Premier African Minerals Ltd (AIM:PREM) updated investors on its offtake situation for the Zulu lithium and tantalum mine project in Zimbabwe after a deadline to make a new deal expired.
The company, in a stock market statement, said that talks continue with previously proposed partner Canmax, though it cautioned that no agreement has yet been reached on amendments to their deal and certain terms currently proposed by the partner would not be acceptable to Premier.
Specifically, it said that among currently proposed terms it cannot accept any effective conversion of pre-payment funds into either convertible debt instruments or equity. Nor can it agree to accept exclusive supply terms for all concentrate from the mine.
Nevertheless, Premier says both parties continue to express their intention to reach agreement and to proceed with the conclusion of a suitable amendment to the offtake agreement.
The update comes after a deadline set by Canmax (25 June) passed. Previously, Canmax said it would not terminate the prior arrangement if amendments were agreed by that time.
Earlier in June, Premier had informed the market that the parties were "close to agreement" over a new deal that could have seen larger offtake and revenue sharing.
On 25 June, Premier served a force majeure notice after it was informed by contractor Stark International that the plant is unable to provide material correctly sized and insufficient tonnage to meet the concentrate production contemplated in the original deal with Canmax.
Meanwhile, Premier gave investors further details regarding the plant for Zulu which is being adapted.
Premier noted that Stark has completed civil preparatory works associated with the installation of the hydro sizer and now for the installation of the UV sorters, and installation is expected to commence this coming week.
It added that the changes are expected to result in concentrate production at or near 50% of design throughput.
An initial shipment of concentrate is delayed due to circumstances beyond Stark and Premier's control, but production projections previously communicated by the company remain achievable.
Premier said it remains cash constrained and further funding will be required, and at an AGM later today it seeks authority from shareholders to issue new equity.
It also noted that it has had approaches from competing hydroxide producers based out of China and Europe which intend to develop downstream lithium operations – which could be alternate offtakers – though Premier said it had so far resisted serious review of any of these approaches in the light of the agreement with Canmax. Now, it intends to engage with these other interested parties.
Chief executive George Roach, meanwhile, 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.
He added: “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."
Premier also noted that it still expects to publish the audited annual financial statements for the year ended December 2022 on or before 30 June 2023, though its auditors will further review the status of the discussions with Canmax and should there be any change to current timeline it will update the market accordingly.
A delay to the publication of results beyond 30 June would trigger the suspension of Premier’s AIM shares.