Offtake and Prepayment Agreement Update

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: [phone]
Michael Cornish / Roland Cornish	Beaumont Cornish Limited (Nominated Adviser)	Tel: [phone]
Douglas Crippen	CMC Markets UK Plc	Tel: [phone]
John More/Toby Gibbs	Shore Capital Stockbrokers Limited	Tel: [phone]

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

 

END