The DRC has a bit of a sketchy rep when it comes to mining deals. AVZ isn't the first company to hit a rough patch; just look at First Quantum Minerals. They poured $800 million into their project, only to have their mining license pulled, which led to a big legal battle with the DRC in the ICC and other courts. Despite these red flags, companies like AVZ keep returning, tempted by the massive potential for profits.
"Last year, on July 31, Michel Kibonge Nyekuma, the chief of staff to the minister of mines, signed off on cancelling the mining licences of 29 companies in just one day!" Some were local, but many were international mining companies, these companies were given legal advice to consider invoking investment treaty rights to strengthen their hand. It's almost as if the DRC cancels mining licenses as casually as swatting flies. Yet, last month, DRC officials were in Paris, talking up mining opportunities and assuring investors about the security of their investments. Go figure...
The whole thing is like a scene out of Borat—funny if it wasn't our money on the line. No matter what, investors keep lining up for a shot at the DRC's treasures. Take a look at AVZ: Nigel and his team weren't deterred by the history of companies having their licenses cancelled. They figured, why not take a shot? After all, they're not risking their own money, it's the investors, including retail investors, who are on the line.
As far as retail investors are concerned, whenever there's a chance of substantial rewards, there's always a group eager to take the leap. Greed can push people to embrace risks, and despite the challenges faced by AVZ (excluding many of its investors, of course), other investors will continue to roll the dice in the DRC, undeterred by the outcome for AVZ.
On a side note, here's an interesting paragraph from a legal firm warning the 29 companies that had their mining licences cancelled last July:
"Whilst negotiating a resolution with the government may be a viable route to consider, they should steer clear of persons that arrive on their doorsteps with promises that they can solve the situation based on who they know. This is especially the case if the persons indicate they could help for a fixed, upfront or success fee "Haha, sounds like Marius, looks like Nigel didn't get the memo.
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