At time of writing, the share price of AVZ Minerals Limited [ASX:AVZ] is down 22.4%, trading at 5.2 cents.
It has been a rough year for the stock, after trading in the 25-30 cent range, it has now lost 81%:
Why has AVZ Minerals’ share price done this?
Announcements out of the company have come spaced by about a month.
On 21 December it released drilling results from the Roche Dure Pegmatite at its Manono project.
On 22 January it announced a trading halt, pending a further announcement.
Today, it came out of a trading halt, only to go down sharply following the company flagging its intention to raise capital via a share purchase plan (SPP).
It is seeking to implement,
‘[B]y way of a prospectus, a Share Purchase Plan (“SPP”) to raise a minimum of A$5 million (up to a maximum of A$10 million before costs) to advance its Manono Lithium and Tin Project (“Project”) in the Democratic Republic of Congo (“DRC”) and for general working capital. The SPP will afford the Company’s Eligible Shareholders the opportunity to participate and support their Company.’
Funds will be used for a Definitive Feasibility Study (DFS) which includes hydrogeological test-work, environmental studies, pit dewatering and ‘general working capital.’
Crucially, the new shares will be issued at ‘20% discount to the VWAP trading price over the 5 trading days before the date of issue of the New Shares.’
AVZ Minerals has significant resource, limited cash
Despite sitting on a significant resource, the market was evidently unimpressed with the news after coming out of the trading halt.
As per their January Investor Presentation, their grade and tonnage are impressive:
Source: AVZ Minerals Limited
It seems as if operating cash has been a stumbling block for them as at 9 November 2018, they had $6.5 million on hand.
Below you can see a chart mapping out their progress and, their intended timeline:
Source: AVZ Minerals
With a DFS yet to come, getting to commissioning by Q2 2020 with $6.5 cash, plus a maximum of $10 million via an SPP, could look an increasingly tough ask, should further positive news not be forthcoming.
That being said, the sheer size of AVZ Minerals resource could attract some speculative bets.
It will be interesting to watch how this story develops over the next few days.
For Money Morning