What’s happening with the AVZ Minerals share price now?

AVZ shares are going to remain suspended until at least the end of the month…

| More on:
A surprised man sits at his desk in his study staring at his computer screen with his hands up while he watched the Sezzle share price fall despite the company accepting a takeover offer from Zip Co

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • AVZ shares were due to return from suspension on Friday
  • However, they will now be suspended until the end of the month
  • AVZ is busy trying to sort out an ownership dispute relating to the Manono Lithium Project

After three weeks offline, the AVZ Minerals Ltd (ASX: AVZ) share price was due to return to trade today.

However, as many likely suspected, the lithium developer’s shares will remain halted for a little while longer.

What’s going on with the AVZ share price?

On 9 May, the company requested a trading halt pending the release of an announcement relating to mining and exploration rights for the Manono Lithium and Tin Project in the Democratic Republic of the Congo.

However, a couple of days later, AVZ realised that it needed more time after being hit with arbitration proceedings by Jin Cheng Mining Company.

In light of this, the company asked for the Australian stock exchange to suspend its shares until today.

This extra time has proven insufficient and the AVZ share price now looks set to remain suspended until the end of the month.

This morning AVZ stated:

The Company advises that as at the date of this letter, the subject of the initial trading halt request remains incomplete. Accordingly the Company requests an extension to the voluntary suspension until the commencement of trade on 1 June 2022 or an announcement to the market regarding its mining and exploration rights for the Manono Project.

Though, whether that will be enough time for the company to resolve this incredibly messy situation remains unclear.

What’s happening?

AVZ has been hit with arbitration proceedings by Jin Cheng Mining Company in the International Chamber of Commerce in Paris (ICC) to pursue claims by Jin Cheng to be recognised as a shareholder of Dathcom Mining SA.

Dathcom is the owner of the mining licence for the Manono Lithium and Tin Project.

AVZ currently owns 75% of Dathcom and therefore 75% of the project. However, Jin Cheng claims that it acquired a 15% shareholding in Dathcom from La Congolaise D’Exploitation Miniere SA (Cominiere).

This is where it gets particularly messy. It remains unclear where this 15% share comes from.

What are the potential ownership scenarios?

AVZ has had a number of opportunities to clear up the ownership structure but has so far failed to do so. This has led to a range of ownership scenarios being bundled around.

Essentially, at best, AVZ will own a 66% stake after selling 24% to Suzhou CATH Energy Technologies for a US$240 million investment and acquiring 15% from Cominiere (which it believes it is entitled to).

At worst, AVZ will own just 36% of the project after the sale to Suzhou CATH Energy Technologies, the potential loss of 15% to Jin Cheng, and the potential failure to acquire 15% from Cominiere.

Finally, in the middle, there’s the possibility that AVZ sells its 24% stake to Suzhou CATH Energy Technologies and does nothing else, leaving it with a 51% stake.

Given the wide range of ownership scenarios, it’s no wonder the AVZ share price is suspended.

Depending on the outcome, the AVZ share price could either be severely overvalued, severely undervalued, or just right.

This once again highlights why investing in shares that are operating in countries like the Democratic Republic of the Congo carry significant risk.

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 Scott Phillips.

More on Resources Shares

Three happy miners.
Resources Shares

Broker sees 23% upside and a huge yield for BHP shares

BHP shares could offer the winning combination of strong gains and big dividends...

Read more »

Two excited mining workers in yellow high vis vests and hardhats shake hands to congratulate each other on a mineral discovery that is making the Galileo Mining share price rise today
Broker Notes

Guess which ASX 200 mining shares these experts are backing

These two ASX 200 shares are benefitting from Australia's current mining boom.

Read more »

Rede arrow on a stock market chart going down.
Resources Shares

Down 9% in a week, what’s going on with the Chalice Mining share price?

It's been a rough week – and year – for the Chalice Mining share price.

Read more »

Young boy wearing a red hard hat frowning with his hands on his head.
Resources Shares

Why are ASX 200 mining shares having such a dire week?

Investors are concerned about slowing commodity demand from China and a potential global recession.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
ESG

Own BHP shares? ‘Almost unbelievable’ breakthrough could be key to miner’s climate strategy

The Federal Government is considering whether carbon stored in tailings dams will count towards carbon credits and offset schemes.

Read more »

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall
Dividend Investing

Here’s the BHP dividend forecast through to 2024

BHP's dividends could be very juicy in the coming years...

Read more »

Happy man in high vis vest and hard hat holds his arms up with fists clenched celebrating the rising Fortescue share price
Resources Shares

Here’s why analysts rate these ASX 200 mining shares as buys

Here are two mining shares rated as buys...

Read more »

a small boy dressed in a superhero outfit soars into the sky with a graphic backdrop of a cityscape.
Broker Notes

Could ASX lithium shares be set for a boost?

A top broker's upgrade on its lithium price forecast bodes well for ASX lithium shares, which have lost major value…

Read more »