AVZ Minerals (ASX: AVZ) reports that it has secured USD$240 million in cash funding for the development of its Manono Lithium and Tin Project in the Democratic Republic of Congo.
The deal, which is subject to regulatory approval, sees subsidiary AVZ International Pty Ltd entering into a transaction implementation agreement with Chinese battery maker Suzhou CATH Energy Technologies in exchange for a 24% stake of a newly-formed joint venture vehicle.
AVZ reports that the proceeds from the transaction will fund a majority of the total project financing required, advancing the project into production.
CATH is a private investment entity jointly owned by billionaire Pei Zhenhua and Contemporary Amperex Technology (CATL), both significant players in the global lithium conversion and lithium-ion battery industry.
“This is a very significant day for the Company and all of our stakeholders as we move closer to making the Manono Project a leading global producer of lithium products”
Addressing the news, AVZ Managing Director Nigel Ferguson said: “This is a very significant day for the Company and all of our stakeholders as we move closer to making the Manono Project a leading global producer of lithium products. 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 within the lithium conversion and lithium-ion battery industry to compliment the world class Manono Project.”
Under the TIA, CATH will earn a 24% equity interest in the multi-faceted joint venture in exchange for USD$240 million cash, plus a further amount to fund their pro rata portion of funding for the development of the Manono Project. CATH is expected to contribute more than USD $400 million in total, subject to final project development and verification of costs.
AVZ will hold a controlling 51% interest in the project, reduced from 75% post-completion of the transaction, and will retain its position as lead developer of Manono.
The company notes that its existing offtake agreement with Yibin Tianyi will be assigned to CATH and expanded in scope to provide offtake of SC6 spodumene concentrate for the life of the project.
Meanwhile, CATH will enter into a long-term primary lithium sulphate (PLS) offtake agreement covering output from the PLS calcining plant, which will be developed in joint venture.
AVZ and CATH have also agreed to evaluate and progress a study to increase annual production at Manono, expanding dense media separation (DMS) production capacity from 4.5Mtpa to 10Mtpa DMS throughput, producing approximately 1.6 million tonnes of SC6 per year. These studies commenced in early September and are expected to be significantly progressed by AVZ by end of December 2021.
Under the expansion scenario, CATH would fund its equity share of the additional Manono Project development capital expenditure and increase its SC6 offtake commitment to approximately 50% of annual production. AVZ has stated that the expansion scenario would ‘significantly scale the size of the project and further de-risk the fundamental economics of the Manono Project .’
