Here’s why the AVZ Minerals share price caused such a stir in May

AVZ shares have spent most of the month suspended…

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Key points

  • AVZ shares have been causing a stir in May
  • This is despite the lithium share spending most of the month suspended
  • AVZ is busy trying to sort out an ownership dispute relating to the Manono Lithium Project

AVZ Minerals Ltd (ASX: AVZ) has been among the headlines frequently in May.

That’s despite the AVZ share price spending most of the month either in a trading halt or suspension.

What’s going on with the AVZ share price this month?

At the start of the month, the AVZ share price was paused pending the release of an announcement.

That announcement came and revealed to much delight that the Democratic Republic of the Congo’s Minister of Mines has signed the ministerial decree to award the mining licence for the Manono Lithium and Tin Project.

However, at the bottom of this milestone announcement was a bombshell which rocked the AVZ share price and has resulted in its suspension.

What was the bombshell?

The aforementioned mining licence has been awarded, as expected, to Dathcom Mining. This is a joint venture of which AVZ is currently the majority owner with a 75% interest.

The key word there is currently. There are concerns that the company could soon go from being the majority owner to just a minor owner of the project.

This follows news that AVZ has been hit with arbitration proceedings by Jin Cheng Mining Company in the International Chamber of Commerce in Paris (ICC). It is seeking to be recognised as a shareholder of Dathcom Mining SA.

This would have obvious consequences for the valuation of the AVZ share price, hence why it is suspended currently.

What ownership outcomes exist?

At best, AVZ will end up owning a 66% stake in the project. This would be the result of its agreement to sell 24% to Suzhou CATH Energy Technologies for a US$240 million investment and acquiring 15% from La Congolaise D’Exploitation Miniere SA (Cominiere), which it believes it is entitled to.

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

The AVZ share price is scheduled to return to trade on 1 June. However, given how long legal challenges can last, I wouldn’t be surprised to see its suspension extended further.

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.

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