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

AVZ shares have spent most of the month suspended…

| More on:
A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy

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 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.

More on Resources Shares

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Down 14% in 2024, why is the BHP share price sliding again today?

ASX 200 investors are bidding down the BHP share price on Wednesday.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Resources Shares

These ASX 200 mining stocks could rise 40% to 50%

Analysts think these miners are dirt cheap at current levels.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Fortescue share price leaps 5% as electric machinery makes a milestone

Fortescue is charging ahead with its electric mining ambitions.

Read more »

rising mining asx share price represented by happy woman miner in hard hat
Resources Shares

Why the BHP share price crushed the benchmark this week

BHP shareholders enjoyed a rewarding week.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Dividend Investing

Here is the profit forecast to 2026 for BHP shares

Let’s unearth how much profit this miner could make.

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Why are ASX 200 mining shares smashing the benchmark on Wednesday?

Rio Tinto, BHP and Fortescue shares are all charging higher today.

Read more »

Two miners standing together.
Resources Shares

Why is the South32 share price getting battered today?

ASX 200 investors are bidding down South32 shares today.

Read more »