Aim-listed Premier African Minerals’ share price on the LSE fell by 39% on Wednesday after it announced a proposed restructuring of its Zimbabwean minerals projects and a demerger.
Premier plans to establish a new wholly-owned subsidiary Newco, into which it will consolidate its entire interests in the RHA tungsten mine and processing plant, the Tinde fluorspar and barite project, the Katete rare earths project and the Zulu lithium project.
It has also entered into an agreement to acquire the assets of KME Holdings, including surface and underground mining equipment, as well as exploration drilling rigs and equipment, for $4-million, which will be settled in shares in Newco. The KME assets will also be owned by Newco.
Premier has further agreed to separately list Newco and plans to distribute its interest in Newco shares to Premier’s shareholders.
The acquisition of KME’s assets will be conditional on Newco raising up to $6-million in debt or equity to support the immediate restart of underground mining at the RHA tungsten mine, exploration drilling and related work at the Zulu lithium project, the resumption of exploration activities at Katete and providing working capital for the enlarged Newco and the expenses of the proposed listing.
Premier will, following the restructuring and demerger, become a cash shell, but will retain its 5% interest in Circum Minerals, the owners of the Danakil potash project, in Ethiopia.
Premier on Wednesday explained that it had, over the past few years, considered a number of options for developing the intrinsic underlying value of its projects, while at the same time dealing with the fact that development of exploration and mining interests comes at a substantial cost,
“While Premier's shares have been actively traded and it is a very liquid stock, the company's share price has continuously suffered and the underlying intrinsic value of Premier's assets has been eroded. In this context, Premier has previously considered a spin-out of some or all of its exploration and development projects and the introduction of new operating management.
“The board of Premier believes the opportunity to combine Premier's Zimbabwe-based mineral projects and KME's operational assets and Zimbabwean management team, that has a proven record in operating mines and developing exploration projects in Zimbabwe, provides a basis for successfully spinning-out the group's Zimbabwe mineral projects on an independent and attractive footing, as well as achieving substantial direct operating cost savings in Premier,” the company noted in a statement.
It added that the proposed restructuring will result in the immediate restart of work on key projects. Further, KME’s openpit mining fleet and underground mining equipment will significantly reduce the operating cost and improve efficiencies of the RHA tungsten mine, while its drilling equipment and exploration team will reduce the drilling cost of the Zulu project, as well as expedite the drilling programme.