AVZ Minerals secures cornerstone investor to develop Manono lithium-tin project

AVZ Minerals (ASX: AVZ) has announced a cornerstone investment from Chinese private entity Suzhou CATH Energy Technologies (CATH) which is expected to advance development of its Manono lithium-tin project in the Democratic Republic of Congo (DRC).

Under a transaction implementation agreement signed with AVZ’s wholly-owned subsidiary AVZ International (AVZI), CATH will earn a 24% stake in the Manono project for a cash consideration of US$240 million (A$330 million).

This consideration plus a further amount is expected to finance CATH’s pro rata portion of funding for Manono’s development with the total transaction estimated to contribute more than US$400 million (A$549 million), subject to final project development costs being verified.

AVZ will retain a controlling 51% interest and its position as lead developer of the project.

Offtake deals now assigned to CATH

CATH is a private investment entity jointly owned by leading lithium-ion battery developer and manufacturer Contemporary Amperex Technology Co Limited (CATL) and Mr Pei Zhenhua, who also holds significant interests in one of China’s largest lithium converters.

AVZ managing director Nigel Ferguson said the company is delighted to enter into this deal with Mr Pei and CATL, “both of whom have the financial capacity, technical expertise and credibility within the lithium conversion and lithium-ion battery industry to compliment the world-class Manono project.”

AVZ’s existing offtake agreement with Yibin Tianyi will be assigned to CATH and expanded in scope to provide offtake of spodumene concentrate for the life of the Manono project.

In addition, CATH will enter into a long-term primary lithium sulphate (PLS) offtake or tolling agreement in respect of PLS produced from the PLS calcining plant to be developed in joint venture with CATH.

Expansion scenario study

AVZ and CATH have also agreed to evaluate and progress a study to increase annual production, expanding dense media separation (DMS) production capacity from a 4.5 million tonne per annum throughput producing about 700,000t of spodumene concentrate, as contemplated by the 2020 definitive feasibility study, to an “expansion scenario” based on a 10Mtpa DMS throughput producing about 1.6Mt of spodumene concentrate.

The studies began in early September and AVZ said they are expected to be significantly progressed by the end of December.

Under the expansion scenario, CATH will fund its equity share of the additional Manono project development capital expenditure and increase its spodumene concentrate offtake commitment to about 50% of annual production.

The scenario is expected to significantly scale the size and further de-risk the fundamental economics of the Manono project.

AVZ and CATH will also assess the feasibility of developing a lithium hydroxide facility once studies currently underway are completed on this process.

Mr Ferguson said the forging of the companies’ partnership also complements AVZ’s “excellent collaborative relationship” with the DRC government and the local communities in which it operates.

Last month the company received government approval of its environmental and social impact assessment, bringing it another step closer to a mining licence.

“We look forward to updating our shareholders in the near future with respect to award of the mining licence and execution of the collaboration development agreement, which are progressing extremely well through government channels,” he said.

“Once this transaction and the associated agreements are finalised, 100% of our saleable lithium products will be accounted for and a significant portion of the Manono project will be financed via the equity contributions provided by this transaction,” Mr Ferguson added.