AVZ Minerals Limited

AVZ Increases Stake In The Manono Lithium And Tin Project: AVZ Minerals Limited (ASX: AVZ) has an engagement in the mineral exploration. The company recently announced about its execution of a Share Sale Purchase Agreement with Dathomir Mining Resources SARL to increase its equity in the Manono Lithium and Tin project. With regard to the ongoing discussions, Dathomir has agreed to sell a 5% equity share in Dathcom Mining SAS to AVZ for a total consideration of US$5,500,000. Dathcom holds 100% of the Manono Lithium and Tin Project concession.

Under the agreement, the first tranche (US$500,000) has to be paid within the 14 days of the execution, and the balance of the consideration can be paid at any time within a period of 36 months from the execution of the agreement.Following the completion of the transaction, AVZ’s equity interest in the project license will increase to 65%, which represents an NPV₁₀ value added, based on the recent 5 Mtpa scoping study of some US$130 Mn to around US$1.68 Bn for AVZ’s 65% equity interest. The extra equity in the Manono Lithium and Tin project will add significantly to the bottom line and Net Present Values, and it is critical for project financing as AVZ continues discussions with potential financiers and off-takers.

In another update, AVZ announced that it has entered into a strategic relationship with Zhejiang Huayou Cobalt Co. Ltd through its group company Huayou International Mining Limited.

March’19 Quarter Performance Highlights: Net cash outflow from operating activities amounted to $2.78 Mn while net cash from financing activities stood at $13.93 Mn respectively. The cash and cash equivalents at the end of the period was reported at $12.07 Mn.


March’19 Net Operating Cash Flow Data (Source: Company Reports)

H1FY19 Financial Performance: Revenue (including other income) increased from $61,657 in H1FY18 to $98,856 in H1FY19. Loss after income tax for the period increased from $2,567,241 in H1FY18 to $2,742,958 in H1FY19.
 

H1FY19 P&L Statement (Source: Company Reports)

What to expect: The PQ sized diamond drill core has finally been cleared and arrived at the Nagrom Laboratory and the metallurgical programme can commence.The study team overseeing the Definitive Feasibility Study have been impressed by the scale of the mineralisation that can be observed in the core. The Company is looking forward to informing the market of the results of the multiple tests as the information becomes available. This metallurgical work programme is expected to not only inform the plant design but also yield data vital to negotiations with potential offtake partners and financiers for the Manono Lithium and Tin Project.

Stock Recommendation: AVZ’s share is presently trading close to its 52 weeks low level of $0.037, indicating an opportunity for accumulation. Its debt-equity ratio for H1FY19 stood at 0.04x, which is lower than the industry median of 0.09x, plus long term debt to total capital (%) for H1FY19 stood at 1.4%, which is also lower than the industry median of 5.2%, which indicates the company is virtually debt free and uses its own fund to fuel its operations. Hence, considering the aforesaid facts and current trading level, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.051 per share (down 3.774% on June 28, 2019).
 

Lepidico Ltd

Lepidico To Acquire All Outstanding Shares Of Desert Lion Energy: Lepidico Ltd (ASX: LPD) has an engagement in the mineral exploration and the development and licensing of the L-Max Technology. The company recently announced that the shareholders of Desert Lion Energy Inc approved the acquisition by Lepidico of all of the outstanding common shares of Desert Lion at its annual general and special meeting of shareholders held on June 27, 2019 in Toronto, Canada.Desert Lion shareholders will receive 5.4 Lepidico shares for each common share of Desert Lion held. The transaction is expected to complete by mid-July 2019.

In another update, the company announced that Pilot Plant leach discharge filter operations commenced as per the schedule on 27 June, but operations were temporarily suspended that evening due to degradation of the filter cloths.It was mentioned that operating costs for the Pilot Plant would not be materially impacted during shutdowns and this advanced commissioning phase. Once the replacement parts are received, it is estimated that normal Pilot Plant operations will be able to resume within 24 hours.

March’19 Quarter Performance Highlights: The company reported cash and cash equivalents of $4.9 Mn with no debt as at March 31, 2019. The cash outflow from operating activities for the period was reported at $3.11 Mn.


Operating Cashflow Statement (Source: Company Reports)

What to expect: As per the release, Lycopodium is expected to commence engineering of the LOH-Max^TM circuit for the Phase 1 Plant in June 2019, with designed output capacity of approximately 5,000 tonnes per annum (tpa) lithium hydroxide. Proposals are being sought for further Phase 1 Plant residue growth trials as well as for a second evaluation project to characterise the blended residue streams for industrial application. It is envisaged that these work streams will commence once material is available from the pilot plant and the first LOH-Max^TM continuous operating trial and a final site selection has been made. The objective of this work is for the Phase 1 Plant to be a zero-waste facility.

Stock Recommendation: Its current ratio for H1FY19 stood at 5.80x, which is better than the industry median of 1.88x, which implies the company is in a better position to address its short-term obligations than its peer group. Hence, considering the progress of its ongoing project operation and current trading level, we recommend a “Hold” rating on the stock at the current market price of $0.026 per share (up 4% on June 28, 2019).  

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