TIME TO SETTLE THIS

Here we are nine months from the trading suspension with no clear path to resolution. Perhaps if we ignore the ‘white noise’ we can focus on the only issue that matters - the issuance of a Mining Licence by the DRC Mining Ministry.

Nine months ago we were on the casp of a mining licence being issued. The DRC had promulgated the Ministerial decree and the licence issuance was imminent.Then it all ‘hit the fan’ - the issue of concern to AVZ was the 15% shareholding that the DRC authorities transferred to the Chinese mining giant Zijin. AVZ objected and the fight began.My research tells me that Zijin is well connected both in China and the DRC. It matters not why, although we all have our views.

The last nine months has resulted in international arbitration filings; threats of further legal action by AVZ; and a myriad of legal opinions requisitioned by AVZ. We are further away from resolution than nine months ago, and what started as a commercial dispute as to a 15% shareholding has now enlarged such that there is a real possibility that AVZ will lose everything and Manono will be developed by others.

The DRC has been clear: they will only issue a mining licence to Dathcom when there are “harmonious relations between the shareholders”.

I recently saw a video where Nigel was reading what appeared to be a ‘legal brief’ to the Minister of Mines. The gist of AVZ’s ‘argument’ is that the Mining legislation does not detail ‘harmonious shareholder relations’ as a criteria for the issuance or denial of a licence. On a strict legal interpretation that may be so, but the reality on the ground in the DRC is that it matters not.

Under the system of jurisprudence applicable in the DRC the government has an element of discretion as to the issuance of a permit (licence). What will not happen here is a ML issued because of a judicial order, whether local of foreign.The DRC stated position is that they want to see “harmonious relations”. This means we need to forget about the 15% and rather than opposing Zijin we should be partnering with them!

As long as AVZ has 51% secured we are in good shape. This is because the size of the resource is such that there will be plenty for everyone. It makes no sense to throw the ‘baby out with the bath water’ when AVZ should be recalibrating at this critical time.The damage done over the last nine months both in the DRC and to the investors has been significant. Litigation is often the death nel for a listed small cap. AVZ needs to immediately ‘recalibrate’ and sit down with Zijin and Cong and sort this. The first offering would be the 15% shareholding. The extant legal proceedings should be withdrawn (including by Zijin) allowing AVZ and the Chinese to jointly develop Manono.

Yes some will find this suggestion distasteful, however imo it represents the only realistic way forward vide “harmonious relations” with the other shareholders. Importantly that is the only way to ‘qualify’ for this Mining Licence at Manono.

Obviously it would be a matter for AVZ as to who conducts these discussions with the Chinese and the DRC parties. Nigel appears to have adopted an aggressive and adversarial stance which is the opposite of what is required to facilitate harmonious relations. Perhaps a fresh face would be of assistance here.

As always this is not investment advice and you should do your own research and seek professional assistance as appropriate.