Premier African Minerals shares are not without their risks. The company has previously failed to meet production deadlines at their Zulu lithium project and is now under tremendous pressure to meet revised targets.
Should these be missed, their offtake partner Canmax is entitled to impose shareholder value-eroding measures including penalty payments, taking newly issued shares in Premier African Minerals, and even taking a direct interest in the project.
That said, Premier African Minerals have given up a substantial amount of their value since touching 1p in April this year and are approaching a level where the balance of risk and reward will start to become attractive to the adventurous investor.
Premier African Minerals’ Zulu lithium project contains 20.1Mt @ 1.06% Li2O & 51.05ppm Ta2O5 at a 0.5% Li2O cut-off. This makes the project potentially world-class.
Premier African Minerals have recently raised £9m to fund the project’s development, including £5m from their partner Canmax. This should meet their immediate needs and reduces the chance of further dilution in the short term.
However, the risk sits with their ability to execute the extraction of the lithium. So far, Premier African Minerals have failed to meet 1,000 tonnes per month production and now have until 1st November to get their house in order and ramp up production.
It will be a tense wait for investors.
Nonetheless, investors weighing the balance of risks to reward on a minimum 2 to 1 basis may see value around 0.30p – 0.40p. This would assume this year’s high of 1p as an upside target and downside around 0.1p, should Premier fail to meet production targets and Canmax start taking $1.5m tranches of newly issued shares on a regular basis.