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We have been told that both Prems and KME have completed their DD and regardless of the Governments position both have agreed to proceed to a formal framework agreement. We were also told that when all conditions are met, the transaction will result in a direct distribution of Newco shares on a pro rata basis to holders of Premier shares when shareholder consent is granted, and Newco shares are admitted to trading whilst at the same time retaining their shares in Prem which effectively will be Circum at the moment.

Both parties have shown signs of considerable confidence in starting the formal process before the official sign off by the Government and at the same time the parties have effectively removed the Governments protracted action off the critical path. So as it stands although it’s frustrating right now it’s simply not affecting Newco’s time-line.

I also believe that drilling and mapping the mines resources has been on going and Prem must now be in a position to be able to complete a comprehensive analysis if that hasn't been done already. That will no doubt be critical information needed for in the Newco process which along with RHA’s revised ownership confirmation should allow a fair valuation to be assessed for the mine.

From what’s been identified at RHA and can be extrapolated within reason from that data we know that the ore strike in the pit runs generally on a line of latitude with grades being the weakest furthest from the underground shaft but improving significantly in a direction towards it We also know that the grades improve significantly again as the deeper ore blocks are identified both in the pit and in the underground mine.

What the current Bara report and the minimalist cost appraisal tells us is that taking the worst case scenario the mine can be profitable at today’s costs and values even if ore was only extracted from the exposed ore blocks in underground mine and nothing more. As far as it goes the report has done exactly wat was called fal and nothing more. This is a really important statement shareholders need to appreciate. I read the BB’s often and I'm not convinced many do.Some see it as indication of the mines annual profitability. But it's not fit for purpose and can't be used that way.It simply allows RHA to say “ even if we only extract what we see here the mine can still wash its face or even show a little profit” or words to that effect.

A much better guide to the mines potential can be gained by considering what's been agreed between PREM and KME and been given in their Heads Of Terms Agreemt along with Prems Mining Plan as far as we understand it.

So the drilling campaign will have enabled the ore bodies both on plan and depth to be delineated and that information will be vital in helping a reasonable valuation of RHA to be made, But perhaps more importantly to enable the design of the new pit walls to be finalised and to develop a best value mining plan overall.

The f

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Finance from the Government if significant is likely to change the mining plan and we may well see the option and timing of constructing the new underground incline being favoured and brought forward. Both the MOI and the MOM will recognise the importance of doing that I've no doubt and optimisation is almost certain to feature in the finance discussions.

But that's not the only implication the finace support could have. Subject to timing and how much obviously but it could make the whole process of forming Newco virtually a "fait accompli" from a financing perspective. Viz from the 7th November 2018 RNS "The Acquisition is conditional, inter alia, on Newco raising up to US$6 million, in either debt or equity, with such assistance as may be required from Premier, at or prior to listing to support the immediate re-commencement of underground mining." It should certainly ease the pressure on that precondition at the very least.

When the time comes to reassess the value at RHA in the coming weeks I’m hoping that there will be sufficient data to place a reasonably accurate value on the mine the proposed 16.000t's/month ROM milestone in Newco being within 6 months after the re-commencement of mining operations and to value RHA the IPO point too.

The 16,000t’s/month ROM at RHA should produce at least 5,000t's Mtu’s APT/month. The underground mine rate should be around 6,000t’s/month at not less than 0.55% grade and the other 10,000t’s/month from either or both the pit and the tailings should produce grades of not less than 0 25%.Further the saving on cost with KME as the operator should reduce the break-even point to around 1,500 Mtu’s APT/month.

If all of that’s about right we’re looking at a monthly net profit of $600 and an annualised profit of over $7m at todays prices. Applying the earnings metric that would give RHA a Market Cap of $70m using a p/e ratio of 10. In the likely event of the "spin - off" and Prems current shareholders retaining 50% to 60% of RHA's value that a notional and representative Market Cap of around $40m which at the current exchange rate and with 8bn shares in issue say (for simple maths) that would represent a SP contribution of 0.4p from RHA using todays criteria around the end of Q2 this year.

Forward projections but using todays criteria the mine should achieve it's designed ROM rate of 40,000t’s/month with a 0.35% grade from the 3 combined sources. At that stage using the same earnings metric that would give RHA a Market Cap of close to $250m applying the same p/e ratio of 10. Again if Prems current shareholders retain 50% to 60% of RHA's value that a notional and representative Market Cap of around $140m which at today's exchange rate and with 8bn shares in issue that would represent a SP contribution of 1.40p again using current criteria in little more than a years time.

Of course any change in the % of shares held will impact the SP’s shown. But that said the figures given for Market Ca

Is this worth investing in or holding for?

The decision whether to go the concentrate route or the more lucrative carbonate route long term on Zulu has always been a no-brainer in my view. Initially we should see plans to produce the Spodumene and Petalite in concentrate simply because it's the quickest route to market and the lowest Capex. But from there we'll see carbonate being produced as quickly as possible I feel sure.

From the the Maiden Resource Statement and Scoping Study (SAMREC compliant and independently validated) it's not difficult to foresee Zulu producing around 50kt's of LCE from a ROM of around 2mt's of ore a year with a grade of over 1% Li2O

The conversion factor from Li2O to LCE is 2.473 and assuming the Tantalum credits are in balance with the recovery adjustments Zulu could enjoy an annual revenue of around $500m with Lithium prices forecast to double in the next three years. The current market price for LCE is around $12,000/tonne which is forecast to double by the time the mine becomes operational. In turn that would convert back to an offtakers agreement of say $2000/t Spodumene at >6% Li2O as proven by the float testing already carried out.

Excluding tax and royalties etc. and from low CC's and AISC's annual AIC's should be much less thsn than $250m which if right would give the mine an "earnings" figure of at least $250m after allowing for taxes and royalties at current rates.

It follows that using the "earnings metric" valuation method and assuming a p/E ratio of 10 Zulu could make a Market Cap contribution of approximately $2.5bn or £2bn to Newco if the £/$ exchange rate moves out to say 1:1.25

I imagine finance will be a cocktail of equity and debt and and perhaps an off-takers loan as suggested by the BOD's. So even if there's 25% more shares in issue come the day and Prem retain just 50% of the value in the mine that still works back to a notional SP of 10p or thereabouts.

That's roughly how valuable and lucrative Zulu could be and a measure of the opportunity facing Prem shareholders.
It's not unknown that Prem are looking to increase the current claims area and I wouldn't be surprised to see that increase by a factor of between 3 and 4. The resource target is currently 120mt's to 160mt's. If I'm right that whould place Prem within the top three largest hard-rock resources in the world and could easily challenge for second place simply by extrapolating the current SAMREC'd resource in the Scoping Study on a pro-rata basis.

Finally if Zulu gets to a DFS within a year and approvals aren't a problem then we could see the j.v. getting to Commercial Production and achieving around these numbers in around three years time as I say.

Beyond that we have the carbonate alternative to look forward to with a notional SP of 35p -40p and I've no doubt that will come within two years given the LOM should be not less than 100 years.

AIMHO

GLA all genuine shareholders.

blackoil - Dart is right to question the reasoning in your post earlier. My guess is he'd like to allay your apparent concern about Prems current status. I believe CF73 is also right in what he's said and in trying to help to clarify the position.

From an insolvency practitioners point of view you should have no near term concerns such you're alluding to.
Although the Insolvency Act is complicated by necessity and no where near as simple as I'm suggesting here a layperson ostensibly need only consider two tests .

Firstly a company's ability to pay it's debts as and when they fall due. Regardless of cash in the bank Prem will not be left wanting in this test as I'm sure you can imagine . Prem has several ways to raise many times the cash it needs in the current outlook. Although releasing equity or a placing if you prefer to call it that is one option it's unlikely to be the favoured one at the moment. There's no doubt in my mind Prem will want to see what's in the MOI's mind when saying in his recent letter that the Government is willing to inject funds into RHA before making any decision on raising cash.

Prem is asset rich and has no debts or near term liabilities it can't satisfy. It is able to liquidate a more that adequate proportion of it's assets to raise cash should it needs to. But here again I very much doubt we'll see the BOD's having to resort to using too much if any of this option either unless it wants to by choice. If you want any further reassurance on the point you need look no further than Prems independent Auditors statement in the year end accounts where he concurs with my views.

And secondly is the comparison test of overall liabilities vs a reasonable assessment of assets or balance sheet test as it's often called. Even with RHA fully impaired and the other assets assessed at a minimal value Prem sails over the bar in this test. I don't think there much need for me to go into the details on this one with the conclusion being so obvious.

So unlike some might fear and others might want to use it to be mischievous the reality is in Prems case cash is not a measure of viability and neither is the company's market cap as low as it is if that's another one of your concerns.

Sell or buy clearly it's your choice. But if you are thinking of selling for the reasons you're alluding to you could do worse than take a closer look at what I'm saying. Prem is not for the feint hearted or the impatient that's for sure and weak holders appear to be selling amongst the traders. On the other hand the upside for both Prem and Newco is huge as I see it.

AIMHO

GLA genuine holders.

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