Beleaguered lithium miner AVZ Minerals (ASX:AVZ) will vote on whether to appoint three new directors to the board at its annual general meeting (AGM) on 23 November 2023.
In essence, it’s a vote on the company’s future having been in a protracted suspension from the Australian Securities Exchange (ASX). The suspension is amid a series of legal stoushes and disputes surrounding its Manono Lithium and Tin Project in the Democratic Republic of Congo (DRC).
AVZ Minerals, which has not traded for 526 days, is recommending shareholders vote against electing former AVZ director Peter Huljich, as well as Michael Carrick and Ty Ludbrook to the board, via privately held Fat Tail Holdings.
AVZ does not endorse the nominees and believes their nominations are not in the best interest of all shareholders. To be elected, a nominated director requires greater than 50% of all voting shareholders to support their appointment to the board.
However, a group with the slogan ‘Make Manono Great Again’ (MMGA) has been formed to shake-up the board and nominate the three directors at the upcoming AGM. The group was established to take steps it believes is needed “in order to restore confidence and faith in AVZ as a trusted partner”.
In an open letter to AVZ shareholders, MMGA says the nominated directors seek appointment to improve corporate governance, restore critical stakeholder relations, and rebuild value in the company.
MMGA adds: “They have the skills and experience necessary to execute this.”
Prior to his resignation in August of 2022 as independent Non-Executive Director of AVZ, Huljich was the Chair of the audit and risk committee as well as the remuneration and nomination committee. He is a seasoned senior African resources industry executive having worked in the legal, natural resources, and banking sectors since 1993.
Carrick is a Chartered Accountant with over 30 years of experience in the resources sector. He has been responsible for the development of 7 major gold mines in 5 countries, including the development of the first ever major gold mines in Tanzania and Mongolia, and most recently the largest gold mine in the Philippines.
Ludbrook is the Managing Director and founder of Allegiance Capital. Prior to litigation funding, he had 15 years of commercial experience across the corporate sector in various roles in both the finance and energy sectors.
When Mining.com.au asked AVZ how confident the company is it can resolve the ongoing arbitration and court cases and resume trading within H1 2024 with the existing board, the company stayed pretty tight-lipped.
“AVZ will continue to pursue each of the arbitratons for the purpose of protecting its interests in the DRC and to exert its rights under the relevant laws.
Currently, AVZ is in negotiations with the DRC government to advance a memorandum of understanding (MoU) which will provide a pathway to granting the mining licence for the Manono Project and the resolution of arbitrations between AVZ and DRC controlled entities.
AVZ’s interests align with those of the DRC, with AVZ investing in the development of the Manono Project which would greatly benefit the Manono community and the people of the DRC. The DRC government recognises this and is progressing the MoU discussions with a strict legal and regulatory framework, which understandably takes time.”
A fat tale
Last Monday (9 October), AVZ referred to media speculation and purported shareholder communications from Fat Tail for seeking to solicit support from shareholders to elect the aforementioned nominees.
The company alleges Fat Tail has made “several inaccurate claims regarding the (incumbent) directors and the Manono Lithium and Tin Project”. AVZ went on to deny the company is to blame for the deteriorating relationships with key stakeholders in the DRC and oppose claims it has not been forthcoming in its communication with shareholders.
AVZ reiterates it is not to blame, telling this news service the board’s negotiations for an MoU “demonstrates a clear working relationship with the DRC government and the best pathway to progressing the Manono Project”.
The Fat Tail nominees believe AVZ is pursuing unnecessary arbitrations that are unlikely to foster long-term relationships and that these arbitrations are fraught with risk.
AVZ engaged global law firm DLA Piper to conduct an independent review of the company’s corporate governance framework in June 2022. Mining.com.au understands the firm continues to assist with the various ongoing court proceedings.
DLA Piper’s appointment came about a month after AVZ was first suspended from trading on the ASX, which is in connection with a dispute over mining and exploration rights at the Manono Project.
When it was initially suspended from trade in May 2022, AVZ had a market capitalisation of $2.6 billion.
Law and disorder
At the crux of the issue is a claim over pre-emptive rights. At present, AVZ owns a 75% stake in Manono Lithium and Tin Project and La Congolaise D’Exploitation Miniere (Cominiere), which is majority owned by the DRC government, holds the remaining 25% stake.
One of the key legal stoushes centres on Cominiere and entity Dathomir not recognising and seeking to overturn a transaction in which AVZ acquired 15% of a Dathcom joint venture under pre-emptive rights.
According to a 27 September 2023 AVZ announcement, Zijin Mining (SSE:601899) subsidiary Jin Cheng Mining Company alleges it in fact acquired the minority shareholding in Dathcom from Cominière. Dathomir is a former minority shareholder in Dathcom, as per the announcement.
The Fat Tail nominees believe there are numerous conflicting statements from Cominière, Jin Cheng, and AVZ regarding the transfer of this 15% interest in Dathcom.
In an ASX announcement on 9 October, the company stated: “AVZ does not disagree that there are conflicting statements regarding the transfer of the 15% in Dathcom. However, any purported transfer of Cominiere’s 15% interest in Dathcom to Zijin should be disregarded, including any reports published by Cominiere or Zijin, as this purported transaction was in clear contravention of AVZ’s pre-emptive rights.”
In an excerpt from AVZ’s 31 December 2022 half-year report the company reaffirms its stance: “On 10 September 2021, Cominiere purported to conclude a share transfer agreement with Jin Cheng for 15% of the shares in Dathcom. This purported sale and transfer breached AVZ’s right of first refusal, is null and void under DRC law, and has not been recognised by Dathcom.”
The dispute over the 15% stake in Dathcom has led to action in the International Chamber of Commerce.
AVZ notes the three ICC arbitration proceedings include claims Cominière and/or Jin Cheng in relation to Cominière’s purported sale of the 15% shareholding in Dathcom to Jin Cheng is in breach of AVZI’s pre-emptive right and other issues of compliance with the Dathcom JV.
Another ICC arbitration proceeding involves Dathomir in relation to its attempts to dispute the sale of its 15% shareholding in Dathcom.
The third arbitration proceeding is against the DRC in relation to what AVZ says is its failure to procure the expeditious grant to Dathcom of an exploitation permit in respect of the Manono Project.
Mining.com.au understands the Fat Tail nominees are confident of resolving these current legal issues and be able to lead AVZ in the resumption of trading on the ASX in the near-term, should they be elected.
While shareholders may be divided as to the best make-up of the board, there is likely to be consensus around one issue – resuming trade and restarting mining activities is favoured to happen sooner rather than later.
Write to Adam Orlando at Mining.com.au
Images: AVZ Minerals