For a long time I have sat back and watched the HC AVZ threads.Sometimes with keen interest in the insights and knowledge shared, but oflately mostly with head-shaking at the meaningless vitriol and tit for tatimmature nonsense and impatience going around.
Disclosure: I hold AVZ stock in 7 figure numbers since 2018. I want the company tosucceed and everything I state below is my opinion only. You will either agree or disagree and Ilike to hear your counter points but be kind and constructive.
Distilling my observations over time to just a few key points:
Point-1: Believe in the resource.
You cannot alter what mothernature has put in the ground at Manono and possibly Carriere de l’Est.Something of this size and purity and no overburden will attract investment anddevelopment. I believe in the resource and I believe it will be developed when the right project has been defined and all involved parties have agreed.
Point-2: Believe in the Company:
Can the company, it’s BoD,Management team and wider organisation unlock the resource’s potential? There’sbeen a lot of emotive talk about BoD not being up to the job or givingthemselves freebies for too little effort or achievement, etc. To go mining I believe this tobe less relevant. The one thing I have never heard anyone talk about is the AVZorganisational capability. How many people do they have in the Perth office, inthe DRC? Do they have the required contract engineers, construction supervisors,logistics experts, i.e. do they have the owners team to undertake what will be their firstmajor mining project. I think that is a valid question to ask and of that wider capability we know little; can they transform from a geologist centred exploration outfit to a mining company? In this context, the Collaboration Agreement between AVZ, CATH and the Government (10 – 25%) will be crucially important, who does what, what rights do the respective parties have and how for example will contracting with 3rd parties be managed. We might see a larger involvement of CATH in the actual execution of the project. Didn't Nigel mention somewhere that Joint Ventures at various levels are in the works? Writing and negotiating such agreements (in multiple languages) takes a lot of time, it will guide the working relationship for decades.
Point-3: Be a patient investor or a short-term trader.
Both areneeded to make a buoyant stock market, decide who you are and be at peace withit. If you believe in the resource and believe in the company for significantreturns in the long run, then put up with it and wait for your ship to sail inin due time; ride out the storms, highs and lows along the way. Going down intothe gutter with the trolls only gives more attention to them and prolongs the nonproductive posts. Complaining about delays on HC will not make things go anyfaster (are they really delays or are they value improvement opportunities thatneed time to do right and maximise the to pay-out?).
Point-4: be realistic:
True, Nigel has not done AVZ any favours by puttingout unrealistic timelines. I think he has learned a lesson and has been quieterrecently. At best I think he performs the Cheerleader in Chief role to the bestof his abilities; at worst he has no idea what is required to get a projectthis size off the ground. And really, this is not a DRC thing. Having worked fornearly 20 years in WA Oil and Gas and 5 years before that in West Africa nextdoor to DRC, I know that all governments drive a hard bargain before issuingproduction licenses. Companies have to make concessions, be it in the shape of committing to local content, environmental monitoring funds or as one prominent O&G Operator found out commit to become a foundation office tenant as part of a former WA Premier’s legacy Perth CBD waterfront development. This happens everywhere around the world and can take many months to years. When both parties believe there is shared gain things will move forward.
Also, we cannot at the same time cheer the mine’s increasing from 4.5Mtpa to 10Mtpa with a hydroxy plant and berate the delay in ML, BFS, collaboration agreement, etc. Again, to use a WA LNG project analogy that failed to meet economic hurdles in 2005/6 it then had to go through a three year recycle, new engineering studies, new costs, new schedules, new contracts to eventually take FID in 2009 on a much more economic project. If the revised 10Mtpa engineering studies (DFS) for a 10Mtpa plant was ready in December/January and AVZ have by now been able to answer all (totally justifiable) questions from government, secured proof of funding, then we have done an amazing job in that little time. Going from 4.5 to 10Mtpa is worth the wait of a few months (provided you’re a patient investor 
Point-5: Recognise and balance your risk/reward.
Every jurisdiction has its risks. Australian investors (Instos) do not know the DRC, see it as risky and fail to see upside. Nevertheless, do not forget, the risks are real too. For me, positives outweigh negatives, the new government under FT appears to be making genuine improvements in areas of governance, transparency, and diversification of foreign investment. AVZ sitting at same stage during Africa business forum with the heads of state of DRC, **on, Morocco and Zambia is an unparalleled endorsement of AVZ being part of Tanganyika province industrialisation. To talk about ‘sovereign risks’ just ask the North Sea oil and gas operators how they saw the surprise 2012 introduction of the North Sea tax levy on oil and gas profits above the corporate rate. A massive outcry on sovereign risks, but nobody left
.
Point-6: recognise what needs doing and what will unlock theinevitable re-rate:
In my view this is the sequence:
1) Agree the collaborationagreement AVZ, CATH, government. Who does what, what are the parties rights andobligations. A possible requirement by government to a commitment to in-countrybattery manufacturing by CATH or at least LiOH to a 3rd partybattery manufacturer might cause delays in this area.
2) AVZ to negotiate the 15% stakein the project from government. This, I think is going on in parallel and bothcollaboration agreement & ML will be a bargaining chip in thesenegotiations. Competing offers could cause delay and might drive up the price.
3) Secure funding for a 10Mtpaplant. CATH will pay its 24% share but AVZ needs to show it can secure loansfor its significantly increased share
4) Obtain HEPP and show howadditional power for 10Mtpa/ hydroxy plant will be sourced. Big increase neededfrom the 4.5Mtpa original plans and hydro power plant might not be enough. Moreengineering studies, more government questions.
5) Once above points arematerially agreed, the ML will be awarded which will trigger release of funds, issueof the stellar BFS and;
6) FID and award contracts. Arethe tendered contracts still valid? Do they need re-tendering for the new plantsize? Has global inflation caused fixed priced contracts to be invalid? Theseissues can cause delays in getting works started. I therefore do not think any production in 2023 is realistic. Roads, rail need upgrading too. In my view end 2024 is a realistic target.
I do not see SEZ to be a precursor to any of this. The Governmentknows the mine is profitable but to attract battery manufacturing a SEZ mightbe declared later. The Manono mine might be in or the mining operations could becarved out all together. It's nice if it improves mine profitability but really you cannot go around telling everybody how profitable the mine is and then require a SEZ to make the investement.
And then of course there’s the Tin to mine and Carriere de l’Est to drill andprove up
Along this path of fantastic announcements to come I see one big capto how high AVZ stock will go and that is a take over. Nigel needs to get someof these milestones ticked off to increase the value of the company to ensure anytake over offer has significant premium to the shareprice. I know some of youare already thinking of operations phase and dividends. I hope we get there,but personally I doubt it. For me this goes back to point-2. Is AVZ staffed,experienced and prepared to design, procure, build commission and operate amine in DRC and is the BoD/Management team motivated and dynamic enough to go all the way?
I too have a few very nice bottles of Champagne on ice, I’mconfident I get to pop a few for these announcements throughout 2022
Good Luck Long Term Holders!!
