Chinese to plough US$400m into AVZ lithium project

AVZ Minerals has locked down US$400 million in funding, a new off-take partner and Chinese backers with very deep pockets and an intimate understanding of lithium battery manufacturing. It looks like it’s game on now for AVZ’s extraordinary Manono lithium project in the DRC after Suzhou CATH Energy Technologies, or “CATH” agreed to pick up 24 per cent of the project for US$240 million and also stump up its share of the project’s CAPEX.

In total, the transaction will inject more than US$400 million into the project, which AVZ says will cover a majority of the total financing required.

CATH is a private investment entity owned jointly by successful Chinese investor Pei Zhenhua and Contemporary Amperex Technology Co, or “CATL”.

CATL is one of the largest battery manufacturers in the world and according to SNE Research, in 2020, its electric vehicle battery consumption volume ranked No.1 in the world for the fourth consecutive year.

Mr Pei is a significant shareholder in Yibin Tianyi, one of China’s largest lithium converters and AVZ’s current off-take partner at Manono.

Under the terms of the deal, the existing offtake agreement with Yibin Tianyi will be assigned to CATH and expanded in scope to provide spodumene concentrate for the life of the Manono project.

CATH will also enter into a long-term offtake or tolling agreement for primary lithium sulphate produced from a proposed calcining plant which will be developed by the joint venture.

AVZ will retain a controlling 51 per cent interest in Manono and will remain lead developer of the project.

The deal continues AVZ’s financing activities, which in July included a heavily oversubscribed capital raise that injected $40 million into its coffers.

It is now waiting to secure a mining licence as it works to build relationships with the recently installed DRC government.

The Perth-based company says Manono is strategically positioned as a sustainable source of lithium for the booming electric vehicle battery market with forecasts placing it as potentially the world’s largest standalone hard rock lithium source.

AVZ recently announced major upgrades to ore reserves at Manono, with JORC proved and probable ore reserves now estimated at 131.7 million tonnes, an increase of 41 per cent on its report in April 2020. Notably Manono has eye-watering reserve grades of 1.63 per cent.

AVZ expects a mine life of 29.5 years at Manono based on an operation of 4.5 million tonnes per annum.

AVZ and CATH have agreed to progress a study into expanding dense media separation annual production capacity from about 0.7 million tonnes to 1.6 million tonnes of spodumene concentrate. The study started in September and is expected to be significantly progressed by the end of 2021. Under the expansion scenario, CATH will fund its equity share of the required capital expenditure and increase its offtake commitment to about 50 per cent of annual production.

The joint venture partners also plan to assess the feasibility of developing a lithium hydroxide facility once current studies are complete.

AVZ Minerals Managing Director, Nigel Ferguson said: ”We are delighted to enter into this deal with someone of the calibre of Mr Pei and CATL, both of whom have the financial capacity, technical expertise and credibility with the lithium conversion and lithium-ion battery industry to complement the world class Manono project.”

“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.”

With one of the most exquisite lithium resources on the planet, it was always only going to be a matter of time before the major players swooped on AVZ’s Manono project.

The fact that AVZ’s partners either make lithium batteries or convert lithium chemicals will give the Perth based company a unique inside running in the rapidly advancing lithium battery market – that they appear to have very deep pockets probably doesn’t hurt either.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au