Why the AVZ (ASX:AVZ) share price is surging 8% higher today

This lithium share is on fire on Monday…

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asx share price increase represented by golden dollar sign rocketing out from white domes of lithium

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It has been a very positive day for the AVZ Minerals Ltd (ASX: AVZ) share price.

In morning trade, the lithium explorer’s shares are up 8% to 35 cents.

This leaves the AVZ share price trading within a whisker of its record high of 35.5 cents.

Why is the AVZ share price charging higher?

Investors have been bidding the AVZ share price higher today after it made a milestone announcement.

According to the release, the company has entered into a transaction implementation agreement with Suzhou CATH Energy Technologies (CATH).

The release advises that CATH will pay US$240 million in cash for a 24% equity interest in a multi-faceted joint venture to develop the Manono Lithium and Tin Project. CATH will also contribute its pro rata portion of funding for the development of the project.

In total, the company expects CATH to contribute more than US$400 million, subject to final project development costs being verified. These funds will be used by AVZ to advance the project into production.

AVZ will retain a controlling 51% interest in the Manono Project post-completion of the transaction.

Further, the release also highlights that CATH will pay a US$20 million break fee. This is payable in the event the required Chinese regulatory approvals are not obtained.

Management commentary

AVZ’s Managing Director, Nigel Ferguson, was very pleased with the milestone agreement.

He 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.”

“We look forward to updating our shareholders in the near future with respect to award of the Mining Licence and execution of the Collaboration Development Agreement, which are progressing extremely well through Government channels.”

“Once this transaction and the associated agreements are finalised, 100% of our saleable lithium products will be accounted for and a significant portion of the Manono Project will be financed via the equity contributions provided by this transaction,” he added.

The AVZ share price has now doubled in value in 2021.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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