As the situation in DRC drags ever on and on, it is providing me with some space and distance to reflect on AVZ and our position in the project.
Given our track record in responding to the political machinations and attacks against us, not to mention our troubles in negotiating the murky waters of the (DR) Congolese bureaucracy to date, I question how we well we will manage the extended period of planning and (particularly) construction which will follow successful delivery of the ML.
The scale of our issues currently being faced has led many to associate the ML delivery as the 'be all and end all', which of course in some ways it is, but also the conclusion to a long saga of drama and intrigue after which we can "go mining" with ease. However in major mining projects, particularly those in difficult operating environments, the delivery of licences is only the start of the troubles - which typically escalate substantively from there. Having the backing of CATL may in our case help alleviate some issues (both on the political and technical sides), however this will be new ground for our management team, and would present a thoroughly challenging prospect even were it being constructed 50ks down the road from Perth! Regarding transport and logistics we are continuing to operate on a "don't worry it will come/be improved" basis, but this could well be another drawn out saga in itself even should our newfangled PL-sulphate gambit work, seperate to the primary difficulties of developing our minefield.
Glencore and a number of other outfits have shown it is not impossible, but they too faced major difficulties and delays after the delivery of licenses, mostly as a result of the government but also other social and community dynamics and construction challenges. Glencore is often mentioned here on HC as an example case of the potential for mining success in DRC, but it must be mentioned that Glencore and its Chinese/DRC partners have been proven to act in ways that AVZ would not consider to achieve even that difficult success. Indeed, a defining feature of successful miners like Glencore in the DRC seems to have been the willingness to make significant (and at times suspect) payments to state-owned companies and other parastatal entities - sometimes even instead of those to the official agencies that collect taxes for the treasury, and perhaps even more importantly, by insulating themselves from the risk of politically motivated retribution or difficulties through questionable partnerships with individuals or entities with close ties to the Congolese political elite. Things may be headed in an improved direction so far under FT, but how deep does this go? Not so deep yet, in my view. And what happens if/when FT goes? The likelihood of FT still being in power before we reach full production remains a question in my opinion. Who comes next in any case, whether through democratic process, death, shifting political winds or coup, and will they return to seeing mining as the private purse it has been in previous decades? Will AVZ stoop to these tactics to achieve success in our operations? Not under ASX standards, we wouldn't (or shouldn't, at least). CATL certainly would, but can we associate with that? In any case, it will be a long and difficult political road ahead, as this current phase has suggested.
This period has also led me to reflect on our ever slipping timelines, a critical trait of AVZ. A red flag for me was NF cheerfully admitting in a meeting that the project engineers advised him the 18 month initial construction timeline to first SC6 on train likely wasn't feasible or realistic, and that it would need at least 24 months, yet including and constantly referencing this construction timeline anyway. We are going to face major challenges even in the pre-construction phase, and anyone that thinks we are ready to turn shovels on the main project construction in the weeks after ML delivery is dreaming. Sure again the Chinese will help, and EPCs know their stuff, but in my experience construction timelines always extend even in excellent operating environments and with hyper experienced management teams - neither of which we have. Personally I will now be surprised if we can reach production by 2025, let alone by the ridiculous 2023 repeatedly and continually referenced my our management. So be ready for the long haul, even should we be able to successfully negotiate the minefield that operating in DRC clearly is.
Sovereign risk has always been mentioned as a key factor for investors to watch in DRC, and this year has certainly highlighted the truth in that. Sovereign risk will continue to represent a major threat to our investment here - and it is difficult to project what could occur over the course of an extended period in a somewhat unstable political region, especially should we desire to hang in all the way to receiving dividends (which best case would likely be beyond 2027-2028 with project loan paybacks, or even later should the lions share of initial project profits be used for expansions scenarios, as they should be in the case of this deposit and mineral. Government support we somewhat appear to have currently, at least at some level, however governments come and go - and even friendly authorities can be flighty when alignment of interests diverges.
I very much want AVZ to succeed in developing Manono, it certainly has the potential to be world class. I want this for my own investment interests, of course, but also think that - done right - the mine could be the flagship for a change in circumstances for the local community. Beyond that, it and the associated SEZ could set the stage for a flourishing mining sector less along the existing rape and plunder model, and one that tied into a wider strategic metals and battery industry could bring real prosperity to the region. At least comparatively. However I am now questioning whether AVZ can and should be in the driving seat to bring about this change, as a junior explor without really relevant experience and with a let's say mixed track record thus far.
All of this is leading me to a difficult point, do I think we should really be trying to "go mining" and develop AVZ into a powerhouse corporation, and one I comfortably feel would be delivering dividends (and general success) by say 2030? Or do I think we should seriously consider a takeover, after all licences are in place and further proving up completed? Some may think it short sighted, and perhaps it is, but with the difficulties I see ahead, the long long road to production and the very real risk we could lose out through sovereign issues, I am really starting to think a buyout might be a good outcome - especially for those with very low share entry points, and who are frustrated by lack of access to significant capital. For me, I think I would currently be happy to take 2$ and turn my attention to simpler pastures, which remain booming in some sectors - though I chop and change in my thinking, and may again be gung ho to go mining before long.
