Premier African Minerals shares sank on Friday after issuing an update on the Zulu lithium project.
Company updates that include the word ‘challenges’ are rarely good. Premier African Minerals issued such an update on their Zulu lithium project on Friday, and shares closed considerably weaker.
Investors have been on tenterhooks awaiting an update from the project as the first production target under a recently revised offtake agreement looms.
The RNS issued at 2.30pm on Friday was not the one many had hoped for.
Friday’s update suggests the first 1,000 tonne production deadline at the end of November is going to be missed.
The company said whether they meet this deadline ‘will be largely dependent on the resolution of the ongoing commissioning and optimisation issues.’
To issue such a statement at this stage of production optimisation signals deep concern at Premier African Minerals or their contractor Stark that the first production target will be missed.
Investors may have been perturbed to learn they will be further diluted by the issuing of $2.5m in newly issued shares to contractor Stark, who is yet to bring the production plant up to the required standard.
Premier African Minerals did say the plant was producing lithium concentrate of the prescribed specification – but stopped short of sharing the actual lithium grades.
If Premier African Minerals fails to ship a minimum of 1,000 tonnes per month at the required specification by the end of November, their partner Canmax has the right to receive penalty payments from Premier African Minerals.
Should Premier be unable to make cash payments to meet these penalties, they must issue Canmax with newly issued shares in Premier African Minerals.
The stakes are high.
Investors will be growing increasingly concerned about the viability of the Zulu plant and the competence of management. In addition, the emergence of contradictory statements on X, formerly Twitter, made by the Stark CEO will increase uncertainty.
Just hours after Premier African Minerals announced Zulu was experiencing ‘optimisation issues’ and ‘material flow challenges’, Stark CEO Geoffrey Madderson said “there is no issue on the plant.”
Madderson posted: “Guys, relax. There is no issue on the plant. The plant is running well and the next big steps are the new large mill to bring to 100% of nameplate. 37.5t per hour to float.”
Someone has released a mistruth. Either Premier African Minerals’ Nomad has signed off a factually incorrect RNS, or the Stark CEO has made an incorrect assertion in a social media post.
Time will tell.