ASIC sues AVZ Minerals for misleading investors

The Australian Securities and Investment Commission (ASIC) has filed proceedings against AVZ Minerals for failing to disclose critical market information about its lithium project in the Democratic Republic of the Congo (DRC).

In its filling to the Federal Court today, ASIC alleges the suspended WA mineral exploration company “breached continuous disclosure obligations and engaged in misleading and deceptive conduct by failing to announce an escalating legal dispute”.

AVZ’s flagship Manono lithium project in the DRC had faced a series of ongoing governance challenges with rival miners and stakeholders but did not disclose this information to the Australian Securities Exchange (ASX), according to ASIC.

ASIC is seeking declarations of contravention against AVZ and declarations of contravention and pecuniary penalties against the company’s then managing director Nigel Ferguson and technical director Graeme Johnston alleging that the pair failed to inform investors of the ongoing issues in this matter for nearly 12 months.

On May 4, 2022, AVZ confirmed to the market that it retained legal title to a 75% interest in the Manono project. However, it referred to media speculation surrounding legal disputes at the Manono project as “spurious and immaterial”.

This was the first acknowledgement AVZ made of an ongoing legal dispute, that had commenced in mid-2021, challenging the company’s ownership of the lithium deposit.

ASIC also alleges Mr Ferguson and Mr Johnston breached their director’s duties and authorised or permitted ASX announcements relating to AVZ that were false or omitted matters that rendered them misleading.

ASIC deputy chair Sarah Court says proper disclosures are critically important to investors, particularly when the company is operating an asset overseas.

“In this case it was all but impossible for retail investors to travel to an overseas location in central Africa, in which the company’s operations are being conducted,” she said.

“In those circumstances, investors rely on the company to provide accurate and timely information. Continuous disclosure and director duties are not only legal obligations they are fundamental principles that protect the integrity of financial markets.”