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Battle over ‘world’s largest lithium deposit’ drags in China
Tom RichardsonMarkets reporter and commentator
Updated Oct 24, 2022 – 8.15am,first published at 5.00am
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Suspended lithium play AVZ Minerals has conceded a Congo court ordered its payments to acquire an additional 15 per cent stake in the Manono Project be suspended, after it was questioned about the September 20 court ruling by The Australian Financial Review.
The ruling suggests AVZ and Congo’s Dathomir face more arbitration over the deal’s validity and sale price, while extending a list of disputes AVZ faces over its ownership rights to the Manono hard rock lithium deposit in the Congo.
AVZ Minerals CEO Nigel Ferguson is disputing claims that a Chinese company owns 15 per cent of AVZ’s lithium project in the Democratic Republic of the Congo. David Rowe
On Thursday last week, AVZ told the market only a properly constituted arbitration tribunal has jurisdiction to overturn an acquisition it says it executed with Dathomir in August 2021 for $US21 million.
The Perth-headquartered explorer rode the lithium boom and excitement over claims Manono is the world’s largest lithium deposit to reach a $2.7 billion sharemarket valuation last May, before shares were suspended over its mining licence’s approval by the Congo government.
Despite the ruling suspending AVZ’s payments for the 15 per cent stake, AVZ said it still had legal title to 75 per cent ownership of Manono.
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In September 2021, AVZ announced a separate agreement with Chinese investor Suzhou CATH Energy Technologies to sell a 24 per cent equity interest in Manono for $US240 million, which by proxy valued the project at $US1 billion.
This compares to the $US21 million AVZ said it paid Dathomir for a 15 per cent stake just a month before in August 2021 in a transaction the Congolese mining group has now had a court rule as suspended.
On May 10, AVZ told investors its future Manono stake would fall from 75 per cent to 51 per cent after the deal to sell a 24 per cent stake to CATH completed, with the right to negotiate to buy another 15 per cent from Congo government’s Cominiere potentially taking its stake back to a final 66 per cent.
However, in May 2022 another Chinese mining group named Zijin Mining announced it had signed a separate legal deal with the Congo government’s Cominiere to acquire a 15 per cent stake in the Manono Project for $US33.4 million.
Fortune-500 company Zijin said the deal was struck in September 2021 and the Commercial Court of Lubumbashi rejected AVZ’s attempt to have the deal thrown out in November 2021 and January 2022.
AVZ didn’t disclose the Zijin legal dispute or court rulings to the market until May 4, 2022, as shares raced to $1.30 in April 2022 on a $4.5 billion valuation. Its stock was suspended on May 9.
In May, Zijin also applied to the International Court of Arbitration (ICC) to force AVZ to recognise its claim to 15 per cent in the Manono project.
“Zijin Mining confidently looks forward to the ICC hearing in April 2023 and expects AVZ’s abuse of Zijin Mining’s 15 per cent stake in the Manono project as alleged will be addressed,” Zijin’s in-house legal counsel Sun Kuiyuan said on Thursday. “Zijin Mining is disappointed with AVZ’s lack of cooperation with the minority shareholders of the Manono project.
“Zijin is surprised that AVZ has not supported its participation in the Manono project, which brings substantial capital and expertise to the benefit of all stakeholders and the DRC.”
Zijin refused to comment further. It previously said the separate sale between Dathomir and AVZ had been legally terminated to mean AVZ only had legal ownership of 60 per cent of the project, with Zijin at 15 per cent, Dathomir at 15 per cent, and the Congo government under Cominiere at 10 per cent.
It also said if AVZ proceeded with the 24 per cent sale to CATH Technologies its stake would drop from 60 per cent to 36 per cent to mean AVZ “will no longer have an absolute controlling interest” in Manono.
AVZ refused to comment on questions around the September 20 court ruling and a separate December 2021 court document related to the Dathomir deal.
Company secretary Ben Cohen said AVZ would only respond further with its lawyers present due to unspecified allegations on social media that Financial Review reporter Tom Richardson is connected with a short selling group named Boatman Capital, which chose to publish mistruths.
London-based short side research firm Boatman Capital has followed Zijin in claiming AVZ’s stake will fall from 60 per cent to 36 per cent if the deal to sell to CATH goes ahead, which theoretically means AVZ would own less of the project than Chinese interests.
On September 9, AVZ issued a statement attacking Boatman for publishing alleged mistruths around the Congo courtroom barneys and reiterated its position that it still owns 75 per cent of Manono.
In response, Boatman instructed lawyers Grosvenor Law to demand both the ASX and ASIC investigate AVZ for allegedly misleading the market and failing to follow its disclosure obligations.
Boatman has also submitted court documents and made unreported allegations to Australia’s regulators it said supported its statements.
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