Materials

AVZ Minerals moves closer to delivering on growth plans

Wed 04 May 22, 2:05pm (AEST)
image

Stocks in article

avz
MktCap:
-

Share article

Key Points

  • AVZ Minerals had already invested $25m ahead of the official green light
  • AVZ's new mining projects are expected to contribute to the global green energy transition
  • Based on current Proved and Probable Ore Reserves, AVZ believes the world-class Manono Project is the largest global hard-rock lithium resource

AVZ Minerals (ASX: AVZ) share price rose by around 14% to $1.15 at the open, but quickly gave back its early morning gains and was down -17.17% two hours out from the close, despite a positive update on its African lithium exploration project.

Today’s announcement had previously been flagged to the market, with the company recently deciding – due to its confidence receiving all necessary approvals - to invest $25m in an early works program.

Today’s conformation that the group received a ministerial decree to award the mining licence for its Manono project is regarded as “leading to a watershed moment" for the large-cap miner and its project partners.

To the uninitiated, AVZ Minerals is a mineral explorer focused on developing the Manono Lithium and Tin Project located in the south of the Democratic Republic of Congo.

The company has a 60% interest in the Manono Project and 15% under Option from Dathomir Mining Resources.

What has been awarded

Today’s release reveals that the Minister of Mines has awarded a mining licence to AVZ’s 75% owned Dathcom Mining SA business for the flagship Manono Project.

The mining licence will cover the entirety of the Roche Dure mineral resource (401m tonnes at Li20 1.65%) and the Carriere de l’Este exploration target.

While the licence does not include a portion of the land holding to the north, the company plans to have ongoing discussions with the government regarding its future inclusion.

Green energy transition

AVZ’s managing director Nigel Ferguson expects today announcement to pave the way for the company to start developing what he regards is one of the most important new mining projects in the world - that will contribute to the global green energy transition.

“We have maintained a strategic approach to developing our world-class Manono Project and we will continue to tick every box that will deliver long-term value to what we believe is the largest global hard-rock lithium resource, based on current Proved and Probable Ore Reserves.”

Early works program

The company is advancing its early works program ahead of a final investment decision to commence major works and first SC6 production toward the later months of 2023.

While the quarter saw AVZ record negative cash flow of $1.3m - mostly directed towards administration costs - the company remains well funded for future activities, finishing the quarter with $70.6m in cash.

Given the company’s cash burn of $42m equates to around 1.1% of its $3.7bn market cap, the stock also appears to be well positioned to fund future growth.

Why the rise and fall today

Given that today’s announcement was seen as somewhat of a rubber stamp, some investors clearly saw today’s rise as an opportune time to take profits off the table, especially with the share price up 471% in the last 12 months.

Also weighing on investors’ minds today were ongoing  legal wrangling relating to a claim that La Congolaise D’Exploitation Miniere SA has transferred a 15% interest in Dathcom to Jin Cheng Mining Company.

Having considered each of the Dathomir Claim and Cominiere Transfer Claim in detail, the company believes them to each be spurious in nature, without merit, containing fundamental and material errors, and having no substance or foundation in fact or law. 

“The Company is continuing to take all necessary actions to resist these vexatious and meritless claims and to protect Dathcom’s and its interests, and the Company will consider all options including engaging with the DRC Government and seeking international law remedies," management noted.

Consensus does not cover AVZ Minerals.

Based on Morningstar’s fair value of $1.12, the stocks appears to be undervalued.

While the company reported revenue of $927,000 last year, none of which came from operations, some analysts expect earnings to virtually double p.a.

image

AVZ Minerals share price growth over 12-months.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

Get the latest news and media direct to your inbox

Sign up FREE