REG - Premier African Min - Zulu Lithium Project Pilot Plant

Premier African MineralsAnnouncement

24/06/2022 07:00

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RNS Number : 0925Q  Premier African Minerals Limited  24 June 2022

24 June 2022

Premier African Minerals Limited

 

 Zulu Lithium Project Pilot Plant

Premier African Minerals Limited ("Premier" or the "Company"), is pleased to
announce that it has entered into a Marketing and Prepayment agreement in the
form of a binding Heads of Terms with Suzhou TA&A Ultra Clean Technology
Co., Ltd ("Suzhou TA&A") that will allow Premier to establish a
large-scale pilot plant at Zulu Lithium and Tantalum Project ("Zulu Project")
to produce SC6 from Q1 2023 ("Agreement").

 

Highlights

 

·    Target annual production from pilot plant of 50,000-ton SC6

·    Take-off for target production committed to Suzhou TA&A

·    Pre-purchase of production pays complete US$35 million construction
cost

·    Minimum price undertaking for first 50,000-ton production underwrites
repayment capability

 

George Roach, CEO commented," I am pleased to be able to confirm that after
our RNS of 13 June 2022, Premier has concluded a binding Heads of Terms in
respect of a Marketing and Pre-Payment Agreement for the Zulu Project. Whilst
full detail is set out below, the net effect of this is the immediate
commencement of construction activities at the Zulu Project intended to see
first shipments before 31 March 2023 and a steady build up in production to
circa 48,000 ton of SC6 per annum.

It is important to note that this is a pilot plant facility and will produce
SC6 only in the first phase. Three by-product streams will be stock-piled and
will go to inventory, pending completion of additional test-work and
additional plant. These products are a tantalum concentrate in a magnetic
fraction, a petalite rich mixed ore and a mica/lepidolite concentrate that is
likely to contain Caesium and Rubidium. That this may be immediately saleable
remains a possibility.

The prepayment is expected to fully fund the construction phase and is
interest free provided first shipment occur by 31 March 2023. At present SC6
pricing, the pre-payment is expected to be fully liquidated inside of twelve
months."

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 ton per hour, however
it is planned to run at a more conservative 140 ton 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 the Proposed Marketing and Pre-Payment Agreement ("Agreement")

Pre-Payment Agreement

Suzhou TA&A have agreed to provide a pre-funding amount US$34,644,385
("Pre-Payment Amount") to enable the construction and commissioning of a
large-scale pilot plant at the Zulu Project. Upon the signing of the
Agreement, US$3,450,000 has been made immediately to Premier to commission the
securing of the pilot plant. The remaining balance of the Pre-Payment Amount
will be paid in one lump sum following completion of the transaction
documents. Both Premier and Suzhou TA&A have agreed to use their best
endeavours to complete the definitive transaction documents within one month
of the Agreement failing which on written notice by Suzhou TA&A, Premier
will be required to immediately refund the amount of US$3,450,000 to Suzhou
TA&A from existing funds held by Premier.

Repayment of the Pre-Payment 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 incurred at the
Zulu Project (being all costs and expenditures incurred including government
royalties) and management fees to be paid to Premier, until such time as the
Pre-Payment Amount has been fully refunded.

 

Zulu Lithium Private Limited ("Zulu") and Zulu Lithium Mauritius Limited
("Zulu Lithium") will provide Suzhou TA&A with security over all existing
assets including all the mining claims, and all other assets, company shares
and inventory including SC6. To the extent that above security fails to cover
any outstanding amounts under the Pre-Payment Amount, Premier has agreed to
cover this shortfall by way of a cross company guarantee.

 

Repayment 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 tonne per
month on a rolling average basis 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, then Premier shall pay interest to Suzhou TA&A at a reasonable
interest rate that represents Suzhou TA&A's actual funding cost for the
delay. 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 Pre-Payment
Amount.

 

Zulu and Zulu Lithium has the right to repay the Pre-Payment 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 Prepayment Amount
has been repaid in full, 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 tonne of
SC6 shipped ("First Delivery") or until the Pre-Payment Amount has been fully
liquidated, 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 Pre-Payment Amount has been fully repaid or 31
December 2023.

Following successful payment of the Pre-Payment 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.

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 the terms of the Agreement
are fair and reasonable insofar as Shareholders are concerned. 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 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 funding under the Agreement is
secured on Zulu and is guaranteed by the Company itself, repayment to Suzhou
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
 Matthew Bonner                      EAS Advisors LLC                    Tel: +1 646 495 2225

 

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

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