The Enemy Within, page-12

Hi Dr_Manhattan
Before I start I really like your posts, we should meet some time to swap notes. I am also Brisbane based. By the way this reply is really aimed at other posters/readers and not you.

Yes I have thoughts on the options due to expire in 2019. In my opinion there will eventually be a serious rerating of AVZ and as we all know serious discussions and negotiations are underway. We have had statements from the CEO that they are having positive discussions around possible funding models or other possible arrangements .. call them what you like. So they are talking to a receptive audience for starters. Tick!.

Now in order for AVZ to obtain a satisfactory agreement is likely to take time and in my view another 3 months at most. Both parties to any agreement want a good deal and it will IMHO take time. Not what many will want to hear I am sure but that’s my opinion.

The recent drilling results indicate that the resource size will continue to grow. I predict that infill drilling will grow the JORC resource size by 15% and the extensional drilling will add a further 10%. This would result in a resource estimate of around 325m tonnes. Considering Roche Dure will not be fully drilled at that stage and Carrier del Este is much bigger, this magnificent resource will be developed, it’s just a question of who will do it.

The all important Reserve estimate should grow to around 50 to 60m tonnes (conservative) which at say 5m tonnes pa gives an absolute certainty of a 10 to 12 year mine life. That’s more than enough to get things moving and a deal settled. Clearly with enough infill drilling a mine life of 30 years from Roche Dure at 10m tonnes pa is just a matter of course. I remind readers this excludes the other six pegmatites. I think that’s a tick.

I have been very pleased to see that five wide drill holes are planned for metallurgical testing. This is a very astute and necessary process which may prove to be the last piece in the puzzle for potential investors and offtake partners. It is critical data in any future negotiations IMHO. If the results continue to reflect very low levels of deleterious elements like iron and manganese, it will confirm that this deposit can supply huge quantities of very high grade, battery quality, lithium concentrate to China. Tick.

The remaining area of concern for many readers is the freight costs. The initial SS did address that but clearly some capital may be required to upgrade roads to Lake Tanganyika to all weather status. Not necessarily sealed. My research suggests the roads are in better shape than some have suggested. Anyway given the Chinese investments in infrastructure in the DRC, if a 10 or 20m tonne pa mine is envisaged for the future to supply Chinas demand for lithium, that road to the lake will not be an issue in the long term.

In the short term there are other freight routes that will get concentrate to customers, albeit more expensive routes. If we assume that battery quality lithium remains at relatively high selling prices for the first few years of operation there are a number of other freight alternatives by truck through either Durban or Richards Bay ports and also by road/rail through Angola. With such low mine operating costs, very valuable tin credits will result in the ability to offset some of the freight costs. Tick.

These are my thoughts and I hope they help those investors that have found the last few months difficult. I remain fully invested in AVZ and happy for events to be played out over the next 3 to 4 months. Should not take any longer than that if they are serious.

Have a good weekend

Chrs W2