Suspended Western Australian mineral exploration company AVZ Minerals and two of its directors are alleged by ASIC to have failed to disclose critical market information about a lithium project in the Democratic Republic of the Congo.
In proceedings filed yesterday (11 November) in the Federal Court, ASIC alleges AVZ “breached continuous disclosure obligations and engaged in misleading and deceptive conduct by failing to announce an escalating legal dispute in the DRC relating to the acquisition of shares in AVZ’s flagship Manono Project to the Australian Securities Exchange (ASX)”.
ASIC also alleges the company’s Managing Director Nigel Ferguson and Technical Director Graeme Johnston breached their director’s duties, authorised or permitted ASX announcements relating to AVZ that were false or misleading, or omitted matters that rendered them misleading.
It’s the latest development in a protracted saga and comes 18 months after AVZ delisted from the ASX after its shares had already been suspended for two years, as reported by Mining.com.au.
The beleaguered miner has endured a protracted series of legal stoushes and board disputes all centred around its Manono project in the DRC, as reported by this news service.
AVZ last traded on the ASX in May 2022 when it had a market capitalisation of $2.6 billion. It went into a trading halt on 9 May that year and was subsequently suspended three days later, without trading again, before being removed from official quotation on the ASX on 13 May 2024.
ASIC Deputy Chair Sarah Court says proper disclosures are critically important to investors, particularly when the company is operating an asset overseas.
“In this case it was all but impossible for retail investors to travel to an overseas location in central Africa, in which the company’s operations are being conducted,” Court says.
“In those circumstances, investors rely on the company to provide accurate and timely information. We allege Mr Ferguson and Mr Johnston failed to inform investors of the ongoing issues in this matter for nearly 12 months.
“The pair allegedly failed to take reasonable steps to ensure AVZ complied with its continuous disclosure obligations and that statements to the ASX were not misleading or deceptive.”
ASIC’s Deputy Chair adds that continuous disclosure and director duties are not only legal obligations, they are fundamental principles that protect the integrity of financial markets.
Legal obligations
On 4 May 2022, AVZ confirmed to the market it retained legal title to a 75% interest in the Manono project, however went on to refer to ‘recent media speculation in respect of several matters in connection with AVZ’s interest in the Manono Project, which the company considers spurious and immaterial’.
The matters included ‘…reference to a decision by ‘Le Tribunal de Grande Instance’ in the DRC … in respect of a claim by Dathomir Mining Resources SARL regarding the validity of a share certificate and an extract of a shareholders’ registry from Dathcom….’
It is alleged this was the first reference made by AVZ to a legal dispute that had begun in mid-2021. ASIC is seeking declarations of contravention against AVZ, and declarations of contravention and pecuniary penalties against Ferguson and Johnston.
ASIC is an independent Australian Government body. It is set up under and administers the Australian Securities and Investments Commission Act 2001 (ASIC Act), and carries out most of its work under the Corporations Act.
Write to Adam Orlando at Mining.com.au
Images: AVZ & Unsplash
