Aim-traded Premier African Minerals has entered into a marketing and prepayment agreement in the form of a binding heads of terms with clean technology developer Suzhou TA&A Ultra Clean Technology.
The agreement will allow the company to establish a large-scale pilot plant at its Zulu lithium and tantalum project, in Zimbabwe, to produce spodumene concentrate six (SC6) from the first quarter of next year.
The targeted production from the pilot plant is 50 000 t/y of SC6 – a high-purity lithium ore with about 6% lithium content being produced as a raw material for the subsequent production of lithium-ion batteries for electric vehicles.
The take-off for target production has been committed to Suzhou, with the pre-purchase of production paying for the complete $35-million construction cost, interest-free.
A minimum price undertaking for the first 50 000 t has underwritten Premier’s repayment capability.
Premier CEO George Roach said on June 24 that the net effect of the agreement was that construction activities at the Zulu project could begin immediately, with first shipments expected before March 31 next year and a steady ramp-up in production to about 48 000 t/y of SC6.
“It is important to note that this is a pilot plant facility and will produce SC6 only in the first phase. Three by-product streams will be stockpiled and will go to inventory, pending completion of additional test-work and additional plant,” Roach explained.
He said that the three by-products were a tantalum concentrate in a magnetic fraction, a petalite-rich mixed ore and a mica/lepidolite concentrate that was likely to contain caesium and rubidium, all of which might be immediately saleable.
“At present SC6 pricing, the prepayment is expected to be fully liquidated inside of twelve months," Roach said.
The pilot plant will use sensor-based ore sorting technologies to facilitate the separation of run-of-mine material into components. Premier expected to increase available capacity in the flotation recovery circuits, where lithium minerals will be recovered.
The company said that the ultimate production and recoveries were a factor of many variables, and that the pilot plant would be likely to assist in dealing with these variables owing to the inherent flexibility of the use of multiple ore sorters.
Moreover, stockpiles of tantalum, petalite and mica/lepidolite-rich material would facilitate further test work and flow sheet development to ensure that this material was truly inventory for later profitable recovery.
The pilot plant will have a nameplate throughput of up to 190 t/h, however, it is planned to run at a more conservative 140 t/h at inception. At this rate, and based on a three-year life of the pilot plant operations – excluding plant upgrades, tantalum recovery, petalite production and any other revenue – a series of sensitivities indicated a robust project and an assurance that Premier will become cash generative from the time of first shipment, the company said.
Under the agreement, Suzhou agreed to provide a prefunding amount of about $34.6-million to enable the construction and commissioning of the pilot plant. Upon the signing of the agreement, $3.45-million was immediately paid to Premier to commission the securing of the pilot plant. The remaining balance of the pre-payment amount will be paid in one lump sum, following completion of the transaction documents.
Both Premier and Suzhou have agreed to complete the definitive transaction documents within one month of the agreement.
Under the agreement, Suzhou will have the right to acquire the first three years of production of SC6, or until such time as the prepayment amount has been repaid in full, whichever occurs later. This term of the agreement can be increased by a further three years, if both parties agree to it.
The sale of SC6 will be priced at a discount, conditional on the approval of the State-owned Minerals Marketing Corporation of Zimbabwe, on the first 50 000 t of SC6 shipped or until the pre-payment amount has been fully liquidated, whichever occurs first.
Following completion of this first delivery, the parties will agree to negotiate a discount based on market conditions for the remaining term. The purchase price will be subject to a floor price until either the pre-payment amount has been fully repaid or until December 31 next year.
Following the successful payment of the pre-payment amount, Suzhou will have the right of first refusal to match any offer from another interested party to acquire SC6 from the Zulu project, should the parties not agree to a renewal of the term.
Premier’s independent directors said they believed the agreement provided a significant opportunity at a time when spodumene prices were expected to remain high given current supply-demand imbalances.
The agreement also provided funding without the issue of any ordinary shares and therefore avoided any dilution to shareholders. Further, in current market conditions, the independent directors did not believe that alternative funding would be available on acceptable terms to the company.