REG - Premier African Min - Zulu Lithium Project Pilot Plant Update

Premier African MineralsAnnouncement

03/08/2022 07:16

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RNS Number : 6673U  Premier African Minerals Limited  03 August 2022

3 August 2022

Premier African Minerals Limited

 

 Zulu Lithium Project Pilot Plant Update

Premier African Minerals Limited ("Premier" or the "Company"), is pleased to
announce that it has concluded the definitive transaction documents in respect
of the Marketing and Pre-Payment Agreement ("Agreement") as set out in the
announcement dated 24 June 2022 and is in receipt of approximately US$18.1
million of the pre-payment required to have been paid to date. This payment
will be utilised for the Zulu plant fabricators and site contractors.
Fabrication and site construction is well underway, with a projected
completion date for commercial production expected in Q1 of 2023.

 

George Roach, CEO commented," I am pleased to confirm the signing of this
Agreement and the receipt of funds. Fabrication, site design and construction
are underway and projected commencement of commercial production is now
scheduled for Quarter 1 of 2023. The pre-payment is expected to be fully
offset against future shipments inside of twelve months at the prevailing SC6
pricing.

We have recently appointed independent project and construction management
teams to assist in ensuring compliance with timelines and budgets.

At the same time, there has been an improved turn around in assays and we
expect to release significant results as they come to hand. Further updates on
the construction of the pilot plant will be provided in due course."

The Pilot Plant

The pilot plant to be commissioned will utilise state of the art sensor-based
ore sorting technologies that will facilitate the separation of run of mine
material into components and in so doing, likely increase available capacity
in the flotation recovery circuits, where lithium minerals are recovered.
Ultimate production and recoveries are a factor of many variables, and the
pilot plant is likely to assist in dealing with these variables due to the
inherent flexibility of the use of multiple ore sorters. Stockpiles of
tantalum, petalite and Mica/lepidolite rich material will facilitate further
test work and flow sheet development to ensure that this material is truly
inventory for later profitable recovery.

The pilot plant has a nameplate through put of up to 190 tonnes per hour,
however it is planned to run at a more conservative 140 tonnes per hour at
inception. At this rate and based on a 3-year life of the pilot plant
operations only, excluding plant upgrades, tantalum recovery, petalite
production and any other revenue, a series of sensitivities indicate a robust
project and an assurance that Premier will become cash generative from the
time of first shipment.

Terms of Marketing and Pre-Payment Agreement

Pre-Payment Agreement

As previously set out in the binding heads of terms announced on 24 June 2022,
under the terms of the Agreement entered into between Premier and Suzhou
TA&A today, Suzhou TA&A has agreed to purchase, in advance,
 US$34,644,385 of product to be sold by Premier ("Advance Purchase Amount")
to enable the construction and commissioning of a large-scale pilot plant at
the Zulu Project and to date, Suzhou TA&A has made approximately US$18.1
million available to Premier. Under the Agreement, Premier has now agreed to
become directly the Seller of the product from the pilot plant at the Zulu
Project.

Repayment of the Advance Purchase Amount will be made by Premier from all
residual funds from invoices raised by Suzhou TA&A from each monthly
Accounting Period following the deduction of agreed Deductible Expenses (being
all costs and expenditures incurred including government royalties) and
management fees to be paid by Zulu Lithium to Premier, until such time as the
Advance Purchase Amount has been fully offset.  Premier has agreed to
conclude a management agreement with Zulu Lithium within 30 days of the
signing of the Agreement.

 

Offset of the Advance Purchase Amount through invoices raised by Suzhou
TA&A for shipped SC6 should commence no later than 31 March 2023 at a
minimum rate of 4,000 tonnes per month on a rolling average basis plus or
minus 10% ("Minimum Delivered Product") following first Concentrate Production
("Supply Commencement Date"). If the Supply Commencement Date does not occur
by 31 March 2023 or there is a substantive delay in the subsequent supply of
SC6, or there is a shortfall in the Minimum Delivered Amount, then Premier
will pay interest to Suzhou TA&A at a reasonable interest rate that
represents Suzhou TA&A's actual funding cost for the delay or shortfall.

 

If the Supply Commencement Date does not occur on or before 30 May 2023, then
Suzhou TA&A may terminate and seek repayment of the Advance Purchase
Amount. Premier has the right to settle the Advance Purchase Amount at any
point.

 

Marketing

Under the Agreement, Suzhou TA&A will have the right to acquire the first
three years of production of SC6, or until such time as the Advance Purchase
Amount has been offset in full or the first 50,000 tonnes have been shipped to
Suzhou T&A, whichever occurs later ("Term"). The Term of the Agreement can
be increased by a further three years, subject to the mutual agreement between
the parties.

The sale of SC6 will be priced at a discount conditional on the approval of
the Minerals Marketing Corporation of Zimbabwe on the first 50,000 tonnes of
SC6 shipped ("First Delivery") or until the Advance Purchase Amount has been
fully offset whichever occurs first. Following completion of First Delivery,
the parties will agree to negotiate a discount based upon market conditions
for the remaining Term. The purchase price will be subject to a floor price
until such time as either the Advance Purchase Amount has been fully offset
or 31 December 2023.

The purchase price is also subject to target product specifications, with
industry standard adjustment for variations.

Following full payment of the Advance Purchase Amount, Suzhou TA&A shall
have the right of first refusal to match any offer from another interested
party to acquire SC6 from the Zulu Project should the parties not agree to a
renewal of the Term. This right is subject to standard regulatory
requirements, Commercial Best Practice, and the reasonable agreement of
commercial terms.

The Agreement also includes standard events of default and warranties from
both Premier and Suzhou TA&A.

Related Party Transaction

Following completion of the subscription agreement by Suzhou TA&A (the
"Subscription") as announced on 8 March 2022, Suzhou TA&A is interested
in 13.38 per cent. of the issued share capital of the Company. Accordingly, as
Suzhou TA&A is currently interested in more than 10 per cent. of the
issued ordinary share capital of the Company, the Agreement is a related party
transaction for the purposes of Rule 13 of the AIM Rules. As previously
announced, as Dr Luo Wei was nominated by Suzhou TA&A as a director of
the Company, he is not independent for the purposes of the AIM Rules and the
Agreement has therefore been considered by the Independent Directors (being
the Board other than Dr Luo Wei).

The Independent Directors of the Company consider, having consulted with the
Company's nominated adviser, Beaumont Cornish, that as announced on 24 June
2022, the terms of the binding head of terms and now incorporated into the
definitive transaction documents (the Agreement) are fair and reasonable
insofar as Shareholders are concerned. As previously announced, the
Independent Directors have in particular taken into account that the Agreement
provides the immediate funding to enable the construction and commissioning of
a large-scale pilot plant at Zulu which the Independent Directors believe
provides a significant opportunity at a time when Spodumene prices are
expected to remain high given current supply-demand imbalances. The Agreement
also provides funding without the issue of any ordinary shares and therefore
avoids dilution to shareholders at the current time. Furthermore, in current
market conditions, the Independent Directors do not believe that alternative
funding would be currently available on acceptable terms to the Company.

The Independent Directors have also taken into account the technical
assessment and pilot plant proposal prepared by Stark International Projects
Ltd ("Stark") and which is based on a relatively straightforward ore sorting
and flotation circuits without the need for any large-scale chemical
processing to isolate and produce the lithium bearing spodumene. The Company
has a fixed price contract with Stark for the pilot plant, and an economic
assessment has been prepared by Bara Consulting (Pty) Ltd (based on the
updated scoping study as announced on 16 August 2021) which also reflects
that the mineralisation for the pilot plant is near surface. Based on this
technical work, the Independent Directors are of the view that while the
Advance Purchase Amount under the Agreement is an unsecured obligation of the
Company, offset of the Advance Purchase Amount to Suzhou TA&A through
production at Zulu can be made in a timely way.

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. Several 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.

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)
 John More/Toby Gibbs                Shore Capital Stockbrokers Limited  Tel: +44 (0) 20 7408 4090

 

Glossary of Technical Terms

 "Accounting Period"              is one calendar month, in respect of which the Seller shall produce monthly

                                management accounts from the date of implementation of this Transaction
                                  Document.

 "SC6"                            spodumene concentrate.
 "Deductible Expenses"            i.      all costs and expenditures incurred in relation to mining,
                                  assaying, treatment, refining, smelting, transportation, insurance, and sales;

                                  ii.     government royalties in respect of the SC6 concentrate (or the
                                  metals derived from those Spodumene concentrate) from which the gross proceeds
                                  from Spodumene concentrate production were derived, and all taxes, bonding and
                                  other amounts payable to Governmental Bodies, and all other amounts required
                                  to be paid under Law;

                                  iii.    management fees payable under the management agreement with
                                  Premier;

                                  iv.    Capital expenditures and replacement equipment costs required for
                                  the Pilot Plant; and

                                  v.     reasonable working capital required by the Zulu Lithium and Premier
                                  and Premier's Affiliates;

                                  for so long as the Advance Purchase Amount remains outstanding and to the
                                  extent that the Deductible Expenses are above $2000 per tonne for any
                                  Accounting Period, the Seller shall seek the consent of the Buyer for the
                                  amount that exceeds $2000 per tonne, such consent is not to be unreasonably
                                  withheld or delayed.

 "First Concentrate Production"   means the last day of the month during which ore has first been processed by
                                  Zulu for a period of two cycles of 4 consecutive days in each cycle.

 

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.

Ends

 

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