Since our last visit to Premier African Minerals [LON:PREM] in January, the AIM-listed, BVI-domiciled mining exploration and production company has seen its shares appreciate 48% year-to-date and a very tidy 142% over one year.
In that time the company has swelled to a valuation of GBP170m which should have left shareholders feeling quite satisfied at the management’s long-term approach to its Zimbabwean Zulu Lithium and Tantalum Project
The ever-ebullient CEO, George Roach recently announced as plant construction at Zulu was completed: “I am personally excited at this prospect of so significant a company-changing moment in the history of our company and am somewhat in awe when I consider that in September 2022 this was virgin bush!”
Just like an overwhelmed Oscar winner, Roach had his list of thank-you’s: “None of this would have been possible without the massive contribution made by so many of our staff and our contractors and the incredible support of our shareholders through some really trying years in getting to where we are today.”
Big clap for the shareholders then.
The hands-on head honcho was busy at his keyboard pushing out RNSs complete with multi-media updating the progress of the Zulu project over the following month. However, as March began things started to slow down despite the continued boosterism.
Delays and interruptions frustrate targets
The company informed the market that an error on the part of the plant designers led to a late change in reagent dosing and reagent requirements.
Then there was the late delivery of certain components of the flotation system of the plant, followed by a severe wet season in Zimbabwe all complicated by the continued issues of slow import clearance of essential plant components at Beitbridge.
This perfect storm of delays combined to frustrate PAM’s target of Valentine’s Day to commission the plant. A statement warned: “Premier was adequately funded to that projected date and remains in funds at this time. It may be necessary to either increase the prepayment amount under current Marketing and Pre-Payment Agreement or accept a short-term loan facility secured against spodumene to be produced to meet operating costs at Zulu in the coming weeks. Should that arise, it will be announced at that time.”
As April hove into view, the company explained it was still waiting on the Zimbabwean government to approve any potential exports of concentrate, and that pesky reagent hadn’t turned up yet. Apparently, the reagent was really common, but not in Africa, where the mine was located (a continent that boasted over a third of all mineral deposits globally). But all was well in PAM land as the share price was still climbing, opening the month at 0.93p
A few days later Roach was pleased to announce that some reagent had been found and the government had given the necessary greenlights to proceed, and everything was back on track, with product expected at the end of April.
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Cashflow constraints at Zulu
By the end of the month PAM was still optimising its plant in order to achieve the stated throughput, however the announcement was bookended with the statement: “cashflow is constrained at Zulu, this is expected to be short term and Premier will implement applicable financing measures to deal with this in the lead up to first revenues from sale of concentrates in the coming weeks.”
Before the month was out, Roach and fellow director, Wolfgang Hampel exercised options over 24,500,000 new shares, and were joined in the issue by other current and former directors and employees putting in around GBP560,000 to the business.
By the start of the Early May Bank Holiday in the UK, PAM’s shares were 0.95p. And by the time King Charles III was trying on an odd-shaped hat in London, despite changing auditor, PAM’s share price broke the 1p barrier, peaking at 1.004p on 9th May. Cue celebrations, a parade and street parties – though that may have been something to do with the Coronation, as opposed to the shares hitting the highest point they had for eight long years.
Premier African Minerals share price down like a stone
However, PAM’s share price went down quicker than the bunting the following week when – presumably in the absence of a further up-front payment from the mine’s Chinese offtaker – Roach informed the market that it had issued another 190 million shares, raising close to GBP1.8m “to assist with further operational funding of the ongoing optimisation operations at Zulu” and “general working capital purposes necessary for the group.” A further GBP610,000 placing bizarrely followed soon after, with Roach putting his money where his mouth was, taking on GBP110,000 of the second placement, upping his personal stake to 7.1% of the company.
Sadly, there have been no further updates as to when Zulu will start hitting its nameplate target, though the company reported the first trickles of concentrate, or any indication when PAM will start turning revenues. PAM’s share price closed at 0.68p (23rd May), down nearly 14% in the day’s trading and seemingly heading in one direction.
Small retail shareholders have been in a tizzy. As with all smallcaps the opinion divides between the proponents who will hold the stock through thick and thin to the Moon, and the detractors who have an almost Private Frazer/Extinction Rebellion pessimism of their holdings in any downturn. PAM is the most marmite of marmite stocks.
Undoubtedly lithium is the new gold and demand will increase in only one direction in the next decade. The company says that Zulu is the largest lithium deposit in Zimbabwe, and Zimbabwe has reasonable deposits of the metal (the largest in Africa and fourth largest in the world by some measures). However, is PAM the right firm to get it out?
Lack of communication has been an issue
Communication has been an issue for PAM. Not so much the volume – the company’s CEO has been more than efficient in that regard – but the type and quality. Investors will grow tired of the boosterisms, whilst waiting for factual information from assays and concrete production updates.
PAM is fishing in febrile waters, but as to when investors can expect any payback is anyone’s guess. Bridgewise rates PAM as a ‘Hold’. The analyst said: “Premier African Minerals Limited reported financial results that met industry averages, however, showed a limited correlation with outpacing its peers in the Materials sector. The company is also a member of the Metals and Mining industry, which presents additional risks such as increased awareness of environmental, social and governance (ESG) responsibilities and the promotion of regulations against polluting industries, mining costs, geopolitical risks, and a decrease in demand as a result of recession and economic slowdown. While investing in this company can provide a viable diversification strategy for a portfolio, it may not be the best option available.”