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AFR - Tom Richardson 12 April 5.37PM

ASX suspends AVZ for non-compliance with listing rules

The Australian Securities Exchange sin binned lithium explorer AVZ Minerals for non-compliance with its listing rules after it told the market operator it cannot disclose all material information related to its fight to control the Manono lithium project in the Democratic Republic of Congo.

The ASX’s decision to suspend AVZ for non-compliance under listing rule 17.3.1 leaves shareholders trapped in the stock. AVZ responded to 20 questions from the ASX about its disclosure of Manono-related ownership disputes and capital raisings in 2021.

AVZ told the ASX its failure to “fully comply” with the key listing rule is partly because its confidential and legally privileged information has been reported by The Australian Financial Review, which revealed on February 8 that it paid a Congo middleman $US1 million cash to help it secure its mining licence from the DRC government.

Shares in the Perth-headquartered explorer raced to a near $4.6 billion valuation in April 2022 as it snagged a place in the S&P/ASX 200, before the run turned sour when it first disclosed ownership disputes last May and entered a lengthy and ongoing trading halt.

ASX scrutiny

In Wednesday’s response to an ASX letter dated February 10, AVZ said it didn’t disclose a May 2021 letter from a DRC entity named Dathomir that terminated AVZ’s agreement to purchase a 15 per cent stake in Manono because Dathomir didn’t have valid legal grounds to scupper the deal.

AVZ added it believed Dathomir’s letter purporting to terminate the sale would not have materially affected the price of its shares if disclosed to the market at the time.

The embattled explorer also claimed it didn’t need to disclose that it knew a DRC-state backed mining body named Cominiere had agreed to transfer a separate 15 per cent ownership interest in Manono to Chinese mining group Zijin Mining in November 2021.

AVZ didn’t disclose the Zijin transfer because it was so uncertain or indefinite that it was not market sensitive, and a reasonable person would not expect the news to materially affect its sharemarket price, it argued.

It added that the 15 per cent stake in question related to AVZ’s right of first refusal to buy it under the terms of the joint venture agreement it entered with Cominiere and Dathomir, which is abbreviated as the Dathcom JV.

Chinese miner Zijin is a powerful operator in the resource rich DRC where it operates one of the world’s largest copper mines and now competes with rival Chinese interests and AVZ for control of Manono’s lithium deposits.

AVZ and Zijin are set for a legal clash at the International Chamber of Commerce in Paris on April 23 over the 15 per cent stake, which Zijin says DRC share registry records show it legally bought from Cominiere.

AVZ is applying to have the dispute thrown out on the basis the ICC has no jurisdiction to investigate the dispute. It also faces an ICC dispute with Dathomir over the separate 15 per cent stake.

The Australian explorer maintains it legally owns 75 per cent of Manono, although 30 per of that interest is under dispute and its mining licence linked to the project was cancelled by the DRC government on January 28.

AVZ disclosed the ministerial decree cancelling the license on February 6, one day after being emailed questions about the order by the Financial Review.

In its response to the ASX it said it became aware its own mining licence had been cancelled six days after the January 28 DRC government order issued February 3.

The ASX also queried AVZ over its cleansing notices after it raised $40 million in July 2021 and $75 million in December 2021. The notices stated no information had been excluded from investors.

AVZ also faces a class action funded by Australian law firm Omni Bridgway that closed for applications on March 31. The compensation claim, to be run by lawyers Johnson Winter Slattery, will allege AVZ failed to adequately disclose information when making positive statements about its ownership rights to Manono, and accordingly engaged in conduct that was misleading or deceptive. AVZ will defend the claim.