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DRC - Sale of COMINIERE shares in the Manono Lithium mine: Zijin Mining's offer far better than AVZ's whose acquisition of Dathomir's shares was rejected by the court

Two companies are at odds over rights to a 15% stake in a massive mine in Central Africa.
▫ The fight is over a mineral that is essential for the future of the green economy.

The discovery of a massive lithium deposit had raised hopes for the sleepy commune of Manono, in southeastern Democratic Republic of Congo, after a failed tin boom a few years earlier.

Australia's AVZ Minerals announced in 2019 that the Manono lithium-tin project in the DRC likely had the largest untapped lithium deposit in the world, with estimates of 400 million tonnes of lithium ore.

Lithium is essential for making rechargeable batteries for phones and electric vehicles, and it is in high demand by countries around the world who are turning to green energy.

The stakes are high and the rewards are high. But infighting and legal battles between shareholders for control of the Manono site put the project on hold.

The main fight is between AVZ and Zijin Mining, a Chinese mining giant, in a case brought before the International Court of Arbitration of the International Chamber of Commerce (ICC).

Zijin claims to have purchased, through its DRC subsidiary Jin Cheng Mining, a 15% stake in Dathcom, a joint venture created in 2016 that owns 100% of the Manono lithium mine.

Zijin claims to have bought this stake from COMINIERE, the DRC's state-owned mining company, which held 25% of Dathcom's shares as part of a deal reached in 2017.

As part of the agreement, AVZ held a 60% stake, while Dathomir Mining Resources (Dathomir) held the remaining 15%.

Zijin said COMINIERE has agreed to transfer a 15 percent stake in Dathcom to Jin Cheng, and the two companies have established a joint venture, Katamba Mining, to explore and develop two new projects on the outskirts of the Manono mine.

"Zijin Mining's purchase price for its 15% interest in the Manono project was fair market value and includes other provisions that benefit the local community and the DRC," said Sun Kuiyuan, Zijin's in-house legal counsel.

"The sale was then approved at an extraordinary general meeting of Dathcom, and legally registered with the RCCM."

But AVZ disputes the suggestions that COMINIERE transferred 15% to Zijin, saying they are "misleading in nature, baseless, containing fundamental and material errors, and having no substance or basis in fact or law."

The Australian company claims that such a transfer would have infringed its right to purchase the shareholding.

"Any such transfer would be subject to the terms and conditions of Dathcom's existing articles of association as well as Dathcom's shareholder agreements," AVZ said in its 2022 annual report published on October 17.

"AVZ confirms that COMINIERE has violated AVZI's pre-emptive rights under the shareholders' agreement by purporting to transfer a 15% stake to Jin Cheng, rendering it invalid and ineffective."

AVZ said it continues to "take all necessary steps to resist these vexatious and baseless complaints and to protect its interests and those of Dathcom."

Zijin reportedly paid US$33.4 million for COMINIERE shares, far more than AVZ's counter-offer of US$15 million.In a letter dated July 21, 2021, Cominiere's Managing Director, Mr. Athanase Mwamba Misao, wrote to AVZ to tell it that Zijin had expressed interest in acquiring at least 15% of the share capital.



"Having had the green light from the Board of Directors and that of the General Meeting of Partners in COMINIERE to begin negotiations with this group, we held a meeting with ZIJIN on July 14, 2021 during which ZIJIN expressed its willingness to enter the capital of our joint company with at least 15% of the share," the letter said.

AVZ responded a few weeks later, objecting to the sale of shares to a third party and expressing interest in buying back the stake.

"AVZ MINERALS notifies you at the same time of its willingness to receive the benefit of the right of pre-emption which would like according to our articles of association that the shares are first offered and sold to shareholders in the company but also this comes from the agreements between parties in the Joint Venture agreement of 2017," AVZ said in its letter to COMINIERE.

It warned that any transaction on the sale of shares between shareholders who have discussions outside the company violates the company's management, joint venture agreement and articles of association.


These cases are now before the ICC's International Court of Arbitration, which is expected to begin concluding the case next year.

Another issue is the compensation that AVZ acquired a 15% stake from Dathomir, bringing its stake to 75%.

However, Dathomir denied selling her shares, saying in court documents that although she initially agreed to sell a 5% stake and then another 10%, AVZ did not pay the agreed amounts on time.

Dathomir, which is owned by a long-time Chinese investor in the country, Mr. Simon Cong, sued Congolese courts to have the transactions cancelled and won.

In September, the Lubumbashi Commercial Court suspended the operation, preventing AVZ from buying the shares.

'The transfer of the shares, which are the subject of the sale, to the purchaser AVZ International Ltd could only take place after full payment of the sums agreed; which was not the case for the plaintiff," Dathomir argued in court.

The Commercial Court of Lubumbashi "will order the suspension of payment of the balances of the prizes of $ 15,000,000 US and 5,000.0$00 mentioned in the two contracts for the sale of shares of 5% and 10% of shares between the plaintiff and the first defendant, AVZ INTERNATIONAL PTY LTP, pending the decision of the Arbitral Tribunal chosen by the parties in the said contracts on the merits of the case".

However, AVZ insists it owns 75% of Dathcom shares after acquiring Dathomir's 15%.

"AVZI duly entered into each of Dathomir's sales agreements in August 2021, including timely payment, and thus legally acquired an additional 15% stake in Dathcom," it said in its response to the court's ruling.

She stated that she considered the court's decision to be IRRELEVANT. "AVZ confirms that it retains legal title to a 75% interest in the Manono Project and its pre-emptive rights to the balance of the Project."

The listing of AVZ's shares remains suspended pending the completion of the sale of its 24% stake in Manono to Chinese battery manufacturer Suzhou CATH Energy Technologies (CATH) for US$240 million.If

the sale goes ahead and AVZ does not have Dathomir's 15%, AVZ's stake will be reduced to 36%.

PS: An October 30, 2022 article by Jevans Nyabiage published under the title "AVZ vs Zijin: the fight for the world's largest lithium deposit" and taken from the newspaper "South China Morning Post" (https://www.scmp.com/news/china/diplomacy/article/3197766/avz-vs-zijin-fight-worlds-biggest-lithium-deposit)