Premier African Minerals shares have suffered a punishing pullback since the company said they would miss a series of production targets that will ultimately result in financial penalties.
Compounding the problems for PREM shares, investors have grown increasingly uneasy with the company’s messaging and lack of clarity about their ability to meet future lithium production requirements.
We recently highlighted the conflicts between Premier African Minerals’ official RNS releases, CEO interviews, and comments by their mine construction contractor on social media.
Our article, ‘Premier African Minerals shares: proceed with caution’, can be read here.
In an RNS released on 3rd November, Premier said the Zulu lithium plant was facing several ‘challenges’, only for the leader of the mine construction contractor, Stark, to post on social media platform X that “there is no issue on the plant.”
There were problems with the plant, and the Stark CEO has since deleted his X account.
It all got a little murky and certainly wasn’t a situation many investors, understandably, wanted to be involved in. Premier African Minerals’ share price has since sunk and traded at the lowest levels since early 2022 last week.
Looking past the mixed and opaque communications debacle, Premier African Minerals is in a difficult financial position. Many questions about cashflows and further dilution remain unanswered. The company said they will likely miss lithium production targets under a revised offtake agreement and face financial penalties.
Investors will be unsure how many monthly targets will be missed and how Premier will satisfy the penalty payments. It may be in freshly issued Premier African Minerals shares, diluting existing investors.
Markets hate uncertainty, and until certainty is provided, Premier African Minerals shares will likely trade with a bearish bias.
With a bearish bias established in Premier African Minerals shares and an absence of clarity on the fundamentals, potential buyers will have to rely on technical analysis to gauge a sensible entry point.
Adventurous investors prepared to accept much higher than average levels of risk may look to the 0.2p level as an interesting entry level.
This has provided a level of support going back to 2021 where analysis of Premier’s market profile shows the stock is happy to reside. This may act as a magnet for the price.
Should support be found above 0.2p, Premier African Minerals could form a nice double bottom and rebound.
If 0.18p-0.2p is broken, 0.1-0.15p is very much on the cards. It is a gamble at best without further certainty.