic Republic of the Congo this month could determine whether Australian investors, or Chinese interests, win the battle for control of what could be the world’s largest source of lithium.
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