PREMIER AFRICAN MINERALS (LON:PREM)
SECTOR – MINING
RATING – SPECULATIVE BUY*
MARKET CAP – £9.6m
CURRENT PRICE – 0.12p#
ANALYST – BARRY GIBB
Year-end Dec
2016A
2016A
Revenue ($m)
0.1
0.4
No forecasts provided
EBITDA ($m)
(1.8)
(6.7)
Adj. pre-tax Profit ($m)
(5.9)
(19.6)
Adj. EPS (c)
(0.2)
(0.3)
DPS (c)
-
-
Net Cash/(Debt) ($m)
(8.9)
(2.9)
P/E (x)
-
-
Dividend yield (%)
-
-
EV/EBITDA (x)
-
-
SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited provides commissioned research coverage to Premier African Minerals and therefore this information should be viewed as a Marketing Communication.
RHA Drilling Update
NORTHLAND VIEW
- Premier provided an update on its drilling programme at the RHA Tungsten Mine (‘RHA’) in Zimbabwe in which Premier has a 49% interest and is the operator. Having commenced a diamond drilling RHA in the beginning of September 2018, this update is intended to guide future development at RHA, in particular whether to continue underground operations through expansion of the existing vertical shaft or to develop a new decline, which when completed would support a significantly greater mining rate.
- Highlights included all drill holes targeting underground depth and strike extensions intersect mineralised zones, with potentially the most significant in RHADD37 of drill width 2.56m from 122.9m grading 7.11 kg/t indicating potential anticipated convergence of ore body lode structures. Multiple high-grade intersections in all drill holes targeting underground operation, included Hole RHADD40 next to the north adit intersected multiple high-grade intersections including 26.73kg/t WO3 over 71cm from 145.81m, 6.01kg/t WO3 over 80cm from 165.94m.
Confidence in the RHA Tungsten Mine is increasing. This drilling programme is designed to expand the underground declared resource base and assist with a determination of the open pit, which the Company now expects to complete by end-November. Whilst the nature of the ore body at RHA appears to be 'spotty' with big variances over short distances, the sheer number of high-grade intersections is encouraging and demonstrates potential convergence of the ore bodies southeast of the main mining areas. Having confirmed forecast depth extensions below the current 870 level, the widening of the ore body would seem to support an increase in tonnage and development of a decline shaft system. RHA plant includes XRT upgrading and has a capacity of up to 50 tonne per hour of sized material through the sorter and is easily capable of accommodating increased ROM feed rates that could be achieved through development of a decline. Taking this positive result on board, investors now await additional detail regarding PREM’s proposed Company restructuring, together with Government confirmation regarding the anticipated RHA Mine equity resolution.
COMPANY DESCRIPTION
Premier African Minerals is a multi-commodity exploration and development company with assets located across Africa. Its holds a 49% operator interest in the RHA Tungsten Mine, and 100% interest in the Zulu Lithium Project, both in Zimbabwe.
TUNGSTEN – A SECTOR SNAPSHOT (note attached)
NORTHLAND VIEW
- The trend of recent years characterised by oversupply and falling ammonium paratungstate (‘APT’) prices now look set to reverse. Global supply/demand dynamics together with greater environmental compliance by Chinese producers has improved the pricing outlook.
- Underlying demand from key industrial sectors, including automotive, aerospace, chemical, electrical components and mining, is gathering pace at a time when China is being seen to curb supply.
- As a result, in June this year, European APT prices peaked at $350-354/mtu, a level not seen since September 2014. Given a projected supply shortfall over the coming 5 years, however, Northland forecasts that the APT price will continue to rise from its current level to between US$445/mtu and US$530/mtu by 2023.
- Northland projects the global tungsten (or Wolfram) market to grow at a CAGR of between 3% and 5% between 2018 and 2023.
- Despite significantly dominating global supply and demand for both primary tungsten concentrates and its key intermediate, Chinese secondary processors and tertiary manufacturers are also continuing to look to secure foreign sources of tungsten by investing in non-domestic projects. This places lower cost AIM-quoted concentrate miners (such as W. Resources, Thor Mining, and Premier African Minerals whose projects are highlighted in red below) in a good position for negotiating sales contracts or offtake arrangements with less integrated western counterparts.
GRADE & TONNAGE OF GLOBAL (non-Chinese) TUNGSTEN DEPOSITS
Source: Northland Capital Partners compiled from various technical reports and corporate documents