Premier African Minerals shares vs Kodal Minerals in 2024

Premier African Minerals and Kodal Minerals are two of London’s foremost ‘lithium stocks’ operating African lithium mines. They are well-placed to enjoy any growth in lithium demand to feed the burgeoning electric vehicle battery industry.

There are still fantasists who think they’ll be driving a diesel car in 15 years. However, it’s clear that by the end of the next decade, almost all vehicles will be electric, powered by some form of battery or hydrogen fuel cell. Whether the majority of batteries are lithium-ion or sodium-ion, or indeed hydrogen power cells, is anyone’s guess.

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Should hydrogen or sodium-ion powered vehicles gain material traction in the coming years, lithium prices could plummet, making the economics of Premier African Minerals and Kodal Minerals’ mine unattractive.

One may speculate that the drop in lithium prices this year reflects not only a slowing demand for EVs but also concerns about the future of lithium-ion batteries.

That said, lithium is at the forefront of most EV manufacturers’ plans for the coming years, and demand for the white metal is set to grow in the near term.

This underpins the investment case for both Premier African Minerals and Kodal Minerals.

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In the interest of diversification, it is probably a good idea for investors prepared to take a higher level of risk in junior miners to buy both. There are also excellent lithium mining ETFs available.

However, in this article, we make a concise assessment of both Premier African Minerals and Kodal Minerals as investment propositions in 2024.

Premier African Minerals shares

Premier African Minerals shares have resumed a holding pattern as investors await crucial news on production.

As we have explained previously, there is tremendous value in the ground at Zulu. Their Chinese partners Canmax, know this or they wouldn’t be involved.

Premier African Minerals’ Zulu lithium project contains 20.1Mt @ 1.06% Li2O & 51.05ppm Ta2O5 at a 0.5% Li2O cut-off.

The problem sits with how much of this value is realised by Premier African Minerals shareholders.

The company freely issues new shares to settle invoices and provide working capital. All of this is diluting shareholders.

In addition, we have not gained any real insight into whether their partners will call in their penalty payments.

Premier said their partner remains ‘supportive’ as far as they haven’t called for penalty payments. Canmax probably hasn’t yet called the payments in because they know Premier African Minerals doesn’t have the cash.

We will see how supportive Canmax are if the Zulu lithium mine is up and running by the end of February.

Premier African Minerals recently announced major upgrades and changes to the processing plant at Zulu, which will delay the ramping up of production well into 2024.

Despite the clouds gathering over Premier African Minerals in recent months, there is a silver lining.

The company confirmed Zulu is producing lithium offtake of the required grade. By simulating the processing capabilities of a properly functioning facility, Premier said they had produced offtake at a Li20 grade of 7.4%.

It is unlikely the average grade of the plant’s lithium offtake is as high as this when spodumene is processed at scale, but it does show the project is able to produce the grade required by their offtake agreement.

The potential upside in Premier African Minerals is probably greater than Kodal at this point. However, it will require a brave investor to take a meaningful position here, given the problems the company have experienced to date. Much of which is of their own doing.

Kodal Minerals

Kodal Minerals share trades more than 50% lower than 52-week highs, despite completing their financing package with Chinese partners for mine construction at the Bougouni Project.

Like Premier African Minerals, Kodal Minerals has a world-class lithium resource.

After an extensive drill campaign through 2023, Kodal Minerals’ upgraded the Bougouni Project’s resource to 31.9 Mt at 1.06% Li2O, with 337.2kt contained Li2O. Kodal says it has further targets to drill, which may increase the resource further.

Just as Premier African Minerals ran into problems with their offtake partners this year, Kodal was hampered by delays and uncertainties in its relationship with its funding partners. However, unlike Premier African Minerals, these have now been rectified, and the company is focused on the construction of its mine.

Kodal Minerals are in the very early stage of mine construction, having said road construction would start earlier this year. Kodal has set an ambitious target of achieving production at Bougouni within 12 months of mid-November this year.

One would expect investors to turn their attention to Kodal Minerals shares as this production target approaches. However, the short-term promises little of interest and Kodal shares may drift into the summer.

Kodal Minerals has huge gold resources that may prop up the share price if the lithium project hits bumps in the road in 2024.

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