Morning all,
Another excellent announcement yesterday, and certainly not a surprise for those that bothered to take note of what has previously been discussed: refer
https://hotcopper.com.au/posts/38833129/single and highlighted as per the below;
But let's recap a few of the main points of what this 'increase in equity deal' essentially provides:
1. AVZ shareholders now own 65% of the world’s largest hard rock lithium deposit (up from 60%).
2. Minimal total outlay and negligible upfront cost for an additional 5% of the project.
3. Based on the recent 5mtpa SS, the 5% equity increase represents additional Net Present Value of @US$130M ($A185m) to a total NPV of approximately US$1.68 billion (A$2.4 billion). However the stated NPV does not include any of the following;
a) the added benefit of tin and tantalum credits that are yet to be factored into the NPV and IRR equations.
b) the clear economic benefit of potentially adding higher grade feed from Carriere de L'este, also yet to be factored in.
c) Upcoming met tests to confirm a premium grade (Tier 1 battery quality) concentrate from RD of between 6.2% and 6.8% (IMO), again another element not yet factored in - and btw this should alleviate any concerns around the company's US$750 median spod. price assumption.
4. Effectively this deal allows AVZ the company to swap 'new' equity in the Manono project for funding i.e. without diluting shareholders to kingdom come. As an example only, please refer to the above slide for a possible project funding scenario (likely to be a mixture of OT, debt and equity IMO).
5. Further 5% increase in equity from Cominiere - more or less a formality IMHO
6. Dathomir can continue to run their business (immediate $500k cash injection) and continue to assist AVZ to progress the Manono project as planned, therefore maximising their remaining 5% stake in the Manono project.
7. Cominiere to do the same. Contrary to popular belief, Cominiere is not a DRC government funded organisation and is therefore required to generate its own income to survive.
Thus IMO anyone who is suggesting that this announcement isn't a positive development is either kidding themselves, attempting to kid others or they simply don't seek or wish to understand AVZ's business nor the business models of our partners (Dathomir and Cominiere).
I know of one such heart who IMO deliberately made some ignorant and ill-informed comments yesterday (no doubt in an attempt to create some panic). He/she has been a belligerent and arrogant non-holder for sometime IMO, but interestingly (and all of a sudden) became a believer/holder around 6 weeks ago, only shortly thereafter to declare his/her exit with a 13.5% profit
.
Unsurprisingly and since that quick trade, this 'expert of all things Lithium' (just another pip trader IMO) has promptly gone back to his/her old ways, preferring to happily mouth off to his/her disciples in public to no doubt attempt to gain a better entry point. Unfortunately this appears to be this individual's business plan period, as opposed to having the guts to phone management and to seek to understand AVZ's business a little better and then perhaps to make a decision to either invest for the long-term (with the potential to reap massive rewards in this case) or to make the decision to take a small profit and then walk away in silence i.e. stop being the antagonist and show some dignity and respect for others as they perform and share their own research.
My point here is not to highlight this individual's profile and agenda, but to use this individual's plan as a case in point that small minds tend to focus on small gains, while open and curious minds tend to think about the big picture and building real wealth the old fashioned way (that is by holding and often doing nothing for years until their investment matures).
Whilst that may be too boring of an approach for the average trader/investor, the reality and exciting part is that the big picture (Lithium battery boom) is now becoming exponentially bigger by the quarter, and just happens to perfectly coincide with Manono's development as AVZ prepares to become a dominant supplier of the increasingly sought after 'Tier 1' battery quality Lithium.
Note the continuous increase in quarterly Li-Ion battery capacity demand projections (build out);
and heading ever so faster towards global production of 2000 GWh by 2023;
Creating another classic s-curve (technology disruption event) as illustrated in the various examples below;
GLTA
Cheers
Elpha
(20min delay)