Why is AVZ Minerals (ASX:AVZ) share price trading at 10 year high today?

Highlights

  • ASX:AVZ gets a cornerstone investor for its Manono Lithium and Tin Project in DRC.
  • Manono Project is amongst the top global producers of EV battery use and other lithium products.

ASX listed mineral explorer AVZ Minerals Limited (ASX:AVZ) share price is at a ten year high on ASX today. The price rally was seen post the company announced its agreement with CATH Energy Technologies to act as a cornerstone investor for AVZ’s Manono Lithium and Tin Project in DRC (Democratic Republic of Congo).

Below are the key details of the AVZ- CATH agreement -

  • AVZ International Pty Ltd (AVZI), a 100% subsidiary of AVZ minerals, has signed a transaction implementation agreement (TIA) with Suzhou CATH Energy Technologies (CATH).
  • As per the agreement, CATH will earn a 24% equity interest in a joint venture focused on developing the Manono Lithium and Tin Project (Manono Project).
  • CATH will pay US$240 million cash in return for the equity interest and fund their pro-rata development finance for the Manono Project.
  • The transaction will bring out more than US$400 million in total. However, the amount is subject to verification of final project development costs.
  • AVZ will retain 51% controlling interest and its position as lead developer in the Manono Project.
  • The existing offtake agreement will undergo a scope expansion and be given to CATH to provide a lifetime offtake of SC6 at the Project.
  • AVZ and CATH are to evaluate and progress a study to increase annual production, as shown by the Definitive Feasibility Study in April 2020. These studies are to be significantly progressed by the end of December 2021.
  • Both shall also assess the feasibility of a lithium hydroxide facility to be developed afterwards.

How will it help?

  • AVZ will use the funds to advance the Manono project into the production phase. The transaction will fund most of the total project financing without a dilution in controlling 51% interest of AVZ.
  • Furthermore, CATH will enter into a long-term Primary Lithium Sulphate (PLS) tolling agreement for production from the PLS calcining plant. It will also be developed in the joint venture.
  • CATH is a private investment firm owned by Mr Pei Zhenhua and Contemporary Amperex Technology Co. Limited (CATL). Both the joint owners have significant influence in the global lithium industry.
  • As per the announcement, once the transaction is finalised, it will de-risk the fundamental economics of the project and help in the downstream development of the Manono project.

Bottom line

The Manono Project is a strategically positioned source of lithium for EV batteries. The current transaction brings in financial capacity, technical expertise and credibility of CATH to the Monono project taking it one step ahead in its operations and worldwide placement.

AVZ shares are trading at AU$0.367 per share at 12:350 PM AEST, over 15% up from the previous close.

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