After three weeks offline, the AVZ Minerals Ltd (ASX: AVZ) share price was due to return to trade today.
However, as many likely suspected, the lithium developer’s shares will remain halted for a little while longer.
What’s going on with the AVZ share price?
On 9 May, the company requested a trading halt pending the release of an announcement relating to mining and exploration rights for the Manono Lithium and Tin Project in the Democratic Republic of the Congo.
However, a couple of days later, AVZ realised that it needed more time after being hit with arbitration proceedings by Jin Cheng Mining Company.
In light of this, the company asked for the Australian stock exchange to suspend its shares until today.
This extra time has proven insufficient and the AVZ share price now looks set to remain suspended until the end of the month.
This morning AVZ stated:
The Company advises that as at the date of this letter, the subject of the initial trading halt request remains incomplete. Accordingly the Company requests an extension to the voluntary suspension until the commencement of trade on 1 June 2022 or an announcement to the market regarding its mining and exploration rights for the Manono Project.
Though, whether that will be enough time for the company to resolve this incredibly messy situation remains unclear.
AVZ has been hit with arbitration proceedings by Jin Cheng Mining Company in the International Chamber of Commerce in Paris (ICC) to pursue claims by Jin Cheng to be recognised as a shareholder of Dathcom Mining SA.
Dathcom is the owner of the mining licence for the Manono Lithium and Tin Project.
AVZ currently owns 75% of Dathcom and therefore 75% of the project. However, Jin Cheng claims that it acquired a 15% shareholding in Dathcom from La Congolaise D’Exploitation Miniere SA (Cominiere).
This is where it gets particularly messy. It remains unclear where this 15% share comes from.
What are the potential ownership scenarios?
AVZ has had a number of opportunities to clear up the ownership structure but has so far failed to do so. This has led to a range of ownership scenarios being bundled around.
Essentially, at best, AVZ will own a 66% stake after selling 24% to Suzhou CATH Energy Technologies for a US$240 million investment and acquiring 15% from Cominiere (which it believes it is entitled to).
At worst, AVZ will own just 36% of the project after the sale to Suzhou CATH Energy Technologies, the potential loss of 15% to Jin Cheng, and the potential failure to acquire 15% from Cominiere.
Finally, in the middle, there’s the possibility that AVZ sells its 24% stake to Suzhou CATH Energy Technologies and does nothing else, leaving it with a 51% stake.
Given the wide range of ownership scenarios, it’s no wonder the AVZ share price is suspended.
Depending on the outcome, the AVZ share price could either be severely overvalued, severely undervalued, or just right.
This once again highlights why investing in shares that are operating in countries like the Democratic Republic of the Congo carry significant risk.
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