Today saw Premier African Minerals (LSE:PREM) reveal that it has secured funding for a definitive feasibility study (DFS) at its flagship Zulu project in Zimbabwe, a key milestone that has sent its shares up 44.4pc to 0.2p.
Fellow AIM player Cadence Minerals (LSE:KDNC) will invest up to $5.1m to fully fund the DFS at Zulu, one of the most significant undeveloped lithium bearing sites in Zimbabwe. The site has an NPV of £127m and a mineral resource estimate of 20Mt containing 526,000t of Lithium Carbonate and 1,000t of Tantalum Pentoxide.
Cadence – which rose 1pc to 0.2p on today’s news – will receive a 30pc stake in Zulu following the five-stage investment and will also be able to nominate a director to Premier African’s board once it has paid $1.5m. When the investment has completed, the firm will receive the right to increase its stake in Zulu to 49pc, will receive exclusive marketing rights on the sale of all mineral products, and will be able to appoint a second director.
A five-person technical committee will now be established to oversee the management of the DFS consisting of a project manager and two members from both Premier and Cadence. With Premier African’s mineral resource estimate over covering 35pc of Zulu’s known 3.5km surface strike length, the site also has plenty of upside potential with an exploration target of between 120-160Mt.
George Roach, chief executive at Premier African, said:
This conditional Heads of Terms with Cadence underlines the value and potential of the Zulu Project, with a post-investment value of US$17 million, which reaffirms Premier’s belief that the Zulu Project is potentially one of the leading hard rock lithium exploration projects on the London Market and is an indication of the significant value that Premier management has already added to the Zulu Project.
‘Cadence continues to demonstrate a strong capability in both advancement of lithium projects and securing appropriate and funded off-take agreements and I am pleased that a Cadence representative will be joining Premier’s Board in due course and I look forward to making a further announcement in this regard in the near future.
‘The final agreement is subject to completion by Cadence of its due diligence and execution of the definitive investment contract and we have all agreed that this should be expedited. Finally, I am particularly pleased that the Investment will be made at subsidiary level and results in no shareholder dilution in Premier for the Zulu Project at this time.”
Kiran Morzaria, chief executive at Cadence, added:
‘The Zulu Lithium Project is well advanced, with significant mineral resources, robust scoping study economics and ample room for expansion given the size of the exploration targets.
‘By coupling Premier’s local relationships and country expertise and Cadence’s experience in lithium project development both parties will be able to unlock value, rapidly advance this project with the aim of developing Zulu into a significant producer to supply the expanding lithium market.’
‘Securing the right to earn into this asset dovetails well into Cadence’s strategy. That is to invest in assets with shorter development timelines, meaning earlier cashflow, and invest directly into the project, taking significant stakes and be part of the management team.’
Author: Daniel Flynn
Disclosure: Daniel Flynn does not own shares in the company mentioned.