REG - Premier African Min - Offtake and Prepayment Agreement Update

Premier African MineralsAnnouncement

26/06/2023 07:00

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RNS Number : 8680D  Premier African Minerals Limited  26 June 2023

26 June 2023

Premier African Minerals Limited

 

Offtake and Prepayment Agreement Update

 

Update on Audited Accounts

 

Premier African Minerals Limited ("Premier" or the "Company"), provides a
further update on the progress of the revision of the Offtake and Prepayment
Agreement ("Agreement") entered into between Premier and Canmax Technologies
Co., Ltd. ("Canmax") as announced on 6 June 2023 for spodumene concentrate
produced at Zulu Lithium and Tantalum Project ("Zulu").

Offtake and Prepayment Agreement amendments

Whilst Canmax and Premier continue to engage, and both parties continue to
express their intention to reach agreement and to proceed with the conclusion
of a suitable amendment to the Agreement, no amendment has been signed to
date, nor will an amendment containing certain of the terms now currently
proposed by Canmax, be acceptable to Premier. In particular, Canmax's proposal
received on 23 June 2023 includes:

 ·         The effective conversion of the Pre-Payment Amount into either (i) a
           convertible debt instrument in the event that Zulu is unable to meet its
           delivery obligations under the amended Agreement, with no floor to the
           conversion price or (ii) a proportionate amount of the equity of Zulu; and

 ·         The sale to Canmax of all concentrate produced at Zulu, not only that from the
           Pilot Plant, at fixed prices with limited ability for Premier to accommodate
           cost variations.

Premier remains committed to an equitable solution and will continue to engage
with Canmax to the extent to which Canmax is so prepared. As previously
announced, Canmax previously confirmed that their intention was to continue to
support Premier and not to terminate the Agreement providing that an addendum
between the parties is entered into on or before 25 June 2023. As above, the
addendum has not been agreed to date.

Zulu plant modification update

In regard to plant modification progress at Zulu, Premier reports that Stark
International Projects Limited ("Stark") has advised that civil preparatory
works associated with the installation of the hydro sizer and now for the
installation of the UV sorters is complete and installation is expected to
commence this coming week. Stark is acting as the design, procurement,
installation, and commissioning contractor on behalf of Premier, and prior to
completion of commissioning, remains as the operator the Zulu plant. Stark has
further advised that the installation of the hydro sizer is expected to see
concentrate production at or near 50% of design throughput. In addition, Stark
has advised Premier that, with the exception of the initial shipment in June
2023 which has been delayed to circumstances beyond Stark and Premier's
control, and which are discussed further below, the Stark production
projections included in the announcement dated 25 May 2023 remain achievable.
Shareholders should note that there can be no assurance or guarantee that
Stark's projections will be achieved and that there will not be further delays
to Stark's completion of plant modification and final commissioning.

Notice of Force Majeure by Premier under the Agreement

As previously announced, Premier had been advised that the milling and sizing
component of the plant required certain limited modifications to allow for
full optimisation to design capacity throughput. In particular, Premier had
been informed by Stark that the plant is unable to provide material correctly
sized and in sufficient tonnage from the comminution section to the floatation
plant to meet the concentrate production contemplated under the Agreement.
Inter alia, the bearing seal assemblies in the EDS mill are unable to prevent
dust and liquid ingress into the bearing assembly and consequentially must be
redesigned. Accordingly, and for reasons set out more fully in the Force
Majeure notice ("FM Notice") that Premier served on 25 June 2023 under its
agreement with Canmax dated 28 July 2022, a formal state of Force Majeure
("FM") is now in effect. The full text of the FM Notice is set out in the
appendix to this announcement and provides greater technical information about
the events which have led to Force Majeure under the Agreement.

The immediate effect of the FM is the suspension of all obligations under the
Agreement including those associated with delivery of Product by Premier and
any consequences associated with it. Specifically, this suspends for the
duration of the FM event, any consequence, notice, interest, or the like
associated with the delivery of Product. The existing Agreement makes
provision for such an event of FM and contemplates a maximum time of six
months during which the cause or causes of the FM should be rectified. In
Premier's current opinion, in the light of recent developments, a de facto
state of FM has therefore been in existence from 25 May 2023.

Of further significance under the FM are the following:

 ·         Canmax may dispute the declaration of FM, but such dispute would be resolved
           under Arbitration in Singapore; and

 ·         A notice period is not abridged by the duration of FM.

Funding update and AGM

Shareholders should note that Premier's Zulu project comprises a built and
installed processing plant undergoing modification as previously announced and
optimisation. Based on current Spodumene prices and costs estimates there has
been no change to the Board's expectation that Zulu, when fully operational
will operate profitably. Zulu is and remains debt free and currently
unencumbered by the Agreement.

Premier has received approaches from competing hydroxide producers based out
of China and from European based entities intending to complete their own
hydroxide and other downstream lithium operations. To date, Premier has
resisted serious review of any of these approaches in the light of the
Agreement with Canmax. However, in the context of the current stage of
discussions with Canmax in respect of the Amended Agreement, Premier will now
engage with these other interested parties.

Premier has previously stated that cash is constrained, and the plant
modifications and optimisation timeline will mean further funding is expected
to be required. At the Annual General Meeting ("AGM") scheduled for later
today, Premier is seeking, inter alia, shareholder approval for the
disapplication of pre-emption for an issue of shares for cash. Shareholders
should note that whether or not the enabling resolution is passed at the AGM,
Premier has in any event the general authority to issue shares on a
pre-emptive basis such as an open offer or rights issue. In these
circumstances, and if Premier remained unable to resolve the status with
Canmax and /or no other party concludes any further offtake agreement on terms
considered fair and reasonable to Premier shareholders as a whole, then the
Board consider that alternative funding options remain available to Premier.

Accounts update

Premier still expects to publish the audited annual financial statements for
the year ended December 2022 ("Accounts") on or before 30 June 2023. The
implications of the FM Notice and status of discussions with Canmax will be
further reviewed with the Company's auditors. Should there be any change to
current timeline, and in particular any possible delay to publication to
beyond 30 June 2023, an immediate notification would be made at that point.
Shareholders should note that pursuant to AIM Rule 40, should publication of
the Accounts be delayed beyond 30 June 2023, the Exchange would suspend
trading in the Company's shares with effect from 07.30 on 3 July 2023.

George Roach, CEO commented: "The issues at Zulu have been acknowledged by the
plant contractor to be beyond the control of Premier, and could not have been
foreseen by Premier. Whilst I am deeply upset and committed to finding an
equitable way forward with Canmax, that solution should strive to be fair and
reasonable and in the best interests of all Premier shareholders as whole.

Whilst my focus is squarely on resolution of the plant issues during this
period of FM and production at Zulu, I will diligently strive to resolve the
issues with Canmax and will actively pursue alternative strategies."

Related Party

As Canmax is interested in 13.14 per cent. of the Company's issued share
capital and therefore a related party under the AIM Rules, any revised
Agreement will be dealt with in accordance with AIM Rule 13.

MAR (Market Abuse Regulation)

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018.

 

The person who arranged the release of this announcement on behalf of the
Company was George Roach.

 

Enquiries:

 

 George Roach                        Premier African Minerals Limited    Tel: +27 (0) 100 201 281
 Michael Cornish / Roland Cornish    Beaumont Cornish Limited            Tel: +44 (0) 20 7628 3396

                                     (Nominated Adviser)
 Douglas Crippen                     CMC Markets UK Plc                  Tel: +44 (0) 20 3003 8632
 John More/Toby Gibbs                Shore Capital Stockbrokers Limited  Tel: +44 (0) 20 7408 4090

 

Forward Looking Statements:

Certain statements in this announcement are or may be deemed to be forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'' ''could'' "should" ''envisage''
''estimate'' ''intend'' ''may'' ''plan'' ''will'' or the negative of those
variations or comparable expressions including references to assumptions.
These forward-looking statements are not based on historical facts but rather
on the Directors' current expectations and assumptions regarding the Company's
future growth results of operations performance future capital and other
expenditures (including the amount. Nature and sources of funding thereof)
competitive advantages business prospects and opportunities. Such forward
looking statements reflect the Directors' current beliefs and assumptions and
are based on information currently available to the Directors. A number of
factors could cause actual results to differ materially from the results
discussed in the forward-looking statements including risks associated with
vulnerability to general economic and business conditions competition
environmental and other regulatory changes actions by governmental authorities
the availability of capital markets reliance on key personnel uninsured and
underinsured losses and other factors many of which are beyond the control of
the Company. Although any forward-looking statements contained in this
announcement are based upon what the Directors believe to be reasonable
assumptions. The Company cannot assure investors that actual results will be
consistent with such forward looking statements.

 

Notes to Editors:

Premier African Minerals Limited (AIM: PREM) is a multi-commodity mining and
natural resource development company focused on Southern Africa with its RHA
Tungsten and Zulu Lithium projects in Zimbabwe.

 

The Company has a diverse portfolio of projects, which include tungsten, rare
earth elements, lithium and tantalum in Zimbabwe and lithium and gold in
Mozambique, encompassing brownfield projects with near-term production
potential to grass-roots exploration. The Company has accepted a share offer
by Vortex Limited ("Vortex") for the exchange of Premier's entire 4.8%
interest in Circum Minerals Limited ("Circum"), the owners of the Danakil
Potash Project in Ethiopia, for a 13.1% interest in the enlarged share capital
of Vortex. Vortex has an interest of 36.7% in Circum.

 

In addition, the Company holds a 19% interest in MN Holdings Limited, the
operator of the Otjozondu Manganese Mining Project in Namibia.

 

APPENDIX

 

Copy of Notice of Force Majeure

 

The following sets out in the full the Force Majeure notified on 25 June 2023
by Premier to Canmax Technologies Co., Ltd:

 

"Premier African Minerals Limited (the "Company"), hereby gives on its own
behalf and on behalf of Zulu (as defined below) the following notice in
accordance with Article 12 of the Offtake and Prepayment Agreement made as of
the 28th of July 2022 between, among others, SUZHOU TA&A ULTRA CLEAN
TECHNOLOGY CO. LTD ("Buyer"), Zulu Lithium Private Limited ("Zulu") and the
Company (the "Offtake").

 

Terms in initial capital letters not otherwise defined in this notice have the
meaning ascribed to such term in the Offtake.

The Company and Zulu hereby advise the Buyer that the performance or part
performance of the Agreement by the Company and Zulu has been, directly and
indirectly, prevented, suspended, and delayed due to a Force Majeure.
Specifically, the following Force Majeure's are being provided pursuant to
this notice both of which fall within the terms of Section 12.1 of the
Offtake:

 (viii)  disruption or breakdown of storage plants, terminals, equipment, machinery, or
         other facilities, which are not in the ordinary course of business.
 (vii)   Shortages, failure, unavailability, or inability to obtain machinery,
         materials, supplies, plant or equipment, water, fuel, transportation or power,
         which are not in the ordinary course of business.

(collectively, the "Force Majeures")

Explanation of Force Majeures

The Company is unable to deliver Product within the stipulated dates as set
out in the Agreement as the comminution circuit is inter alia dependent on the
continuous performance of the EDS mill to deliver sufficient ore milled to
less than 150 microns to support the floatation section of the plant. A latent
defect in the bearing seal assembly has been discovered. The bearing seal
assembly is unable to prevent dust and liquid ingress into the bearing
assembly, and that the mill is unable to operate with a feed moisture content
greater than 10% when return feed causes the moisture content of the feed to
exceed this limit. For Product to be produced at the contracted quantity, 37,5
ton of ore at 150 microns needs to be transferred to the floatation section of
the plant in a continuous supply stream. Given the foregoing, the disruption,
breakdown and failure of the components of the plant constitute the Force
Majeures. The Force Majeures could not have reasonably foreseen by the Company
when the design and construction of the plant was taking place, and the
inability of the plant to operate with the elevated moisture content and the
latent defect discovered is not an ordinary course disruption, breakdown or
failure.

The latent defect in the bearing seal assembly will mean waiting until the
specialist parts are available and, to this end, the Company has worked
diligently with the main contractor responsible for the design and
construction of the plant, Stark Resources, both to identify the issues with
the plant which has caused the disruption, breakdown and failure and to ensure
that the repair which is not in the ordinary course of business, can take
place expeditiously.  Stark has confirmed the defect and has undertaken to
remedy it. In support thereof, I refer to correspondence from Stark Resources
dated 23 May 2023 (the "Stark Letter"). The proposed remedy is set out by
Stark Resources, as is the timeline in the Stark Letter. It is anticipated
that up to 50% of required Product may become available from Late July 2023.

The remedy to the Force Majeures requires either the supply and installation
of new EDS mills, or the addition of an additional conventional ball mill that
is not immediately available. The specific remedies are set out in the Stark
Letter, and it is expected that implementing a complete remedy is expected to
require 16 weeks.

In accordance with Article 12 of the Offtake, this notice confirms that no
liability for damage or delay will arise against either the Company or Zulu on
account of its failure to perform its obligations under this Agreement or on
account of any disruption or delay due to the Force Majeure or the
consequences of it.

As the Force Majeure will likely defer or prevent future deliveries of a
Parcel of Product, we look forward to discussing revisions to the Company's
shipping schedule with you in due course, all as contemplated by Section 12.5
of the Offtake."

 
Ends

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