Running discussion on SP, page-57103

Nice interview and Q&A already posted by some commenters yesterday.



Some points below from the interview -
Please DYOR and consider your own circumstances. While lithium seems to have a great future, there could be ups and downs along the way with resistances and sharp retraces along the way. Purpose of this comment is mainly to breakdown some points of this nice interview. Please watch the whole very nice interview to get the full picture and in case any mistakes below.

Points below are more or less in same sequence of interview. So easy to cross check any points if not clear. I’ve bifurcated it into main headings based on main questions/pauses in the interview.

This is obviously a long comment since it attempts to break down a very long interview.

1/ Matt’s introduction to AVZ

Matt O’Keefe from Cantor Fitzgerald interviews Nigel Ferguson, AVZ MD

Matt points out AVZ had heck of a good run, pushing AUD 1.7 billion market cap and for good reason.

Matt smiles and points out that it is really the largest lithium deposit in the world and high grade. Beautiful deposit, spectacular deposit, and far more advanced than lot of people expect.

Matt also points out that DRC is spectacularly well endowed with mineral resources

Matt seems pretty impressed overall with our deposit

2/ Nigel’s introduction to AVZ

Excellent and very detailed introduction to AVZ by Nigel -

Realised some years back that AVZ is a massive beast. Ended up with resource of 400 million tonnes at 1.65 lithium. Tin and tantalum credits too

PFS and DFS done

2 million and 5 million tonne scenario done

10 million considered but we said let us not do yet – so DFS done on 4.5 million tonne scenario throughput to produce 700,000 tonnes of SC6 product. Tweaked little more to include front half of hydroxide plant

Project smack bang in middle of Africa. Long way from port. So reduction in number of tonnes on railway system, would be to our benefit

Decided that PLS or Primary / raw lithium sulphate – front half of it – so its calcining section of hydroxide plant – we pulled that into DFS. Adds a lot to bottom line. We got 80% lithium product through test work. Working on getting to around 97% lithium

45% revenue PLS
50% revenue DMS SC6
Balance small tin credit

Capital cost for 4.5 million tonnes was USD 545 million.
Refurbishment of hydro facility included. Can produce 30 megawatts of power

Everything there to run operation on hydro power and obviously big green tick

Looking into electric equipment, solar systems

Looking into more than just DMS and PLS plants – hydroxide studies should be out in january

Plan to start with DMS plant+1 PLS plant and then add second PLS plant on site. Then we’ll look into 2 more PLS plants later

Nigel talked about recent deal with CATH and talked about CATL and Pei Zhenhua. I’ve passed a detailed comment on it here below some weeks back
https://hotcopper.com.au/threads/running-discussion-on-sp.4111732/page-52778?post_id=56407535

Pei was so interested in supply for his expansion plans that he approached us

$400 million funding from Pei
Investigating 10 million tonne scenario

Waiting for mining license and collaboration agreement. Mining license is last hurdle

Expecting license in 2-3 weeks. Our DFS being reviewed by 15 member committee

Collaboration agreement with government – very good progress with Minister of industry as our flag bearer. PM on board and President has vision for DRC to become supplier of battery minerals
. Collaboration agreement hopefully in next month or so

Pei’s funding subject to mining license and collaboration agreement

Several discussions with pan-African DFIs for balance funding

Transport detailed analysis made -2 railway systems
Manono to Kabongo Danda on trucks and then 2 rail systems – Lobito or Dar es Salaam. Other opportunities to move to south of Africa too

DRC business forum coming up

3/ Awakening the monster

Matt loves that slide – huge absolutely massive huge thing. Matt compares AVZ to other lithium deposits

15 km long in total strike length
5 major pegmatites
Roche dure 2400-2600 metres long. Only drilled out 1600 metres for 400 milion tonnes of resource. Solid pegmatite
Thickest intercept 270 metres at 1.6. Average thickness 225-250 metres
Strip ratio 0.48:1 – Half tonne of waste to 1 tonne of ore

Carrier De L’est – 1 drill hole 250 metres at 1.44
5 pegmatites

Looking at 1.5 billion tonnes at 1.5. Massive massive deposit. Don’t think it will be mined out in our lifetime

Matt also points out that besides huge size, grade is also lot higher than other lithium deposits
Matt points out that China have struggled with lower grade material from Aus and might hence be interested in DRC.

Nigel points out that we’re sitting at 1.63 in our reserves - 2^nd highest of any hard rock deposits
Matt again suggests that this slide comparison just shows how spectacular it is

4/ Ownership

We have 75 % of project
We’ve got to give 24% of our share to CATH

5/ Operating costs

Lower than lot on mining, extraction and processing
Transport costs a bit

371 FOB for SC6 – 260 of that is transport
162 FOB for PLS

Looking to reduce more

6/ Pricing

Pricing for spodumene concentrate discussed – spot vs contract

Under contract for 80% of our product. Mainly SC6 540,000 tonnes
160,000 tonnes that feeds into PLS plant yet to be placed

Spot prices going crazy but probably not sustainable

1200-1500 per tonne probably reasonable in 5-10 years
Our modelling on 699 per tonne and 7400 for PLS

Variety of 3-4 year contracts – floor, rising ceiling, etc. So contracts not absolutely fixed price. Price not public and won’t become public (both laugh)

7/ Surface rights

AVZ has not only license underneath from natural surface down but also surface rights for the land, to ensure safety on site

8/ DRC

Sea Change in government with new government in 2018. Incredibly good change
President Tshisekedi all over the world trying to get investment getting everyone on board. Even BHP sniffing around
Things changing on investment climate; corruption taken out; calm approach.
Very positive changes overall

9/AVZ interaction with government

1 meeting with president himself
Quite a few meeting with Prime minister
Minister for industry one of our stalwarts and our flag bearer
Engaged with local populace as well

10/ ESG

Chairman and Nigel worked in Africa for very long time. All inclusive and engaging of locals wherever they’ve been
In process of setting up AVZ foundation
Looking to consult and engage with all stakeholders in area – NGOs, local chiefs, local government, teachers , doctors, nurses, etc to put funds in right spot

Greenhouse gas assessment completed by independent consultants. Hydro scheme makes a big difference.
Electric equipment, calcining technology, etc.
Looking at putting in sugar cane and byproduct ethanol could fire up generators

1^st ESG report Feb-Mar next year. 90% complete

11/ Staff right now

3 expats helping ie exploration manager, 2 camp superintendents, 2 local geologists, 30 more staff mainly security and labourers, and then building labourers.

Lubumbashi 3 staff for small admin office

2 senior people – lawyer and director of corporate affairs

12/ Construction, operation phase later

Probably 250 man camp at site supplemented by extras from town itself – probably 500 in construction phase. Probably 5000 families positively affected by that

Operational phase 200-250 for 4.5 million tonne scenario

13/ Catalysts going forward 12 to 18 months

Next 12 to 18 days hopefully mining license

Then collaboration agreement

14/ Expansion of operation

Ramp up period 3 months for DMS plant. If extra PLS plant, then 90,000 tonnes of PLS – roughly 2 tonnes of that to one tonne of hydroxide; so 40,000 tonnes of hydroxide

Spodumene is sole project for company and from that project we get SC6 obviously and we’ll add in extras on top of that
1^st stage 4.5 million tonne plant producing 700,000 tonnes SC6
We’ll pinch 150-160 thousand tonnes of that to produce PLS around 43-44 thousand tonnes

2^nd stage middling streamof crushed material. Put in floatation circuit and add another PLS train. Middlings would feed floation circuit and feed PLS train


Stage 3 -Then add on PLS trains 3 and 4 and then stage 4 - hydroxide plant at back end. Hydroxide might come forward if DRC government wants

15/ Economics of stages

Right now only stage 1 of 4 mentioned above is considered

16/ Updated technical report to include other stages mentioned above

Close to making updated DFS but waiting for mining license and then will make a BFS – maybe next month or so

17/ Scope of updated DFS to come

Based on 4.5 million tonne scope but might include other bits and pieces as well

18/ Road ahead

Mining license
BFS
Contractors in background – $450 million odd requests for tender. Final candidates to be lined up
FID to be made
Contractors mobilized the next day

19/ Date – breaking ground

Breaking ground early next year
Jan – Feb bad wet season
Preliminary earth works probably

20/ Date – shipping

Plan is quarter 2 or 3 of 2023 for shipping of product

21/ Bottleneck

Probably road to get equipment in
Things would probably flow very quickly once collaboration agreement comes throughput
Government permissions needed, bridges to be built, etc

22/ American interest

Matt mentioned that they missed it a bit earlier at least in North American market, gone under radar but getting traction now and for good reason.

Nigel mentioned that they are lodging documents for OTC qx upgrade

23/ Tin

Tin was 5% of revenue in 2020 study
We believe 8000 to 15000 tonnes of tin
Now with tin price much higher, we’re going to give more importance to tin
Putting small plant on site as separate one
Tin grades pretty phenomenal -seen upto 2000 grams per cube
Tin involved in Evs too

24/ Tantalum

Haven’t even modelled yet
High value product. We’ll look to recover that and niobium

25/ Summary

As mentioned, please DYOR and watch whole interview. Just sharing some of my own notes .

Matt seems very excited about our deposit and mentioned several times all throughput

Matt seemed to genuinely enjoy the interview and information given

Heaps of technical info from Nigel

Great summary from Nigel on company

Cantor Fitzgerald is American and this is very good if we have increased North American interest. Matt suggested that it had gone under the radar there

Catalysts for year ahead – mining license, collaboration agreement, funds to be received from CATH, FID, balance funding for project, ESG report, updated DFS, etc

Cheers