It has been an incredibly volatile day for the AVZ Minerals Ltd (ASX: AVZ) share price on Wednesday.
After rocketing 19% higher to $1.18 in early trade, the lithium developer's shares are now down a massive 20% to 79 cents.
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What's going on with the AVZ share price today?
The AVZ share price initially rocketed higher this morning after the company revealed that the Minister of Mines has awarded a mining licence to AVZ's 75%-owned Dathcom Mining SA business for the flagship Manono Lithium and Tin Project in the Democratic Republic of the Congo (DRC).
The mining licence will cover the entirety of the Roche Dure mineral resource and the Carriere de l'Este exploration target. And while it does exclude a portion of the land holding to the north, AVZ intends to have discussions with the government in the near future regarding this land.
All in all, the company can now advance its early works program ahead of a final investment decision to commence major works and first production toward the later months of 2023.
So why the selloff?
The weakness in the AVZ share price appears to have been driven by some comments at the bottom of its release relating to Manono Project ownership claims.
Under the terms of the joint venture agreement, La Congolaise D'Exploitation Miniere SA (Cominiere), which owns the other 25% of the Dathcom business, will cede 10% of its interest to the DRC Government.
AVZ now wants to acquire the remaining 15% of the interest in Dathcom, which it believes it has the rights to. However, Cominiere has decided to transfer this interest to Jin Cheng Mining Company out of the blue.
So, with AVZ about to sell 24% of its stake in Dathcom to CATH in exchange for a US$240 million cornerstone investment to fund development, the company looks set to have its ownership in the Manono Lithium Project trimmed down to just 51%.
AVZ doesn't believe this is lawful and intends to fight the claim. Though, how successful it will be is hard to say. After all, the so-called Democratic Republic of the Congo is one of the most corrupt countries in the world according to Transparency International. It ranks 169th out of 180 and sits just a few points away from North Korea.
AVZ commented:
"In relation to the Cominiere Transfer Claim, the Company notes any such purported transfer would be restricted under the terms of the existing shareholders agreement between the Dathcom shareholders and accordingly, any purported transfer of the 15% interest to a third party would be a material breach of the pre-emptive rights contained in the existing Shareholders Agreement owed to AVZI, invalid and of no force or effect.
The Company has considered each of the Dathomir Claim and Cominiere Transfer Claim in detail and believes them to each be spurious in nature, without merit, contain fundamental and material errors, and have no substance or foundation in fact or law. The Company is continuing to take all necessary actions to resist these vexatious and meritless claims and to protect Dathcom's and its interests, and the Company will consider all options including engaging with the DRC Government and seeking international law remedies."
