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tedoby. Fantastic history lesson and brilliant research, thankyou
Great post Tedoby. Nice to get an over view of the the history of RHA.
Not been in this one long, It was the open letter that GR wrote recently that caught my attention.
The fundermentals look promissing , As with all investing you never know until it happens.
GLA
awesoem tedoby .
It really helps to understand why George put £20m into RHA . I can see why now. There is a lot of potential there and if they can start mining in january , then profitable in Q1 2020 , this will make the shares alone rocket. So there are many catalysts for a re rate here
not just EPO rns , but Zulu and RHA and circum .
When a company has so much news flwo to come over next three months the market will take this a lot higher.
Thanks so much again tedoby! For a long time, it seemed that PREM was pushing a project that was just not viable. But from your post, we can place RHA in a proper context. It is also noticeable that there are genuine murmurrings that RHA may well achieve the potential we once believed was possible - and perhaps even more!
Diamond market getting smaller for diamond producers based in Zim. ZCDC's Russian JV partner Alrosa revenues are down by 40% due to "challenging world diamond market situation," the company said. US sanctions plus low grade diamonds produced by ZCDC are factors contributing to downturn in revenue.
http://www.interfax.com/newsinf.asp?id=931959
jonjo
ok thanks will find out soon enough in the morning best get back to prem
before we upset the locals so any thoughts as to EPO Monday or having to
wait until he returns from Russia ?
Passiton, I dont think it is tbh. A lot of VAST holders will be disappointed imo as its not easy dealing with Zim govt. The shareholder ownership structure between ZCDC and VAST will take time to negotiate. Saying that from experience with RHA and NIEEF.
jonjo
did not mention that part on this board although on vast board the other story they think
is a lazy roll of the interview in September (hope their right) without updating. My Post
more to do with prem getting signed off as President swanning off again this time to
Russia so hoping prem sorted over the weekend and part of the next wave of sign offs
on Monday otherwise we are looking at the end of the week if his Hand**** required
Quite astonishing work tedoby, thank you again!!
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This post is related to RHA. It'll be boring to quite a few. Especially LTH's as I think they will probably know more about the mine than I do. Apologies upfront to those but hopefully I can jog a few memories of the events over the last seven years or so.
As an overview RHA is located approximately 20 km south-east of Hwange and 270 km north of Bulawayo in the prospective multi-commodity Kamativi Tin Belt in north-west Zimbabwe. It sits in its own licence area of 1800ha or 4400 acres which is roughly five times bigger than Zulu under its current license area and slightly bigger than the Scilly Isles for perspective.
Picture the scene of a disused and long abandoned mine in the middle of the Zimbabwean countryside as it was when Prem first saw it in 2012. The site was overgrown and the old shaft there must have been like an old well full of foul smelling run off rainwater . The shaft was accessible via two adits one North and one South which were relatively small but clearly visible. They still exist and are in use today I believe.
Crossing the mining area was a low ridge approximately 850 m long and 300 m wide standing about 120 m above its surroundings.
There was known to be mineralised ore body that included wolframite and copper in a strike approximately 400 m long and 150 m wide. Grades of the WO3 were found to improve in a south easterly direction towards the existing shaft and at depth. Seven Lodes were identified and they were previously exploited early in part in the mines 100 year history.
The old mine workings were in the form of an underground mine with two adits, open pits, caved stopes, trenches, roads and rock dumps that occupied the surface. Tailings and dumps were located on the north and south sides of the ridge and complete the picture.
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RHA comprised 50 mineral claim in the 1800 Ha, consisting of 10 owned by Prem and 40 under option.
Small-scale surface and underground mining was conducted at the site between 1931 and 1979, with total production from the mine is standing at 1 247,65 tonnes of WO3 in concentrate containing 65 percent APT.
Intermittent small scale mining was carried out at both RHA and the adjacent much smaller Tung mine (which Prem had an option over at the time) between 1931 and 1979. The mines jointly produced 1,247 tonnes of wolframite concentrate at an average concentrate grade of 65% WO3. So perhaps 80,000mtu was produced at RHA which today would have a sale price of just $210m.
The mine workings were almost entirely carried out during the 1930s where the underground mine which was accessed via the two adits in the sides of the ridge and a single vertical shaft down to the 845m level. Some open pitting was also carried out mainly in the western part of the strike.
During the mid to late 1970s Falconbridge Ltd, trading as Blanket Mines in Zimbabwe, carried out underground geological mapping and extensive channel sampling on the accessible parts of the underground workings, principally on the 926, 895 and 859 levels. Their exploration work had to be curtailed . But undoubtedly this mapping together with any previous data would have formed an integral part of Prems due diligence and would have helped in the preparation of RHA’s first Scoping Study which was to be completed later in 2013.
Prem joined the AIM market mid December in 2012 and by that time it had purchased RHA in a j.v. with the Governments Fund NIEEF by necessity.
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The j.v. had been formed under a Letter of Intent at the time and Prem through its subsidiary owned 49% of the mine in keeping with the indigenisation law that was in place.
Early in 2013 saw further drill results announced as RHA was working towards a SAMREC code compliant resource and it’s PEA or Scoping Study as it’s also known.
In August that year Prem announced RHA’s PEA that confirmed its SAMREC compliant resource.This was the first milestone for the mine un it’s j.v.’s ownership.
The study was minimalist and simply based on an extension of Lode 2 out of the 7 Lodes identified at the mine. Lode 2 then became known as Lodes 2A for the original length & 2B for it’s extension.
Nevertheless the Assessment confirmed the economic potential of Lode 2 in isolation demonstrated it would support a tungsten mining operation with an annual Run of Mine rate of 192kt’s from an open pit and underground mining strategy over a six year LOM from just $13.5m Capex.
Other projected fundamentals such as an NPV of $118m an IRR of over 300% and Free Cash Flows in excess of $20m/annum were equally encouraging at the time.
Tungsten prices were then almost twice what they are now at around $400/mtu APT and that figure was the one used in the study. All very acceptable if not attractive.
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The j.v. had been formed under a Letter of Intent at the time and Prem through its subsidiary owned 49% of the mine in keeping with the indigenisation law that was in place.
Early in 2013 saw further drill results announced as RHA was working towards a SAMREC code compliant resource and it’s PEA or Scoping Study as it’s also known.
In August that year Prem announced RHA’s PEA that confirmed its SAMREC compliant resource.This was the first milestone for the mine un it’s j.v.’s ownership.
The study was minimalist and simply based on an extension of Lode 2 out of the 7 Lodes identified at the mine. Lode 2 then became known as Lodes 2A for the original length & 2B for it’s extension.
Nevertheless the Assessment confirmed the economic potential of Lode 2 in isolation demonstrated it would support a tungsten mining operation with an annual Run of Mine rate of 192kt’s from an open pit and underground mining strategy over a six year LOM from just $13.5m Capex.
Other projected fundamentals such as an NPV of $118m an IRR of over 300% and Free Cash Flows in excess of $20m/annum were equally encouraging at the time.
Tungsten prices were then almost twice what they are now at around $400/mtu APT and that figure was the one used in the study. All very acceptable if not attractive.
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The j.v. had been formed under a Letter of Intent at the time and Prem through its subsidiary owned 49% of the mine in keeping with the indigenisation law that was in place.
Early in 2013 saw further drill results announced as RHA was working towards a SAMREC code compliant resource and it’s PEA or Scoping Study as it’s also known.
In August that y
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Most significantly really good news ensued shortly after Prem joined the market. It came from discovering a significant new Lode extension in late in 2013.
Further drilling was carried out on what was then identified as Lode 2A until December that year. Some extremely high grades were identified as well as many new WO3 veins in the Lodes. The results were then RNS’d on 13th March 2014.
These drilling results were stella and they rocked the market to its vore as no doubt some long term shareholders invested at the time will recall.
The grades were consistently higher than had been previously identified. But the highest was a world record testing 35% WO3. More than 350kg/t. Simply incredible and jaw dropping. Hitherto the j.v. partners were looking at grades of 0.8% or 8kg/t as exceptional.
The new Lodes were categorised as Lodes 1E.1W.1FW & 1FE and were announced in a further RNS on May 1 2014. The discoveries were to increase the resource by a further 1.3mt’s at an average grade of over 1% or 10kg's/t. A huge increase and the overall effect on RHA was transformational.
This is what the press had to say:-
“The measured and indicated resource has been upped by a staggering 957% to 1.55mln tonnes at a composite grade of 8.0 kg/t WO3, while there is 1.2mln tonnes at a composite grade of 9.7kg/t WO3 in the inferred category.”
http://zimbabweinvestor.com/premier-african-minerals-soars-on-massive-zimbabwe-resource-upgrade-agrees-ethiopia-bridging-loan/
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The period that followed up to the time when RHA was put on care & maintenance in January 2018 would see a myriad of further changes to the resource and mining plan. The changes wern’t all brought about just by the ongoing route in APT prices and the difficulty of raising debt finance especially but those two factors clearly had quite an influence.
Mostly they came about from RHA gaining a much better understanding of the mineralisation on the site through further exploration and drilling campaigns. An understanding that has been costly and time consuming to say the least.
I could go on and on but let's fast forward to where are now. Now we have a much better understanding of the resource and in particular where the higher grades of WO3 are located in the underground mine.
Although the existing pit is covered by a layer of blown in silt and debris we know from drill results that the strike runs generally in an East/ West direction and the WO3 grade improves on strike towards the existing shaft and at the same time at depth as new blocks have been identified.
We also know that that is a small amount of WO3 located in the old tailings and that that is readily accessible and easy to deliver to the ROM pad to compliment the rest of the WO3.
Although Prem haven't disclosed a new mining plan yet it seems the mine will be restarted more or less where it left off with the added bonus that it’ll be electrified from the grid.
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Hopefully with higher grades being accessible from the newly cut stopes the mine will be profitable shortly after it restarts.
As with any mine RHA needs to be optimised and then run in a steady state.
When the mine restarts mining will be restricted to underground via the old shafts and adits. The anticipated fundamentals include a ROM of 6kt's/month at a grade of around 0.7% at least hopefully.
To completely optimise the mine it needs further investment the new semi automated incline shaft built. Once built that will not only allow the mining rate to be increased to more than double but also allow unfettered access to mine the pit.
When that's done in say a years time.the ROM should be around 40kts /month and subject to APT prices we should see a contribution to Prems MC from it of perhaps £60m even at suppressed APT prices. If APT prices were to be around the $400/mtu APT forecast by many industry experts it will be an extremely attractive asset for Prem. Perhaps as much as 1p on Prems SP as things stand.
So FWIW I think we'll see Commercial Production reached within a month or so of the mine restarting and at that point RHA's impairment removed.at that point I have Prems fair value of the asset at $20m which represents 0.15p on its SP.
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In cash terms Prem should begin to receive an income under its newly negotiated Rental Agreement and its new Management Contact incorporated in the head Shareholder Agreement on RHA. From the old agreement I have those combined to be over $750k/annum. But I'm not entirely sure. Payments to Prem under its Loan Agreement needs to be considered too but as yet the details are undisclosed..
I hope some of this is of interest. But more than that I hope "RHA has its day in the sun" as GR tells us.
AIMHO and fingers crossed.
Another quite awesome post from tedoby. I thank you sir!
Passiton that article about VAST JV deal not completing next month has been covered by many news outlet. It says the shareholder structure needs to be finalised between ZCDC and VAST which can take longer than expected.
https://bulawayo24.com/index-id-news-sc-national-byo-173052.html
http://www.zbc.co.zw/zim-seeks-to-empower-communities-in-diamond-mining-areas
charts as they say all a bit geek let alone greek to me but one just posted
on twitter bull flag forming targeting 0.197 then 0.32 sounds good to me
some interesting chat on VAST board main bit that concerns PREM is the routine cabinet
meeting normally Tuesdays now being held on Monday as President Mnangagwa flying
to Russia Tue/Wed as part of the Alrosa deal and promotional events. He returned to
capital Friday so like vast guess we are hoping he did some sorting over the weekend to
hopefully sign things off Monday before he leaves or we are looking at the end of the week
for our long anticipated news
Thanks Tedoby, great research
Well that was the Lord Mayors Show of posts......
no i think I was spot on!!!!
Tedoboy possible the best poster here to date , it shows detailed research and many thanks ! please keep on posting, yesterdays post was a great overview and todays shows the possibilities that we all await to unfold.
Fantastic posts Tedoby. Clear and concise, recommended for any holder, investor or sideliner, new or old.
#newdawn
GLA LTH
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My simple way of looking at things tells me we may want to consider Prem now in milestones and on just the projects that are centre stage. Those being RHA Circum Zulu and MNH.
The other apples on the tree including the REE at Katete however are growing nicely. But for me they're too green yet to pick. They're worth remembering though for sure and Katete may yet prove to be as significant as Zulu in its own right!
Prem owns 25 mining blocks at Katete with significant grades of REE. Some of which have virtually doubled in price this year. So huge potential behind the scene but given what Prem currently has on its plate perhaps it's best left for now.
It isn't clear yet what deal if any between Prem and MHN we as shareholders are going to be asked to consider and vote on. Whatever the fundamentals may turn out to be it seems both Prem and MNH see the merits. MHN want a route to the markets which Prem can offer and on the flip side Prem are looking for a cash generative asset as it always wanted and seems MNH are in a position to offer that from its manganese mine Otjozondu.
The $80m/annum revenue figure being bandied about for MNH's Otjozondu manganese mine could well be a conservative one in my view. It’s a forecast that's derived from MNH's latest presentation and it represents a calculation of revenue at a time when the mine should be running in an optimised and steady state in a little over two years time.
It’s could well be conservative because it’s based upon a production of 500k/t'annum of 35% grade Mn Concentrate. That seems about right but it's based upon today's commodity price for Mn at around $500/t with no uplift for the rallying commodity. Furthermore we're lead to believe Otjozondus manganese is of premium quality and therefore in theory it should be commanding a premium price. No allowance has been made for that either.
My best estimate for the mine at that stage assuming it will have little or no debt and probably be paying no Corporation Tax using The Gold Councils cost categories is roughly $190/t for"Cash Costs", $250/t " for All In Sustaining Costs" and $300/t for "All In Costs". Corporation Tax has been excluded as it’s unlikely to be payable in the early years. However a small Royalty has been allowed for as usual in these circumstances.
So perhaps out of the $80m/annum revenue just over $50m/annum could be costs. Even so the mine could well be running with a Market Cap of $300m on that basis and if MNH say reversed into Prem in a deal worth 25% of the mines notional Market Cap to Prem Otjozondus contribution to Prems SP would be 0.50 to 0.60p . I’ve simply used the 25% figure as an example.