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Premier African Minerals: more to come after 650% share price gain in 12 months?

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Premier African Minerals (LSE:PREM), a miner with a market capitalisation of £72m, has been a good bet for investors in the last year, with its share price up a whopping 653% over the last 12 months.

The AIM-listed company’s shares have been boosted by two developments in particular over the last year. The first, in March 2021, was when the company was granted an Exclusive Prospecting Order (EPO) for its Zimbabwe Zulu lithium and tantalum project. Since then, the group has started drilling for the project.

Where to now for Premier African Minerals?

The share price was once again positively impacted this week, after the company reported exploration results for the Zulu project on Monday and said it had signed a non-binding deal on a possible investment in the project.

Chief executive officer George Roach did point out that unseasonal and excessive rains led to difficult conditions at the exploration site, however, he added that after mobilising another three drill rigs, drilling is expected to commence next week.

On Thursday, the company also accepted an offer from Vortex to exchange Premier’s 4.8% interest in Circum Minerals for 5 million new shares in the former, making up a 13% interest.

Neil Herbert, chairman of Premier, commented: “This Vortex offer consolidates a substantial percentage of minority shareholders representing 36.7% of Circum. With current potash prices at all-time highs this project has significant potential value which is only constrained by the current conflict in Ethiopia. On settlement of the conflict, Circum believes it will be well placed with an approved Definitive Feasibility Study and corresponding extension of Circum’s Mining Licence to finalise project financing and the commencement of construction.”

In early morning trading on 11 February, Premier’s shares were up nearly 15%.

The company was founded by Roach and Bruce Cumming in 2007, when they established G&B African Resources, which was later renamed to Premier African Minerals. It acquires and develops mineral properties across Africa. In addition to its projects in Zimbabwe, the group has operations in Namibia and Mozambique.

And while the company has had some good news over the last year, it’s important to note that Premier isn’t currently generating revenue. At the end of June 2021, the company had net cash of $937,000, up from $727,000 in December 2020. It had a net cash outflow from operating activities of $1.06m. Meanwhile, it recorded a operating loss of $737,000 over the six month period.

A good time to back this mineral play?

Thanks to the reversal of an impairment of the evaluation and exploration assets of Zulu lithium, the group recorded a pre-tax profit of $3.943m, up from a loss of $1.287m at the end of 2020.

The commencement of drilling at the Zulu lithium and tantalum project comes at a good time for the minerals. One of the main uses of tantalum is in the production of electronic components, including in smartphones. Meanwhile, lithium-ion batteries are a key component for hybrid and electric vehicles. As the demand for electric vehicles continues to rise, the demand for these minerals are also increasing. Therefore, the continued electrification of people’s lives can prove to be a tailwind for the business.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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