ASX-listed lithium developer, AVZ Minerals, has agreed to buy out its junior partner’s 10 per cent stake in the massive Manono lithium and tin project in the Democratic Republic of the Congo for $15.5 million. AVZ will now move to 75 per cent ownership of the project and it is currently advancing discussions with potential debt providers and offtake partners for the proposed US$545m project development.
Under the terms of the latest equity purchase agreement, AVZ has made an advance payment of US$500,000 to junior partner, Dathomir Mining Resources, with the remaining US$15 million due within 12 months of the agreement being executed or as soon as AVZ secures a minimum of US$50 million in project financing.
Assuming all approvals are obtained in relation to the sale of Dathomir Mining’s 10 per cent interest, AVZ will emerge with 75 per cent and the DRC Government will maintain its 25 per cent stake in Dathcom Mining, the overarching JV vehicle in which the Manono project is held.
The recently completed definitive feasibility study clearly demonstrated our Manono project is very robust, with strong financial metrics.
This additional equity in the Manono project will add significantly to the project’s bottom line and net present value and is critical to AVZ’s ongoing discussions with prospective financiers.
The Manono project is potentially one of the world’s largest open-pittable, lithium-rich pegmatite deposits, with indicated, measured and inferred resources at the Roche Dure deposit currently sitting at a prodigious 400 million tonnes grading 1.65 per cent lithium oxide.
An initial mine life estimate for Manono of 20 years assumes proved and probable ore reserves of 93Mt at 1.58 per cent lithium oxide for the production of up to 700,000 tonnes per annum of lithium concentrate grading about 6.1 per cent.
According to AVZ, its increased stake in Manono takes the company’s – now 75 per cent – share of the project’s NPV from US$1.41 billion to US$1.76 billion before tax and from US$616 million to US$771 million after tax.
The definitive feasibility study on Manono completed in April – based on the full 100 per cent of the project – shows a colossal life-of-mine EBITDA of US$8.36 billion and a profit after tax of US$3.78 billion over the initial forecast 20-year mine life, with an incredible payback period of just two-and-a-quarter years after tax.
AVZ says it expects to make a final investment decision on the proposed development soon, which is contingent on progress in its financing negotiations with prospective lenders in Europe, the Middle East and South Africa.
The resources-rich DRC has managed to attract a number of Tier 1, big-name mining players over the years who went there seeking the gargantuan-sized mineral deposits that the region is so famous for.
The list includes Barrick Gold and AngloGold Ashanti at their $US1.4 billion Kibali gold mine and Glencore at its Katanga copper-cobalt operations.
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