AVZ Shares: Secures Cornerstone Investor for Lithium Project (ASX:AVZ)

The AVZ Minerals Ltd [ASX:AVZannounced today that it has entered into a transaction implementation agreement (TIA) with Suzhou CATH Energy Technologies.

CATH will bag a 24% equity interest in a multifaceted joint venture to develop AVZ’s flagship Manono Lithium and Tin Project.

To earn its stake, CATH will pay US$240 million cash and a further amount to fund their pro rata portion of funding to develop Manono.

Subject to verification of final project costs, AVZ expects the transaction to contribute more than US$400 million.

Interpreting the deal as a positive de-risking measure, the market sent AVZ shares rising 8% at the time of writing.

AVZ share price is currently trading at 34.5 cents.

ASX AVZ - AVZ Share Price ChartSource: Tradingview.com

Today’s spike adds to the gains made by AVZ recently.

Over the last 12 months, the AVZ share price has gained 445%.

CATH partners with AVZ to develop Manono Lithium and Tin Project

AVZ Minerals today announced its wholly-owned subsidiary AVZ International entered into a transaction implementation agreement with Suzhou CATH Energy Technologies.

CATH is a private investment entity jointly owned by Pei Zhenhua and Contemporary Amperex Technology (CATL).

Both Mr Zhenhua and CATL are major players in global lithium conversion and the lithium-ion battery industry.

Proceeds from the potentially US$400 million transaction will fund a ‘majority of the total project financing required.

AVZ will end up with a controlling 51% interest in the Manono Project after the CATH transaction is finalised.

AVZ will also remain the lead developer of the project.

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AVZ and CATH will work to increase production

The existing offtake agreement with Yibin Tianyi will be assigned to CATH and expanded in scope to provide offtake of spodumene concentrate (SC6) for the life of the Manono Project.

AVZ and CATH have also planned to evaluate and progress a study to increase annual production.

This will be done by expanding the Dense Media Separation (DMS) production capacity from a 4.5Mtpa throughput producing approximately 0.7 million tonnes of SC6 to a 10Mtpa DMS throughput producing approximately 1.6 million tonnes of SC6.

The original throughput target of 0.7 million tonnes of SC6 was flagged by AVZ’s 2020 definitive feasibility study.

The expansion studies have already commenced and are expected to be ‘significantly progressed by AVZ by end of December 2021.’

AVZ’s Managing Director Mr Nigel Ferguson commented:

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 caliber 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.

What’s next for the AVZ share price?

What a difference 1% makes.

Two weeks ago, Ioneer Ltd [ASX:INR] announced a US$490 million Rhyolite Ridge joint venture with multinational miner Sibanye-Stillwater.

But that deal meant Ioneer’s stake in the Rhyolite lithium project shrunk to 50%.

Unlike AVZ, the injection of capital came with the loss of INR’s controlling interest in its project.

After the transaction with CATH goes through, AVZ will still retain a 51% controlling interest.

The INR share price closed 11% down on the day of the announcement.

The large funding agreements announced by AVZ and INR follow another junior lithium developer — Lake Resources NL [ASX:LKE] — announcing a US$50 million deal with Lilac Solutions for a 25% stake in LKE’s Kachi Project in Argentina.

The run up in the share prices of the likes of AVZ and Vulcan Energy Resources Ltd [ASX:VULhighlight the strong interest and excitement about the lithium industry.

But the clean energy transition garnering so much hype currently isn’t restricted to just lithium.

If you are interested in opportunities in the clean energy sector, then I suggest checking out this report by our market analyst, Murray Dawes.

In the report, Murray goes through seven Aussie stocks he thinks possess the long-term potential to disrupt old industries.

Worth a read.

Regards,

Kiryll Prakapenka,
For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here


Kiryll Prakapenka is an investing autodidact who is passionate about conducting in-depth research on investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from The University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies.


Money Morning Australia