Like most posters, I welcome the potential for a deal being done and this has the potential for AVZ to get off the canvas. AVZ has continued to find that rarely will any non Chinese entity invest in the DRC. This deal ( in whatever guise it is finalised ) will cement Chinese control of Manono and also strongly influence the world Lithium market. I suspect that when the project is operational, and with the probable large output, this will keep the price of Lithium under constant pressure. The Chinese Company's needs for Lithium material will be met by the availability of this major resource, and this will help to restrict the buying price of Lithium. You only need to see what has happened in Indonesia with Chinese control of Nickel. Was Zijin's action of being the Bad Cop used to allow Cath to be the Good Cop to ensure control of Manono?
It is now a bit clearer why the Locke deal took so long. The Cath deal was also running in parallel for some of the time.
I suspect that Cath has nearly all the ducks lined up with all groups involved, and we are only waiting on the finer details to be signed off by each party before the Chinese Govt. gives the seal of approval. This must have been a massive effort, as the groups involved include DRC Govt, Cominiere, Dathomir, Zijin, AVZ, Cath and the Chinese Govt. Cath's size, reputation, and ability to conclude deals were some of the ingredients that AVZ lacked.
I have a few concerns, and we can only hope that our Board can get some success in protecting the Company and Shareholders. AVZ does not have a lot of clout or big brother support. Shareholders must recognise that Cath will not be a benevolent supporter of shareholders.
The Cath deal announcement by AVZ makes no comment about the legal issues. Interestingly, neither party has paid the fees to progress the cases. AVZ indicated that they would pay, but we have no confirmation of this action. Don't forget we were told that the deal with Locke was finalised but we had no confirmation of any signing. Cath proposes to provide funds at the end of January. Is this too late? Is termination of legal action part of the Cath deal? What happens if the deal falls over? I doubt that AVZ will get any substantial funds from the judgements made to date, but AVZ may be able to use these legal awards as bargaining chips.
The price Cath pays for their 30.5% of the total project is just under $300 million. How were these figures worked out? Is it as a result of other deals? With AVZ being left with 29.5% ( based on the initial 60% holding ) this should highlight to shareholders that AVZ's value is nowhere near some of the dreams postulated by a few.
Yes, if the Dathomir deal is sorted, AVZ can go to 44.5% of the project. I believe Cath is the only group that can get this finalised. AVZ requires this to be fixed to cancel the DRC Court's rulings of penalties against AVZ, and to eliminate the action against Graeme Johnston. Funds held in escrow how will this be fixed? Will Dathomir be paid any extra?
Regarding Cominiere, is it possible to cancel previous deals regarding AVZ's ROFR. If AVZ can gain a minimum of 6% of Cominiere's original 25%, and agreement is made that payment is offset by the approx $60 million legal costs awarded against Cominiere, this could lift AVZ's share to 51%. Zijin to retain the other 9% (?) and Cominiere pass on the 10% to DRC Govt.
Shareholding then Cath 30.5%, AVZ 50.5%, Zijin 9 % and DRC Govt 10%. Cath may dangle the Lithium Hydroxide or other material upgrading to smooth the path with DRC Govt.
I believe that this is highly improbable. Zijin will counter any proposals with details of what they have spent on payments to Cominiere and others, plus drilling costs etc on Manono and Hydro Power upgrade costs.
A further concern is what amount of PR13359 will AVZ/Cath gain. I doubt it will be the total amount, but hope that AVZ's original boundaries which include the camp and water access are gained as a minimum. If Zijin/Cominiere retain any amount of 13359 they could build an extremely large plant and the output could provide similar results to what has occurred in the Nickel market.
The other issue is ownership/access/operational items for any Manono Lithium output.
Who owns/controls/builds/operates/markets output. Will any of these be used as bargaining chips?
1. Hydro Power, 2.Water, 3. Transport 4. Tin etc
Like the majority of shareholders, I have NFI about what is happening with these negotiations. The above only covers part of the possible options, but it is an attempt to alert shareholders of the complexity as I see it that the Board is facing.
I have made these comments as I felt they needed to be aired, as it may come to pass that as shareholders we have to vote on an agreement.
These comments are not financial advice but a general opinion of the current situation as I see it.
