Premier African Minerals agrees loan note funding as mines near drilling

As well as confirming that its RHA tungsten mine should hit its targeted rate next months, Premier African Minerals has arranged a £3.5m round of new loan notes from investor Darwin Strategic Limited.

AIM-listed Premier has signed a subscription agreement with Darwin for up to 140 loan notes each worth £25,000 that are repayable at the rate of eight per month from 1 February 2017 or if failing repayment may be converted into new ordinary shares in Premier.

With the first trance of 70 notes issued on Monday and 35 over the next nine months and the final 35 after that, both at Darwin's discretion, Premier will receive 90% of par value, so £22,500 per note.

"This loan instrument removes any short-term funding issues the company may have faced as RHA is fully optimised and ensures the rapid development of the exploration activities at the Zulu exploration tenements," said chief executive George Roach.

Roach said existing shareholder might not face any dilution as there was an opportunity to repay the debt and hence "reasonable prospects" that Premier would avoid the notes being converted into equity.

He said there was an "anticipated liquidity event" coming either from Premier's 2m shares owned in Ethiopian potash miner Circum Minerals Limited, currently valued at $4m, the RHA developments or the anticipated closing of the Mozambique acquisition — though he reminded that no future occurrence was guaranteed.

Drilling is expected to begin next month at 49%-owned RHA, where the company has in-house resource management and laboratory facilities, so expects a "rapid and efficient turnaround" from these exploration activities, with concentrate shipments also expected to resume at the same time.

Ore from underground operations fed through the plant has returned a head grade greater than 4kg per ton and a recovery of up to 70% of the contained metal. Concentrate produced is at grades of up to 65%.

Premier's target throughput is 8,000 tons per month at a grade of 6kg per ton and a recovery of 80% of contained wolframite, though sensitivity analysis has indicated that RHA is profitable when the recovery is at 70% and the selling price of Ammonium para-tungsten (APT) is US$180 per metric ton unit (mtu).

Meanwhile, on-going surface exploration has brought the Zulu lithium and tantalum project to a drill-ready state, with final site preparations and negotiations with a drilling contractor underway such that drilling is also expected to begin in September.

In Mozambique, due diligence on the acquisition there is “nearing completion” and expected to close “within the next 30 days”. Discussions on possible offtake agreements for agricultural lime and development funding are already being held, while Premier said the timber operations “continue to show improvement”.