AVZ Minerals Ltd – Digging Deep
We talk to AVZ Minerals about how they are creating a long-term prospect from a unique asset.
AVZ Minerals Ltd is an Australian Securities Exchange-listed company with $110 million market capitalization. Its sole asset is the Manono tin and lithium project, where the company is focusing on the lithium side. The area is host to a historic tin mine that was mined from 1925 to 1982 and today AVZ has three licences covering 1,200 square kilometres of the licensed area.
“It’s a substantial operation,” says the company’s Managing Director, Nigel Ferguson. “We’ve drilled out only a small portion of it and have produced a JORC compliant mineral resource of 400 million tonnes. We own 60% of the project and have first right of refusal on further equity, having already managed to secure an option over an additional 5% so far.”
AVZ Minerals is approximately 85% of the way through a definitive feasibility study of the asset and the results this is turning up, demonstrate that they have a robust project on their hands, with a projected internal rate of return of 64% and an NPV10 of US$2.6Bn. The next step is to secure the financing necessary to put their mine into production by 2021.
The mine presents a unique opportunity, with a deposit unlike those found anywhere else.
“A lot of companies with hard rock pegmatite deposits that we’ve seen in Western Australia, Zimbabwe and South Africa, are all multi-vein, stacked deposits of between one and ten metres in average thickness, some thicker ones too,” Ferguson says. “But this deposit averages 200 metres thick and is very homogenous, incredibly clean, with no detrimental elements such as fluorine, phosphorous, iron, or mica in large percentages. We’re incredibly low on those factors, while some Australian companies are struggling with iron. We’re seeing very clean product better suited for conversion to battery products. There is no issue with the number of tonnes, so we can expand our output to fit demand.”
The biggest challenge, it turns out, may not be actually producing the materials to sell, or even finding an audience to sell them to, but physically transporting the goods from the mine to the customer.
“We believe we can get the product to port and loaded for $323 a tonne, and we’re trying to improve those numbers,” Ferguson says. “We are expecting the total price to come down as we investigate additional routes for export and lock in quoted numbers instead of “off the shelf” ones. Transport is 63% of our costs, and we’re looking to reduce those in the first quarter of 2020.”
While Ferguson concedes that transport is the number one challenge that AVZ Minerals is now dealing with, he understands that there is a preconceived idea that central Africa is completely lacking in roads or transport infrastructure.
“Everyone is looking at our deposit saying it’s stranded in the middle of Africa but what people don’t understand is how much infrastructure is being put into Africa. It’s almost like the second Scramble for Africa, but this time, for battery minerals,” he insists. “Roads are being constructed. There is a $285 million incentive by the Chinese, roads and bridges are being constructed. There is lots happening and people are realising infrastructure is critical to get supplies in and product out and the Government is now realising that this needs to change. Perhaps with assistance from the private sector, but it is changing.”
A Rich Talent Pool
While the local infrastructure is being developed, a resource that the region has in abundance is its rich, experienced pool of mining and engineering talent.
“We draw staff from the local population. Our employees are approximately 95% local, 5% expats. We have a good crew on board, the Democratic Republic of Congo has a good pool of talented technicians and professionals to draw on as would be expected with a long history of mining within the copper belt,” Ferguson says. “There are a lot of people trained up to be as good as any western geologists, engineers or technicians.”
AVZ Minerals has always helped to train and professionally develop their staff, but recently they have begun to formalise those arrangements further.
“We’ve recently incorporated the AVZ Foundation,” Ferguson says proudly. “Historically we trained people up on the job and we continue to do that, but the Foundation will allow us to do it more formally and far more extensively. That is part of the commitment we have made to the new government; to have on-site training and education brought to the community, not only for our own use but for general use within the society as well. We will be training welders, boilermakers, electricians, etc. and will get them certified under a local scheme to allow a formal, recognised qualification.”
Schemes like this help to further cement the strong relationship AVZ Minerals has with the local government.
“We have a very good relationship with the President’s Office. We’ve engaged with them and have had good feedback and support,” Ferguson says. “They are extremely happy to support us in moving forward. We’ve been in discussions concerning a public-private-partnership and a special economic zone to uplift the area, which is incredibly poor at the moment. We would be the catalyst, inviting other people to come and join us. It’s something we’ve been happy to entertain and we’re very satisfied with our initial discussions.”
Mining into the Future
When we ask Ferguson about the future of the project, he laughs that they will likely still be drawing resources from the site as our grandchildren grow up.
“We’ve only modelled 20 years in our financial modelling because we can’t forecast further than without it getting ridiculous. But the ore consumed by that forecast is only 25% of the current resource. That’s a quarter of what we believe is in the ground at Roche Dure but only a fraction of what we believe the total exploration target could be of some 1.5 billion tonnes,” he says.
As the project grows, their biggest challenge remains one of getting their ore to customers.
“We’re looking to produce 62,000 tonnes a month, which is two consignments on a train or 30 trucks a day,” Ferguson says.
However, AVZ is also looking into other solutions to their transport and logistics issues.
“Eventually we’ll produce a hydroxide on-site and we’re looking to produce 20,000 to 25,000 tonnes of hydroxide per annum to give us a product with a higher unit value and fewer transport costs. It takes us, let’s say 6 to 7 tonnes of ore to get one tonne of 6% concentrate and 7 to 8 tonnes of SC6, to produce one tonne of hydroxide which means less shipped tonnes and a cost-saving,” Ferguson says.
This production serves two roles, it not only adds value to the raw produce of the mine but also reduces the costs of transporting it.
“That said we’ll continue with concentrate production. We’ll be well and truly producing for the next 20 years with capacity to expand and accommodate further requirements,” Ferguson says.
With the mine due to open officially in 2021, they cannot wait to get started.
Pull Quote: “Everyone is looking at our deposit saying it’s stranded in the middle of Africa but what people don’t understand is how much infrastructure is being put into Africa. It’s almost like the second Scramble for Africa, but this time, for battery minerals.”