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”).
· 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”)
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.
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.
Premier African Minerals Limited
Tel: +27 (0) 100 201 281
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