Running discussion on SP, page-57308

My main takeaways from the AGM

Voting Q’s – There were few questions. The only two touched on performance rights, and IMO the board answers were poor:

How is 19m reasonable for performance compared to peers? – A: It wasn’t 19m when the shares were proposed (subtext – but they aren’t changing)

How are the performance requirements (like EPC award) above and beyond regular duties? – A: They reflect significant hurdles in getting the project to production.

Nigel Ferguson

Project Ownership: More project equity is expected, and negotiations are being held with the DRC government to receive further project ownership

Get Champagne Ready: You will all likely be pleased with what is coming – you will also be popping champagne when the financial projections drop as soon as ML is delivered

Mining License Review: Several questions were put forward by those in DRC government reviewing the ML, they were all answered, and we don’t expect any further hurdles to the issuance of the ML.
Of the 5 ML requests landing on the table of the issuing authority, 4 were rejected, but not ours.

Hydro Plant Agreement: HEPP deal is ready to move forward, it’s just waiting on the collaboration agreement being reached with DRC government

Permitting Timeline: Major outstanding agreements (ML / Collab / HEPP) all expected this year. Question on SEZ remains however (see below)

Transport: expected to be upgraded to required levels by time of production
AVZ are supporting rail vendors to meet these levels (for example through linking them up with potential investors)
Draft agreement reached with 2 of the 3 rail vendors, advanced discussions with the 3rd.
Prices are reasonable, though likely to come down further once they see the scale of planned activities coming to pass
High pressure coming down on rail operators from DRC government to get with the program, as this is a strategic need for them

Expansion Plans: Huge potential to upscale and expand the project
For instance, 5mpta throughout to 10mpta is not a big ask if money and power will be available – which they will be
The company is also looking at diversification. “One project is not enough for a major company”.Will be looking for other opportunities, and potentially at corporate activities also (note: I imagine this refers to M&A activity). however, first priority is getting Manono up and running, but the company has a long term vision to use its funds.

Middlings: Large middling stockpile is looking economic to transform to SC6, and we will look to move ahead with this plan.

Government Relations: AVZ getting a lot more traction with the government, and even closer relations will be outlined at the 24/25th business forum in Kinshaha – “which you should all listen in on for an update”

Special Economic Zone: Still on the table, however:
Preparing a full application, though we are having to go back and re-do the proposal in the government’s required format after going down a different path (oops).
They are now two-thirds of the way through it
My take – sounds like SEZ is a ways off, but they are still expecting it to happen in the long run.

Sulfuric Acid: They will almost certainly be moving forward with putting a sulfuric acid plant on site, they have the experience. This will cost 25-27 million for a 250m expenditure saving = no brainer.

Solar: Two large solar arrays are being planned to smooth any power issues, and also to put more back into the community – 1 at the camp, 1 for the process plant

Hydroxide: NF was very positive that the company would move down this route
CATH & Mr Pei would fully support AVZ in producing hydroxide, whether in DRC or in any other location identified
Hydroxide feasibility study would be prepared after initial scoping study (due Q1 2022)
Otherwise, we won’t want to be shipping SC6 around the world, but shipping PLS instead and using a portion of our PLS to fill the needs of hydroxide plant

Ethanol: There is a potential for the development of an ethanol or biodiesel plant, which could potentially be used for the calcining – currently the only area of the plan not manageable through hydro-power. Will require diesel generators initially.

ESG: likely to be one of the lowest carbon footprint / lowest greenhouse emission lithium producer on the planet, largely due to hydro power plant
Have a social vision through the AVZ foundation, their social investment has been ad-hoc to date but will become more formalized.
Draft ESG report is done, with full report to be released in Q1 2022. This will be the first of many, and will improve each time.
AVZ will also be focusing on waste reduction, in part due to plans to export PLS eventually to Europe – where they have a carbon and waste tax.

Graeme Johnson

Building data: While the team move forward with building the processing plant, GJ will be leading on mapping out the under-investigated orebodies

Mine re-model: Previous 2 year pre-strip requirement gone through wedge drilling and subsequent mine remodeling

Expansion of Mineral Reserve Estimate:Looking this coming year to expand Roche Dure resource & reservesSignificant diamond drilling program commencing in 2022 to increase MRE/reserves
Might drill deeper than previously planned to increase target
These inputs will be used to re-run mine optimization study

Carriere de Leste pegmatite: Highly encouraging initial drilling results at CDLWill be looking to move foreward with drilling aimed at maiden CDL MRE

Tin: Looking more closely in 2022 at unlocking tin potential

Ben Cohen:

Electric Vehicles: Over the next decade are expecting EV penetration to be reaching close to 50%, up from 7% currently

Lithium Market: We are entering a long-term buoyant market for lithium

EPC Vendors: They are essentially ready to move forward on EPC when the hammer drops and FID is reached, a short-list is looking firm and everything needed has been investigated

Finance

FID Timeline: As soon as ML drops, FID will be very close behind it

Readiness: We are ready to hit the ground running as soon as main conditions precedent drop, which are expected before 30 November, after which we will be in full swing
On conditions precedent, NF mentioned that the end of 30 November deadline for CATH investment to be met, is not a ‘drop dead date’, and CATH itself is still not on top of their end (namely PRC approval). This could be extended out if need be, CATH isn’t going anywhere – they want this partnership.

Debt Financing: Banks and financial institutions (pan-african DFI’s included) have full confidence to invest, especially after the CATH cornerstone investor took up all the required equity portion of the financing program. (Note: interesting comment from NF later, about the DFIs quickly coming back to the table after the CATH deal – were they backing off until then, or just hesitant until equity was sorted?)

Hope this all helps. Not a huge deal of new information, but all sounds onwards and upwards really for me.