Strategic Investment to Fully Fund Zulu DFS

RNS Number : 6827S

Premier African Minerals Limited

27 June 2018

 

Premier African Minerals Limited / Ticker: PREM / Index: AIM / Sector: Mining

For immediate release

27 June 2018

Premier African Minerals Limited

Strategic Investment to Fully Fund Zulu Lithium DFS      

Premier African Minerals Limited ("Premier" or the "Company") is pleased to announce that the Company has today entered into a conditional Heads of Terms with Cadence Minerals PLC ("Cadence") (AIM/NEX: KDNC; OTC: KDNCY) to secure a direct investment at subsidiary level into the Zulu Lithium and Tantalum Project ("Zulu Project") in Zimbabwe. The investment of up to US$5,100,000 secures 30% of the shareholding in the Zulu Project ("Investment").  

Highlights:

·     US$5,100,000 Investment to fund the Definitive Feasibility Study of the Zulu Lithium Project

·     Cadence has the right to acquire up to 30% interest in the Zulu Project on completion of the Investment

·     Cadence has the right to nominate a director to the Board of Premier

George Roach, CEO, commented:

"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."

Proposed Transaction

On 26 June 2018, Premier African Minerals Limited and Cadence Minerals Limited, ("Cadence") entered into a conditional Heads of Terms (together the "Parties"). The intention is to replace these Heads of Terms with a binding Investment Agreement ("Investment Agreement"). Cadence has agreed to acquire up to 30 per cent of the issued share capital of Zulu Lithium Mauritius Limited ("MauCo"), a company wholly-owned by Premier by investing up to US$5,100,000 to fund the Definitive Feasibility Study ("DFS") of the Zulu Lithium Project. MauCo wholly-owns Zulu Lithium (Private) Limited, a company registered in Zimbabwe which owns the Zulu Lithium Project.

The Parties have agreed that the investment will be payable in five instalments and each instalment will become convertible into ordinary shares of MauCo following each disbursement of proceeds in accordance with the project development budget as set our below:

Stage	Percentage in MauCo	Investment Amount	Conditions precedent for payment of each Investment Amount
1	10%	US$1,500,000	Investment Amount payable on ·    completion of the Investment Agreement; and ·    Mobilisation of the drilling and the commencement of the DFS work at the Project
2	5%	US$1,200,000	Investment Amount payable on completion of 5000 meters of diamond core drilling unless otherwise agreed in writing;
3	5%	US$1,100,000	Investment Amount payable on completion of a further 5000 meters of diamond core drilling unless otherwise agreed in writing;
4	6%	US$950,000	Investment Amount payable on confirmation of 50% of drilled core having been assayed and reported to the Parties by accredited independent laboratory unless otherwise agreed in writing;
5	4%	US$350,000	Investment Amount payable on completion of 40% of the DFS unless otherwise agreed in writing;
TOTAL	30%	US$5,100,000

The Parties agree that the Investment will be applied in accordance with the Project Development Budget. Any overruns of the Project Development Budget will be apportioned pro rata to each Party's respective interest in MauCo providing such overruns could not have been reasonably planned for in the Project Development Budget. Any variation of the Project Development Budget will require written approval by Cadence and Premier.

The Investment Agreement is subject to standard anti-dilution and down-round protection. In particular, if any Party fails to pay its full share of any amount due under the Project Development Budget by the due date, MauCo shall as soon as possible give notice of such default to all the Parties. The non-defaulting Parties shall within 15 business days, following the date of service of the default notice on the defaulting Party contribute to the amount in default pro rata to its percentage interest in MauCo (the "Default Contribution"). If the default continues for more than 45 days from the date of service of a default notice then the non-defaulting Parties will be entitled to convert its Default Contribution into shares in the capital of MauCo at a price per share at which the Investment Shares were valued.

In addition, if at any time for a period of 24 months after completion of the DFS any new shares in the capital of MauCo (of any class) are issued by MauCo which would result in Cadence's shareholding in MauCo being diluted by at least 15% at a price at least 15% below the price the Investment Shares were issued ("Down Round Price"), MauCo shall immediately issue to Cadence such number of new shares necessary to price the completed Investment at the Down Round Price.

A technical committee will be established to oversee the management of the DFS, consisting of five persons. Cadence and Premier will be entitled to each appoint two members of the technical committee and the Parties will jointly appoint a project manager.

The Parties have acknowledged that at the date of the Heads of Terms an aggregate amount of US$4,064,374.88 has been advanced by Premier to MauCo ("Premier Loan") and the Parties have agreed that the Premier Loan and any interest due under the Premier Loan will be offset on a pro rata basis against the Investment Amounts paid by Cadence to MauCo.

Following the payment of the stage Investment Amount of US$1.5 million, Cadence may appoint one director to serve on the boards of Premier, MauCo and/or Zulu and following the payment of stage 5 Investment Amount, Cadence may appoint a second director to serve on the boards of MauCo and/or Zulu.

The Parties have further agreed that Cadence will, following the payment of the stage 5 Investment Amount:

(i)           be awarded exclusive rights on commercial terms to the marketing and sale of all mineral products for the benefit of MauCo ("Marketing Rights"); and

(ii)          be granted an irrevocable right of first refusal ("ROFR Investment") to subscribe for such number of shares in the share capital of MauCo equating to an additional 19% of the issued and fully diluted share capital of MauCo on terms no worse than those offered to MauCo by another potential investor.

Conditions Precedent

Completion of the Proposed Transaction is conditional on the following matter:

i.    All relevant shareholder approvals being obtained;

ii.    Cadence's satisfaction with the final form of the Investment Agreement, completion of due diligence and the Project Development Budget;

iii.   the Parties agreeing, signing and exchanging the Investment Agreement that incorporates all the terms of the Proposed Transaction; and

iv.   there being no material adverse change in the business, operations, assets, position (financial, trading or otherwise), profits or prospects of MauCo or Zulu between the date of this letter and completion of the Investment Agreement.

Premier has granted Cadence an initial period of exclusivity from the date of signature of the Heads of Terms for a period of 60 days during which period Cadence shall complete sufficient due diligence so as to be able to convert the outline terms in this term sheet into a definitive agreement.

About Cadence Minerals PLC

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is an AIM-traded investing company (capitalised at approximately £ 16 million) which invests in lithium mining projects. Cadence typically invests at the early stage of the resource development cycle and its principal investments now include stakes in Bacanora Minerals, European Metals Holdings, Macarthur Minerals, Yangibana North Project, Clancy, San Luis stakes in Argentina and Auroch Minerals. As at 31 December 2017 Cadence Minerals audited total assets were approximately £31 million. Full details on Cadence Minerals' activities and portfolio is available on its website, www.cadenceminerals.com

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Enquiries:

Fuad Sillem	Premier African Minerals Limited	Tel: [phone]
Michael Cornish / Roland Cornish	Beaumont Cornish Limited (Nominated Adviser)	Tel: [phone]
Jerry Keen/Edward Mansfield	Shore Capital Stockbrokers Limited	Tel: [phone]
Jonathan Evans	Brandon Hill Capital Limited	Tel: [phone]

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 project in Zimbabwe.

The Company has a diverse portfolio of projects, which include tungsten, rare earth elements, lithium and tantalum in Zimbabwe, encompassing brownfield projects with near-term production potential to grass-roots exploration. In addition, the Company holds 5,010,333 shares in Circum Minerals Limited ("Circum"), the owners of the Danakil Potash Project in Ethiopia, which has the potential to be a world class asset. Premier also has an interest in Arc Minerals that has a number of mineral assets in Europe and Africa.

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.  Many 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.

ENDS

 

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