AVZ Minerals Ltd (ASX:AVZ) (OTCMKTS:AZZVF) (FRA:3A2) has received firm commitments to raise A$40 million from sophisticated, professional and institutional investors in a placement to advance the tier-1 Manono Lithium and Tin Project in the Democratic Republic of Congo.

The capital raising was undertaken to allow the board to efficiently progress towards a Final Investment Decision (FID) for the commencement of project development at the Manono Project.

It also follows the continued achievement of several key recent milestones, placing AVZ in a strong position as it progresses toward FID.

The placement, which was heavily oversubscribed by A$10 million, was well supported by high-quality institutions from Australia and North America and includes a European-based physical energy commodities merchant.

“Important milestone”

AVZ managing director Nigel Ferguson said: “The capital raising marks an important milestone in our journey to develop the Manono Project, providing AVZ with the required funds to increase the company’s stake in the project and secures the necessary working capital to commence the early capital works program.

“Increasing AVZ’s equity stake to 75% of the Manono Project adds significant value to AVZ shareholders including the possible option to attract strategic cornerstone equity partners at the project level, which will assist to de-risk and potentially accelerate Manono’s development.”

Increased reserves

Proceeds will increase AVZ’s cash reserves, allowing it to:

  • Increase its interest in the Manono Project from 60% to 75% by exercising the options to purchase Dathomir’s minority shareholding of 15% equity in Dathcom Mining for US$20 million (~A$27).
  • Negotiate project financing with an enhanced balance sheet position, assisted with the addition of a supportive, larger nonretail shareholder base; and
  • Assist to establish a working capital and contingency cost buffer during project development and enhance AVZ’s limited early capital works program before FID.

The company’s planned project development timetable for the second half of 2021 will include several milestones including:

  • Finalisation of the Bankable Feasibility Study which is well advanced and tracking well; and
  • Expected awarding of the Manono Permis d’Exploitation (or mining licence) which will be a catalyst for FID.

Transitioning to larger shareholder base

This placement comprises 307,692,308 new shares at an issue price of A$0.13 per share to raise A$40 million (before costs) utilising the company’s existing ASX Listing Rule 7.1 capacity.

The issue price represents an 18.8% discount to the closing price on June 29 with the lead manager and book-runner being Curran & Co.

AVZ’s board has opted not to proceed with a Share Purchase Plan (SPP) at this time due to the heavily oversubscribed placement.

Ferguson added: “The placement also assists our financing discussions, providing capital for up-front debt finance establishment costs, ensuring minimum liquidity requirements are met, whilst providing debt financiers with confidence from seeing a transition to a larger, supportive non-retail shareholder base, providing AVZ with a solid foundation from which to negotiate favourable terms.

“We welcome our new shareholders and thank our existing shareholders for their continuing support in what is expected to be an exciting time in the development of this truly world-class asset.”