AVZ Discussion 2022

[SilentOne]

Can't see anything happening without a mining licence, nothing that ends in value for shareholders anyway. If management are negotiating anything the ML has to be a key part of it you'd imagine.

Hi Sam,

People need to remember that the Mine has a tangible value with or without the Mining Licence. It would be implied that something being negotiated even without the mining license that the DRC have committed to approving the ML after the deal was done (simply an act of price manipulation) - no one is going to buy a dead asset.

Also keep in mind that AVZ has completed all the compliance/due diligence requirements for the issuance of the Mining License. Hmmmm how much did we spend? Its a walk in the park for the next person.

I honestly believe that AVZ is in a very strong position especially with all the litigation that is currently running. FT would want the litigation to end sooner than later - he wont want adverse findings and compensation rulings against the DRC. Oh and the World Bank has also been dragged into this whole debacle indirectly too.

No one is going to invest in a Battery Hub in the DRC without a solid supply of Lithium.

Large corporations must laugh at the shenanigans of the DRC when they are approached by their Ministers. It would be like a remake of the Benny Hill Show (no disrespect to Benny Hill) or Yes Minister.

SilentOne.- Simply a thought bubble

 

[The Fox]

Look at the sale of 24% to CATH for what’s required.

Edit I just checked the Cath proposal and the 24% didn’t request shareholders approval.

Thanks Chilla

So are you indicating in your last post that a wholly owned subsidiary like AVZ International Pty Ltd does not need AVZ Minerals Ltd shareholder approval to sell an asset?

I can’t pinpoint the ASX listing rule/s that stipulates if a subsidiary like AVZ International Pty Ltd was to dispose of the interest held in Manono, that the shareholders of AVZ Minerals Ltd would need to vote.

Anyway, if you or anyone else could share a link to the ASX listing rules that covers this item that would be most helpful thanks. If not, no stress, we may find out in the near future anyway if this is at all relevant or not.


Cheers

 

[RHyNO]

Can somebody smarter than me clarify something.
If AVZ sells the asset, let’s say it sells putting the market cap at $5 a share, and then we start trading again. How would this value be reflected in the share price in a speculative marketplace? Obviously the company would be worth that in cash. But who would buy the shares?

 

[CHB]

Can somebody smarter than me clarify something.
If AVZ sells the asset, let’s say it sells putting the market cap at $5 a share, and then we start trading again. How would this value be reflected in the share price in a speculative marketplace? Obviously the company would be worth that in cash. But who would buy the shares?

The value of the company would be cash backing then.

If a company has $200M in cash then it's market cap is not going to be worth $100M. Because investors will know it's value is at least $200M and will buy.

 

[Doc]

The value of the company would be cash backing then.

If a company has $200M in cash then it's market cap is not going to be worth $100M. Because investors will know it's value is at least $200M and will buy.

Question is who would sell in those conditions? You’d have to be bat shit crazy

 

[UpTheDuff]

I'm speculating here.

Hypothetically AVZ sell the rights to tenement/assets to A and B for $C amount.

Current holders would get a special dividend payment.
AVZ will have $C in funds but pretty much no physical assets of value. Just cash.
AVZ will exit TH (Question: before or after special dividend payment?).

What that does to SP? No idea, I have not seen something like this before. Usually market cap will reflect current assets... but unsure in this hypothetical case given the issues facing this company.

 

[RHyNO]

I'm speculating here.

Hypothetically AVZ sell the rights to tenement/assets to A and B for $C amount.

Current holders would get a special dividend payment.
AVZ will have $C in funds but pretty much no physical assets of value. Just cash.
AVZ will exit TH (Question: before or after special dividend payment?).

What that does to SP? No idea, I have not seen something like this before. Usually market cap will reflect current assets... but unsure in this hypothetical case given the issues facing this company.

That makes sense, but what compels management to do a special dividend? If Nigel wants to continue his ambitions as a mining magnate, can he just keep the funding and buy into another asset with approval of the BOD? We are shareholders in AVZ, not the deposit itself. Just thinking out loud here. Wondering who if anyone has some insight?

 

[The Fox]

Yes speculating on all this without all the pieces can be a bit frustrating, I'm asking myself is it even worth the effort knowing there are a number of paths forward and an exercise like this is really a bit of guess work to a certain extent.

However, there's not much else to do until we wait on an AVZ announcement to provide the clarity we deserve.

In any evert, under the potential scenario of a asset sale, the company could make a special dividend, (that dividend could be partly or fully franked IMO, depending on how tax paid in the DRC is treated here) or maybe a share buy back would be an option.

Maybe under an asset sale the BOD decide to secure another resource opportunity (AUS?) on or around the same time of selling the interest in Manono? This could mean AVZ is not left without an assert at any stage, or possibly depending on the timing of things, Manono would not be assessed as the only asset held under the company.

Big guesses here on all this, wish I was a Taxation Lawyer as it would be helpful to know if under an asset sale whether shareholders would enjoy some local taxation relief for tax paid on the gain in the DRC.

As others have mentioned, a special dividend is income to shareholders, fully taxable unless there is some franking involved. All questions for a tax lawyer as this information is not easily discernible when reviewing ATO information, nor can I find a precedent.

It would be a shame not to enjoy the CGT discount from selling our AVZ shares in due course, assuming the value is representative of the realisation of a potential asset sale.

Some have said AVZ may not need to trade again on an asset sale, maybe. However trading again on completion of an asset sale may provide the opportunity for a shareholder to exit while others come in to make a clip or margin on any special dividend. Anyway, just kicking this thing as there's not much else to do in the interim, the rabbit hole on these types of scenario's goes deep

Of course all of the above is irrelevant should there be no asset sale, and some new type of JV is agreed, or if a group makes a bid for AVZ Minerals Ltd on the ASX, which would be a cleaner outcome and a preference assuming the pricing is attractive and there's no blocking by the FIRB.

For what it is worth, I think an asset sale is the most likely outcome, yet happy to be surprised with any other outcome for shareholders that provides better value now or in the short term.

Cheers

 

[Winenut]

Yes speculating on all this without all the pieces can be a bit frustrating, I'm asking myself is it even worth the effort knowing there are a number of paths forward and an exercise like this is really a bit of guess work to a certain extent.

However, there's not much else to do until we wait on an AVZ announcement to provide the clarity we deserve.

In any evert, under the potential scenario of a asset sale, the company could make a special dividend, (that dividend could be partly or fully franked IMO, depending on how tax paid in the DRC is treated here) or maybe a share buy back would be an option.

Maybe under an asset sale the BOD decide to secure another resource opportunity (AUS?) on or around the same time of selling the interest in Manono? This could mean AVZ is not left without an assert at any stage, or possibly depending on the timing of things, Manono would not be assessed as the only asset held under the company.

Big guesses here on all this, wish I was a Taxation Lawyer as it would be helpful to know if under an asset sale whether shareholders would enjoy some local taxation relief for tax paid on the gain in the DRC.

As others have mentioned, a special dividend is income to shareholders, fully taxable unless there is some franking involved. All questions for a tax lawyer as this information is not easily discernible when reviewing ATO information, nor can I find a precedent.

It would be a shame not to enjoy the CGT discount from selling our AVZ shares in due course, assuming the value is representative of the realisation of a potential asset sale.

Some have said AVZ may not need to trade again on an asset sale, maybe. However trading again on completion of an asset sale may provide the opportunity for a shareholder to exit while others come in to make a clip or margin on any special dividend. Anyway, just kicking this thing as there's not much else to do in the interim, the rabbit hole on these types of scenario's goes deep

Of course all of the above is irrelevant should there be no asset sale, and some new type of JV is agreed, or if a group makes a bid for AVZ Minerals Ltd on the ASX, which would be a cleaner outcome and a preference assuming the pricing is attractive and there's no blocking by the FIRB.

For what it is worth, I think an asset sale is the most likely outcome, yet happy to be surprised with any other outcome for shareholders that provides better value now or in the short term.

Cheers

Definitely want CGT discount in any scenario going forward

Should an alternative prevail and we are afforded no CGT relief you may as well be sucking the taxman's dick...

 

[The Fox]

Definitely want CGT discount in any scenario going forward

Should an alternative prevail and we are afforded no CGT relief you may as well be sucking the taxman's dick...

 

[Powerage]

While we’re speculating….
Wouldn’t be beyond the realms to have the ML written into the conditions precedent (same with SH approval obviously)… as others have said, no one in their right mind would be stumping up 5+ bill without the fix being in on the ML - easily fixed with a CP in the asset sale - DRC saves face, purchaser gets surety etc etc.

If it’s of any help, I was balls deep in PSC and we sold (at asset level) to the Chinese (in Zimb)…. In any offshore sale of a major asset, company gets an ATO ruling, in our case it was around 85% special dividend (unfranked of course as it’s off shore) and 15% return of capital (this component is untaxed, but is subtracted from cost base should you later sell the underlying shares)…

So essentially you get a massive bag of cash, then a nasty tax bill (which I was going to pay for by selling a few of my AVZ shares…. Doh).

Cheers,
Powerage

 

[wombat74]

I'm speculating here.

Hypothetically AVZ sell the rights to tenement/assets to A and B for $C amount.

Current holders would get a special dividend payment.
AVZ will have $C in funds but pretty much no physical assets of value. Just cash.
AVZ will exit TH (Question: before or after special dividend payment?).

What that does to SP? No idea, I have not seen something like this before. Usually market cap will reflect current assets... but unsure in this hypothetical case given the issues facing this company.

If the asset is gone can we expect our Chinese SH to off load if trading resumes ? Could get very messy . Would be much better if AVZ can retain a stake in the project . If AVZ has a future then obviously all the money wont be dished out to SH . IMO

 

[Azzler]

I was under the impression that a payout (hopefully some kind of tax favorable method) would happen per share after a settlement date occurs.

This enables the shares to trade again and maintain their price regardless of who sells.

If they state all shares will be payed out at $2 per share for example, the SP will maintain at around $1.99, because knowing a $2 payout is comming will attract endless buyers if people sell at $1.99 or a bit lower.
So you can get out right away at a fraction less, or wait until settlement.

Unless there's special tax considerations and a return to trade is not appropriate.

 

[CHB]

That makes sense, but what compels management to do a special dividend? If Nigel wants to continue his ambitions as a mining magnate, can he just keep the funding and buy into another asset with approval of the BOD? We are shareholders in AVZ, not the deposit itself. Just thinking out loud here. Wondering who if anyone has some insight?

Yes definitely can keep the money and buy another asset.

 

[JasonM]

I was under the impression that a payout (hopefully some kind of tax favorable method) would happen per share after a settlement date occurs.

This enables the shares to trade again and maintain their price regardless of who sells.

If they state all shares will be payed out at $2 per share for example, the SP will maintain at around $1.99, because knowing a $2 payout is comming will attract endless buyers if people sell at $1.99 or a bit lower.
So you can get out right away at a fraction less, or wait until settlement.

Unless there's special tax considerations and a return to trade is not appropriate.

I'm no tax professional, I think plenty on here that could give better guidance when the time is right, just sharing what I found out with psc.

I was also a holder of PSC. From the asset sale, they returned funds and they retained some funds for further operation, cant remember exactly but something like $460m to shareholders and $40m retained. as stated above, they had to seek ato clarification on how the $460m funds could be returned to shareholders, in the end funds returned as part dividend and part capital. I think largely for local investors the dividend return was not welcomed as it resulted in higher tax being paid but I understand there was some offshore buying as those entities were not bound to pay tax locally. throughout this time, the shares traded below the value of cash backing presumably as many would have been happy selling out to secure a cgt discount than wait for the dividend but the price closed the gap towards settlement.

so in your example, if price is $2/sh, then if in the highest tax bracket, a dividend payout would result in 45% being paid in tax, so a gain of $1.10/sh vs a cgt payable at 25%, so a gain of $1.50 to the individual. so based on this you could see a situation where many holders would be happy to sell out at say $1.80 as the tax outcome would be better. as stated previously though, off shore entities that dont pay tax on the dividend would buy up the shares on offer at $1.80. the further out from settlement, the bigger the time factor of money and so the steeper the discount to the cash backing. I would also say there would be a rush of people wanting to get out of avz and this would also add to the discount on open.

needless to say everyones tax position is different so there are multiple scenarios/outcomes based on your tax position.

I'm not going to look into this further until we hear something of substance in an announcement, who know what the fuck is going to happen.

I would much prefer a TO rather than an asset sale as it is much cleaner, we get all our money returned and get to take advantage of the cgt discount so tax position is better for most holders remembering that everyone local would qualify for the cgt discount as holders for longer than 12 months.

last week of July, sure hope we get an announcement this week.

 

[Chilla]

I'm no tax professional, I think plenty on here that could give better guidance when the time is right, just sharing what I found out with psc.

I was also a holder of PSC. From the asset sale, they returned funds and they retained some funds for further operation, cant remember exactly but something like $460m to shareholders and $40m retained. as stated above, they had to seek ato clarification on how the $460m funds could be returned to shareholders, in the end funds returned as part dividend and part capital. I think largely for local investors the dividend return was not welcomed as it resulted in higher tax being paid but I understand there was some offshore buying as those entities were not bound to pay tax locally. throughout this time, the shares traded below the value of cash backing presumably as many would have been happy selling out to secure a cgt discount than wait for the dividend but the price closed the gap towards settlement.

so in your example, if price is $2/sh, then if in the highest tax bracket, a dividend payout would result in 45% being paid in tax, so a gain of $1.10/sh vs a cgt payable at 25%, so a gain of $1.50 to the individual. so based on this you could see a situation where many holders would be happy to sell out at say $1.80 as the tax outcome would be better. as stated previously though, off shore entities that dont pay tax on the dividend would buy up the shares on offer at $1.80. the further out from settlement, the bigger the time factor of money and so the steeper the discount to the cash backing. I would also say there would be a rush of people wanting to get out of avz and this would also add to the discount on open.

needless to say everyones tax position is different so there are multiple scenarios/outcomes based on your tax position.

I'm not going to look into this further until we hear something of substance in an announcement, who know what the fuck is going to happen.

I would much prefer a TO rather than an asset sale as it is much cleaner, we get all our money returned and get to take advantage of the cgt discount so tax position is better for most holders remembering that everyone local would qualify for the cgt discount as holders for longer than 12 months.

last week of July, sure hope we get an announcement this week.

If an asset sale is the way it happens, Best outcome for shareholders would be AVZ retains all the proceeds for a year and gives time for shares to be sold on market as all are eligible for CGT discount…..so max tax payable would be 22.5% on the capital gain.

If it’s a new JV structure then ML is issued and we return to trading and life resumes and you hold or sell……and again everyone is entitled to CGT discount.

All imo.

 

[cruiser51]

Labor’s battery dream to cost taxpayers more than it earns

The Productivity Commission has warned the Albanese government against pouring billions of dollars into picking winners, including local battery manufacturing.

www.afr.com

Maybe something the DRC government should read

 

[Winenut]

If an asset sale is the way it happens, Best outcome for shareholders would be AVZ retains all the proceeds for a year and gives time for shares to be sold on market as all are eligible for CGT discount…..so max tax payable would be 22.5% on the capital gain.

If it’s a new JV structure then ML is issued and we return to trading and life resumes and you hold or sell……and again everyone is entitled to CGT discount.

All imo.

Would love to be in a position to have to think about the best way to manage the tax impost!!!!

 

[cruiser51]

Labor’s battery dream to cost taxpayers more than it earns

The Productivity Commission has warned the Albanese government against pouring billions of dollars into picking winners, including local battery manufacturing.

www.afr.com

Maybe something the DRC government should read

VW CEO Matthias Müller made it clear to the Handelsblatt that Volkswagen is not planning to build a battery factory.

"We certainly don't do such nonsense."

The production of battery cells is highly automated, offers only a few jobs and is "very expensive".
The group looks at the entire process chain of battery technology.

This begins with the extraction of raw materials and their use through to cell production and the construction of batteries and their installation in a car.

VW will announce its plans later this year.

"Then we will see to what extent we are committed to this topic and ultimately also invest."


Regarding AVZ sp and taxation dreams...

At this stage it is just that, dreaming.

Until we know what is really happening, it is much healthier to go to the beach, watch the seagulls and pretty girls.

 

[David Krappenschitz]

I'm no tax professional, I think plenty on here that could give better guidance when the time is right, just sharing what I found out with psc.

I was also a holder of PSC. From the asset sale, they returned funds and they retained some funds for further operation, cant remember exactly but something like $460m to shareholders and $40m retained. as stated above, they had to seek ato clarification on how the $460m funds could be returned to shareholders, in the end funds returned as part dividend and part capital. I think largely for local investors the dividend return was not welcomed as it resulted in higher tax being paid but I understand there was some offshore buying as those entities were not bound to pay tax locally. throughout this time, the shares traded below the value of cash backing presumably as many would have been happy selling out to secure a cgt discount than wait for the dividend but the price closed the gap towards settlement.

so in your example, if price is $2/sh, then if in the highest tax bracket, a dividend payout would result in 45% being paid in tax, so a gain of $1.10/sh vs a cgt payable at 25%, so a gain of $1.50 to the individual. so based on this you could see a situation where many holders would be happy to sell out at say $1.80 as the tax outcome would be better. as stated previously though, off shore entities that dont pay tax on the dividend would buy up the shares on offer at $1.80. the further out from settlement, the bigger the time factor of money and so the steeper the discount to the cash backing. I would also say there would be a rush of people wanting to get out of avz and this would also add to the discount on open.

needless to say everyones tax position is different so there are multiple scenarios/outcomes based on your tax position.

I'm not going to look into this further until we hear something of substance in an announcement, who know what the fuck is going to happen.

I would much prefer a TO rather than an asset sale as it is much cleaner, we get all our money returned and get to take advantage of the cgt discount so tax position is better for most holders remembering that everyone local would qualify for the cgt discount as holders for longer than 12 months.

last week of July, sure hope we get an announcement this week.

Great post, I was a PSC holder too and sold my shares a few days after the announcement that there would be a sale of the Arcadia project.
I remember the SP traded mostly in the $1.70-1.85 range (roughly) for around 4 or so months before the settlement. I think the ~$460mil sale in terms of MC would’ve equated to share price around $2.10 (if I recall correctly), so it was trading at around 17% below asset sale value on average. I sold at $1.75 and in the months after it fluctuated a bit even hitting $1.90 range at one point.
Would be pretty happy if we got an outcome like this where shareholders were able to sell and get the CGT discount. It would be a great outcome considering a straight TO may not be allowed.