Very happy to be in suspension today. Some thoughts -
1/ AVZ protected from today’s chaos in ASX lithium world
Firstly, sympathies with all ASX lihium stock holders. I myself dipped my toes on May 12 in 2 other well known lithium stocks , and last few weeks’ profits since have disappeared in just a day.
From what I read, it seems like it is the
Goldman report which caused the damage.
My primary expectation is that lithium stocks will get back to normal once this report is shrugged off and longer term lithium realities come into play again
Of course as an AVZ holder, one would have to be ecstatic to not be trading today.
Saved from last month global market chaos and now saved again today!
Yikes, imagine being short today on AVZ of all lithium stocks when almost any other one would have given shorters great quick profits
2/ Bearish trading principles
There are some bearish trading principles which IMO, many shorters were counting on
Market hates uncertainty – Market does not like any uncertainty in general and IMO many shorters were hoping that uncertainty, real or perceived and confusion of Dathomir, Zijin, etc would hit AVZ
Sell the rumour and buy the fact (for bad news) – Ideally stocks sell first on bad news and then might actually be bought once the bad event has taken place. We see this (sell the rumour whether true or not) in ltihium stocks today
Stocks go up the stairs and down the escalator – Stocks generally make a slow grind up but come down much faster. We see this in some lithium stocks today
Take the above principles together, and we can see what some shorters would have been hoping for.
It does not even have to be genuine facts but some scaremongering could also cause a fair bit of damage.
Thus ideally, and especially on day like today, AVZ holders should be rejoicing to be in suspension while shorters would ideally be very disappointed
IMO some of the scaremongering we have seen would make more sense when seen from this angle – AVZ will get delisted, will never good out of suspension, end of world, blah blah blah. Won't be surprised to see much more of this continue.
Keep in mind that today’s fall in lithium could simply be based on the Goldman report. So
persistent co-ordinated scaremongering for AVZ even based on complete falsehoods could have real life impacts.
So, great that AVZ is in suspension till several issues have clear answers
3/ CATH extension
Noticed that CATH deal is extended to July 31, while voluntary suspension request is till July 1. Also noted words of CATH extension - “The parties are committed to close the TIA
as early as practically possible to progress the development of the Manono Lithium and Tin Project.” I don’t think these words were used before
Really, it amazes me that so much nonsense was being spread about AVZ possibly being 36%.
As if AVZ and world famous lawyers, DLA Piper would actually finalise a deal not yet finalised that would take us to a minority stake.
But I won’t go into the case more here as several other commenters have done a great job on that
Noted from above CATH extension though, that AVZ could also possibly have another suspension next month. It is
likely that CATH deal would only be finalised once AVZ is absolutely clear about its final stake in the project.
4/ Mining license
IMO, coming out with a bare minimum of mining license was an absolute priority for me as
mining license is main sign of government co-operation and the heart of a mining company.
Now, with an extended suspension it
looks very likely that AVZ will only come back trading once mining license is in hand and more likely with a lot more stuff.
5/ Interconnectedness
In April, I was trying to see the benefits of
battery hub in DRC and it became clear that so many of the
benefits were really synergies based on the interconnecteness of various parties
https://hotcopper.com.au/threads/running-discussion-on-sp.4111732/page-68995?post_id=60956423
Battery hub seems like a genuine desire of DRC and to realise this, several parties have to co-operate and simultaneously make sure no one is harmed.
Looking at our own case -
CATH will want the mining license to go through and for AVZ to proceed with the 24% deal
AVZ needs to ensure that it has clear majority interest before even considering the deal
DRC would like the AVZ-CATH deal to go through for the hub and from longer term perspective would need to
address any corruption in shady deals some other parties might have made
IMO, heaps of simultaneous conversations are being held and all issues would be resolved at the same time, or else AVZ can’t logically proceed with the deal.
Shorters are dreaming IMO if they think this will go on for years, as DRC is also keen to move ahead with hub plans .
At same time, AVZ cannot practically come out of suspension right now, even if wants to, as these multiple issues being resolved might take time. So, glad that we have a 1 month suspension, giving AVZ plenty of time to address these issues with government
6/ Australian timelines vs international timelines
Things might get much faster in Australia. Well, international markets recognize all this and Australia is supposed to have less jurisdiction risk.
Obviously, other countries don’t follow the same brisk pace we follow here. So logically, we have to be ready to have more patience in waiting for stuff to be resolved in other countries like DRC, where our timelines simply don’t apply.
The key here is that hopefully, AVZ simply comes out with clear answers for everything when we are out of suspension. If it takes time, then so be it, but clarity of the situation is far more important
7/ Borrowing cost for shorters / time in suspension
The same is 4 basis points per day according to Jens.
Well, obviously each day in suspension makes it worse for shorters, who would ideally hope for being in trading sooner than later.
Also refer my original point about market hating uncertainty. Ideally, you’d assume that
with passage of time, AVZ will come out with clearer and clearer answers getting rid of the uncertainty, which shorters would be more reliant on and prefer. Also in shorter term, stocks move more based on sentiment while fundamentals and truth catches up in longer term.
So all those posts from concerned non holders who suggest that each delay in coming back to trading, is bad for AVZ and all those end of world scenarios – that is just nonsense.
It is just plain stupid for any investor to want to be trading in the midst of uncertainty and especially on a day like today with 10-20% falls in lithium stocks.
8/ Tax loss selling
Keep in mind that there could be some tax loss selling in June.
Another bullet dodged by AVZ
9/ Conclusion
Imagine if an elephant (or maybe even a dragon)
rushes into a party hall and messes up the place. Would you want to
start the party immediately or wait until the mess is cleared. Same principle here!
Ideally, IMO, AVZ would be best served if we are out of suspension with
clear facts and all issues resolved, irrespective of time – 1 month, 2 months, 3 months, 6 months etc.
All social media scaremongering is irrelevant in longer run and
IMO clear market announcements based on actual facts would be the main determinant for AVZ share price when we come out of trading. I’d certaintly not like to see us trading based on half information.
We’ve dodged several bullets – last month global stock sell off, today’s lithium sell off, etc which is handy but obviously the main reason, we are in suspension is to address all issues fully, in connection with our mining rights.
Nice to see several DRC NGOs possibly supporting our case. Refer
@Whiddon3 post below
https://hotcopper.com.au/threads/avz-time-for-a-short-squeeze.6759856/page-70?post_id=61740844
All IMHO, please DYOR.
Cheers
