LONDON — A British company, Cadence Minerals, has signed a conditional heads of terms agreement to acquire up to a 30% stake in Zulu Lithium Mauritius Limited (Mauco), a wholly-owned subsidiary of Premier African Minerals.
Under the agreement, Cadence will invest up to $5,1m in Mauco, the parent company of Zulu Lithium (Private) Ltd, which owns the Zulu Lithium Project in Zimbabwe.
The investment will fully fund the definitive feasibility study of the project. A scoping study of the project last November revealed a lithium concentrate net present value (NPV) of $127m and lithium carbonate NPV of $718m.
Shares in both companies surged last week. Cadence jumped 17,5% to 0,23p, while Premier African soared by almost 75% also to 0,23p.
“The Zulu Lithium Project is well advanced, with significant mineral resources, robust scoping study economics and ample room for expansion given the size of the exploration targets,” said Cadence chief executive Kiran Morzaria.
“By coupling Premier’s local relationships and country expertise and Cadence’s experience in lithium project development both parties will be able to unlock value, rapidly advance this project with the aim of developing Zulu into a significant producer to supply the expanding lithium market.”
He added that securing the right to earn into the asset “dovetails well” into Cadence’s strategy.
“That is to invest in assets with shorter development timelines, meaning earlier cashflow, and invest directly into the project, taking significant stakes and be part of the management team.”
Following an initial $1,5mln investment, Cadence has the right to appoint a director to the boards of Premier African, Mauco and/or Zulu. Cadence may appoint a second director to the boards of Mauco and/or Zulu once it pays $350 000 — the fifth stage of its total investment.
The intention of Cadence and Premier African is to replace the heads of terms with a binding investment agreement.
Premier African chief executive George Roach said: “This conditional heads of terms with Cadence underlines the value and potential of the Zulu Project, with a post-investment value of $17 million, which reaffirms Premier’s belief that the Zulu Project is potentially one of the leading hard rock lithium exploration projects on the London Market and is an indication of the significant value that Premier management has already added to the Zulu Project.”
“Cadence continues to demonstrate a strong capability in both advancement of lithium projects and securing appropriate and funded off-take agreements and I am pleased that a Cadence representative will be joining Premier’s board in due course and I look forward to making a further announcement in this regard in the near future.”
In a separate statement, Premier told investors that the repayment date of the $300 000 loan made by a trust of which chief executive George Roach is a beneficiary has been extended.
The loan, first announced on June 5, was originally due to mature after 60 days but Premier now has until November 30 2018 to pay it back.