RE: Prem22 Apr 2022 01:06
Snowking,
Yes, I said that construction of the mine will not commence this year and maintain that position. If PREM have learned anything from RHA, which I imagine they have not, it is that mine construction should not commence until appropriate underpinning information is in place. You may remember at RHA, PREM instructed contractors to sink an incline shaft at considerable cost to shareholders and once further ground investigations were undertaken concluded the shaft had been sunk in the wrong area. All because they were trying to move too fast (as well as them being useless at mining).
So, should PREM commence construction of a mine at Zulu without having a DFS in place. Absolutely not. We know PREM is not a miner and has a shocking track record at delivering almost anything, never mind a large scale hard rock lithium mine in a jurisdiction like Zimbabwe.
As per my post last week, PREM should complete the DFS and sell Zulu after DFS with the clear reasons for this being as follows.
1. Ability to make approx 1.25p - 1.8p per share, largely derisked. (assumes sales price of $500m - $700m for Zulu, CGT @ 20%, USD/GBP 0.76, transaction costs of £20m).
2. Prem is not a miner and has demonstrated it is not capable of delivering a mine.
3. Development timescales of building a mine - easily 3 years to do this in Zimbabwe, likely much longer for PREM. Assuming DFS late 2022 (I think mid-2023 is more likely given lack of progress to date), allowing 6 months for finance, procurement and design (which is optimistic), 2.5 years for build (again optimistic), that would mean first revenues in early 2026, approx 4 years from now.
4. Finance risk - who is going to give PREM $250m to build a mine in Zimbabwe with their track record, or lack thereof. Hence why a JV model would be required with a major rather than any scenario with PREM continuing to hold 100% being realistic.
5. Investment risk of doing business in Zimbabwe. We saw the Fraser link yesterday which placed Zim 84th out of 84. This would make finance expensive.
6. Commercial risk of doing business with a Chinese company. A JV where a Chinese partner would provide finance will be full of measures which give them funder step-in rights in the event of poor performance = huge commercial risk = why companies, especially in resource development, avoid long term agreements with the Chinese.
The combination of these factors make a compelling case for selling Zulu post DFS rather than attempting to build a mine themselves.
Bickmaster
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