Member Info for Bickmaster84

ivans,

So a company that needs to spend a few hundred million developing an asset in a war affect part of Africa will be paying a dividend before building their mine, selling any product and generating any revenue? Can't say I've seen a similar dividend policy in place anywhere else previously. Can you enlighten us?

Bickmaster

iky

Hostile takeovers take time and I believe the acquirer has to hold 10% of the voting shares to go down that route. If a party was to go down that route there wouldn't be anything stopping GR from doing a deal while they were going through the process.

Bickmaster
Bickmaster

He should have listened to me last year!!

Steward

Useful analysis. My only comment would be that you would need to apply different risk profiles to each scenarios to take account of partners (or not if full sale of each DFS area), the time value of money, country risk over time, international trade risk, commodity pricing risk etc.

Bickmaster

I did put a + at the end of the $500m!!

The fundamental point to remember with Zulu is it doesnt need to be bigger than 60Mt (60-80Mt was the target).

Once the DFS is able to identify an area with 60Mt it will be ready to market. The rest of what is currently being assessed is dealt with in another DFS which should hopefully have a quick turnaround. If that area (DFS2) is immediately next to the Zulu DFS area I imagine whoever buys Zulu would be very keen to buy it.

So rather than looking at a JV on one big area (GR hasnt defined the strategy, he is just hellbent on building a mine) you work on a structured exploration and disposal programme.

DFS1 - 60Mt - late 2022 - $500m+
DFS2 - 60mT - late 2023 - another $500m+
And so on.

Clear strategy, reduced risk, guaranteed payoff for shareholders. What's not to like.

Bickmaster.

PB,

Yes, that is what I am thinking as well.

PREM should focus on exploration. When Zulu is sold (and hopefully they have the ~$500m+ less CGT@ 20% in the bank), they can they look at 2-3 other targets and work on them simultaneously to develop the next asset for sale to the market.

It is a much cleaner way of still providing significant shareholder value.

Bickmaster

Chip,

That is the major issue. GR has picked the wrong strategy (if Chinese) and changing to the right strategy will be perceived negatively. Payoff for shareholders will be better though in my opinion.

Bickmaster

Kenny

That may be correct but, in my mind, it is a hugely flawed strategy if the partner is likely to be Chinese. There is a reason other parties are selling 100% of their assets to the Chinese rather than looking to enter JVs with them.

Bickmaster

Infinity,

A few different parties (actual miners rather than PREM) have tried to mine it in the past and have lost their 6ollocks. Nobody will but the 19% in MNH. I would write it off.

Key is not to buy any more of it.

Bickmaster

Acker,

The key reason for going down the placing route is to avoid the JV, thus ensure market competition is maintained which will result in a better price on disposal. If there was a shortfall, I really don't see how it would be more than £1-2M and could be funded through short term debt.

Bickmaster

Kenny

That is part of the issue and very typical of GR. He is drilling here there any everywhere when the focus should be on the DFS rather than the step out zones.

Bickmaster

Acker,

Let's say the 582m share placing is done to raise £1.5m. I would imagine a further £6m would be required to complete the DFS, likely in two raises. There is only 6000m drilled to date (only 2800m in the last 3.5 months but that is a different matter). I can't see how PREM wouldn't need another 6000-9000m to finish off the DFS (most companies go for 20000m but PREM should be able to get away with 15000m). I estimate the all in costs of the DFS will be about £9-10m which equates to approx £600 per metre which isn't far off industry norms.

So, assuming £3m will have been spent after the £1.5m raise, there would be a need to raise a further £6m which would be approx 2b shares. So, from currently levels there would be dilution of 13% (2.582b shares) to complete DFS and maintain market competition for an auction of Zulu.

It would mean waiting until DFS is completed and asset is sold but at $500m the payback should be 1.3p per share (assuming USD/GBP exchange rate of 0.74 and capital gains tax of 20% ).

So shareholders are handsomely rewarded for their patience and the risk profile is kept relatively low.

Then go after the rest of the EPO area.

It is a much better solution than the multi-stepped , drip-feeding funding approach of getting into bed with the Chinese in Zimbabwe where we are promised the world but have a hugely higher risk profile.

Bickmaster

The placing 6 weeks ago was for £800k. Prem will have had a burn rate of approx £50k/week on the drilling programme over the past in 5 of those 6 weeks (assuming a week off for Christmas) and will be spending money on testing. So I would expect overall company burn rate to be £75k week. As a guess there may be £200k still available from the placing. Once there are 6 rigs running and the testing programme ramps up I have no doubt burn rate will be £150k per week.

There are 19.418 billion shares currently in issue. Placing 582m shares would take shares in issue to 20b. Assuming these are placed at 10% discount to current SP, the placing would take place at 0.285p resulting in a raise of £1.65m. So there would definitely be £1.5m after costs. My expectation was the previous placing would take PREM until mid March and I imagine the £1.5m would fund activities up to start of May.

582m shares would equate to dilution of 3% for £1.5m. Those additional 3 rigs and the testing programme won't pay for themselves and this would de-risk the delivery programme and allow for more assay results.

Bickmaster

So it doesn’t make sense to directly dilute via a placing (which would maintain market competition) but it does make sense to indirectly dilute via a JV?

The logic doesn't stack up.

Bridgedogg,

Applying your logic that you don’t agree we would want to get monies upfront, would PREM not be better off funding the remainder of the DFS themselves through a few placings (we now have a higher SP) or through some institutional debt?

Bickmaster

Steward

The Chinese won't mind whether they are junior or senior partner. They get their foot in the door and before you know it you are on the outside looking in. Zimbabwe isn't an ideal place to do business. The Chinese aren't an ideal business partner. So doing business with the Chinese in Zimbabwe is the worst of both worlds. Which makes two points very important.

1. Ideally PREM would do a deal with a non-Chinese party.
2. Ideally PREM would get paid as much as possible up front as part of any deal - a deal with tranches is much less favourable.

Hence why I am nervous about the approach GR is taking. Obviously Prospect though it was best to sell 100% of Prospect rather than looking at a JV. Similarly Neo Lithium thought it was best to sell 100% to Zijin and Millennial Lithium Corp thought it was best to dispose of their asset to CATL.

A PREM sale of Zulu at ~$500m would return approx 1.4p per share once costs and CGT etc have been taken into account. That is approx a 5 bagger from current levels and would be a clean break from Zulu whilst retaining the ability to exploit the rest of the EPO area. I would be more than happy with a 'low risk' 1.4p per share. Obviously that is not enough for most on here.

The good thing for us shareholder is PREM has a huge advantage as they have GR at the helm and the Chinese will take a look at his track record and know he isn't to be messed around so we are in very safe hands....

Bickmaster

Altag,

Exactly, security would be shares in the Zulu spv, so there will be dilution to PREM shareholders, either indirectly or directly.

Altag,

So if a company is going to invest millions in PREM what do they get in return? They get a percentage of the company.

Otherwise what security do they have for their investment?

Bickmaster

Snowking,

I don't look at things negatively, I look at them pragmatically taking experience and risk into consideration.

You take the blinkered approach that everything will all be fine. It is not that straightforward with GR at the helm.

It is also good to know that if a partner comes on board there wont be any dilution whatsoever to PREM shareholders and that company will put in $m without needing to own any of PREM. Which is entirely wrong.

Bickmaster