Premier African Minerals Considers Strategic Options for Zulu Lithium Plant
Premier African Minerals Limited is considering various strategic options for its Zulu lithium plant, located at the Fort Rixon lithium mine in Zimbabwe's Matabeleland South Province. These options include a potential full or partial sale, or bringing in an investment partner through a joint venture. The company reported an operating loss of $12.03 million for the six months ending June 30, 2024, as detailed in its unaudited interim results.
A key issue for the group is the $42.8 million advance received from its offtake partner. This amount must be repaid either through the sale of spodumene concentrate (SC6) from the Zulu Lithium and Tantalum Project or by issuing shares based on a valuation of $200 million if the debt is not cleared by April 1, 2025. Despite these financial pressures, the board maintains that Zulu remains a valuable asset with an estimated fair value of $200 million under the prepayment and offtake agreement.
In a statement to shareholders, CEO George Roach acknowledged the company's challenges, particularly related to the plant's poor recovery rates and grade of SC6. He pointed out that design flaws in the comminution circuit delayed the commissioning of the plant by a year, with operations only starting in March 2024. Despite these setbacks, Roach highlighted some positives, including successful test floats of spodumene at other facilities in Zimbabwe.
To address these issues, Premier is exploring several options, including the installation of an additional spodumene float plant, which would cost around $400,000 and could be operational within three months of ordering. The company has engaged in discussions with a Chinese Engineering, Procurement, and Construction Management firm with experience in building similar floatation plants, including one already in operation in Zimbabwe.
In terms of financing, Premier African Minerals has incurred significant debt, which may require restructuring over time. However, recommencing full production at Zulu will still need additional funding. Roach stated that while the company is investigating strategic alternatives, resuming production at the Zulu mine is a serious option if these alternatives do not materialize.
At a broader level, the company faces significant creditor obligations and is seeking additional disapplication authorities from shareholders to meet these commitments. Roach emphasized that these authorities would only be used if necessary, depending on the outcome of the ongoing strategic negotiations.
Lithium is a critical mineral for Zimbabwe’s mining sector, with the government banking on it to drive industry growth. The mining sector currently contributes over 75% of the nation’s exports and employs over a million people, directly and indirectly.
