Premier African Minerals Regulatory News (PREM)

Premier African Minerals Limited / Ticker: PREM / Index: AIM / Sector: Mining

For immediate release

 7 November 2018

Premier African Minerals Limited

Proposed restructuring of Zimbabwe minerals projects, conditional purchase of exploration and mining assets and proposed demerger and separate listing

The Board of Premier African Minerals Limited ("Premier" or the "Company") is pleased to announce a proposed restructuring of the Company's Zimbabwe minerals projects, together with the proposed purchase of assets owned by KME Holdings Limited ("KME"), comprising surface and underground mining equipment including exploration drilling rigs and associated equipment in Zimbabwe ("Acquisition"). Immediately on completion of the restructuring and Acquisition, the Company intends to demerge its Zimbabwe minerals projects ("Demerger") and seek a separate listing for these including the KME Assets on a London-based market ("Listing").

Highlights:

Under the proposed restructuring, Acquisition and Demerger:

· Premier will first establish a new wholly-owned subsidiary, Newco, into which it will consolidate its entire interests in the RHA Tungsten Mine and processing plant, Tinde Fluorspar & Barite project, Katete Rare Earths project and the Zulu Lithium project ("Restructuring");

· Premier has agreed binding conditional heads of terms to acquire the assets of KME ("KME Assets") for an initial consideration of US$4 million, to be satisfied by the issue to KME of new shares in Newco representing approximately 20% of Newco's then enlarged issued share capital;

· Newco will on completion of the acquisition own Premier's Zimbabwe minerals projects and KME's surface and underground mining equipment together with exploration drilling rigs and equipment and KME's management team will join Newco;

· Premier has agreed to seek a separate market listing for Newco and intends on listing to distributing its entire interest in Newco shares to Premier's shareholders through the most tax efficient means possible;

· 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 at RHA Tungsten Mine, exploration drilling and related work at the Zulu Lithium Project, resumption of exploration activities at Katete and to provide working capital for the enlarged Newco and the expenses of the proposed listing ("Funding");

· The distribution of Premier's interest in Newco on completion of the Acquisition, Funding and Demerger ("Transaction"), will require the prior approval of Premier shareholders at a General Meeting to be convened in due course; and

· On completion of the Transaction, which will constitute a fundamental change of business, Premier expects that it will then be classified as an AIM Rule 15 cash shell. Premier will continue to retain its 5% interest in Circum Minerals Limited ("Circum"), the owners of the Danakil Potash Project in Ethiopia.

· Key benefits of the Transaction expected to be as follows:

- Enables the immediate recommencement of work on key projects;

- Newco will be a Zimbabwean-focussed mining, development and exploration company and a platform for future growth and acquisitions;

- Planned introduction of a new Zimbabwe-based management team at Newco, with the relevant skills and experience in the design, construction, commissioning and operating of numerous large-scale opencast and underground mines to efficiently fast-track RHA Tungsten Mine back to production;

- The open pit mining fleet and underground mining equipment will significantly reduce the operating cost and improve efficiencies of the RHA Tungsten Mine;

- KME's drilling equipment and exploration team will reduce the drilling cost of the Zulu Lithium Project as well as expedite the drilling programme;

- Provide reduced cost basis for both drilling and exploration work on potential new projects in Zimbabwe;

- Direct participation by existing Premier shareholders who will receive a distribution of Newco shares on Listing;

- Continued shareholding in Premier provides an exposure to the potential upside of Premier's interest in Circum Minerals Limited; and

- Overhead reductions in Premier on completion, with operational responsibility transferred to Newco.

George Roach, CEO, commented:

"This proposed transaction is intended to accelerate a return to production at RHA and commencement of the work needed to complete the proposed Definitive Feasibility Study at the Zulu Lithium Project. In effect, when the equity in RHA Tungsten Mine is adjusted as is indicated by the Zimbabwean Government, Premier and Premier shareholders will on completion hold a substantially similar stake in RHA Tungsten Mine and Zulu Lithium Project whilst ongoing operating costs at Premier will be reduced and Premier effectively ring-fences its shareholding in Circum. My views are supported by the KME Management team who believe that this transformative transaction delivers considerable value to both Premier's and KME shareholders through the combination of a revised Zimbabwean management team that has a proven track record to successfully operate mines and develop exploration projects under Zimbabwean working conditions. The further development of Premier's mineral assets are substantially de-risked by the inclusion of KME Assets into the Newco thereby allowing for greater potential shareholder value in the long term.

The KME management team has detailed knowledge of the RHA Tungsten Mine and they foresee no significant operational difficulties in bringing the RHA Tungsten Mine back into production.

I anticipate further announcements in the coming days, not least in regard to the RHA Tungsten Mine equity resolution as Premier continues to be in constant contact with the Ministry of Industry, Commerce and Enterprise Development and, following recent public comments by the Minister of Mines in Zimbabwe, we believe that the current delays are solely procedural in nature.

The Board of Premier believes that this transformative transaction will deliver considerable potential value to both Premier's and KME shareholders alike."

Background to and reasons for the proposed Restructuring, Acquisition and Demerger

Over the past few years, Premier has considered a number of options for developing the intrinsic underlying value of its projects, while at the same time dealing with the fact that development of exploration and mining interests has a substantial cost. While Premier's shares have been actively traded and it is a very liquid stock, the Company's share price has continuously suffered and the underlying intrinsic value of Premier's assets has been eroded. In this context, Premier has previously considered a spin-out of some or all of its exploration and development projects and the introduction of new operating management.

The Board of Premier believes that the opportunity to combine Premier's Zimbabwe-based mineral projects and KME's operational assets and Zimbabwean management team, that has a proven track record in operating mines and developing exploration projects in Zimbabwe provides a basis for successfully spinning-out the Group's Zimbabwe mineral projects on an independent and attractive footing, as well as achieving substantial direct operating cost savings in Premier. Premier Shareholders will on completion have a direct interest in Newco and continue to hold their interest in Premier, whose sole asset will then be its interest in Circum.

Acquisition terms

On 6 November 2018, Premier African Minerals Limited and KME Holdings Limited (together the "Parties") entered into a conditional binding Heads of Terms to combine Premier's Zimbabwe minerals asset portfolio with KME's mining and exploration drilling assets. Premier's Zimbabwe minerals asset portfolio ("Premier Assets") comprises its entire interests in:

· RHA Tungsten (Pvt) Ltd, Tungsten Mine in Zimbabwe ("RHA Tungsten Mine");

· Tinde Fluorspar (Pvt) Ltd, Tinde Fluorite & Barite project in Zimbabwe;

· Katete Minerals (Pvt) Ltd, Rare Earths project in Zimbabwe;

· Zulu Lithium (Pvt) Ltd, Lithium Project ("Zulu Lithium Project") in Zimbabwe; and

· The Wolframite Modular Plant, Equipment, Generator and XRT Sorter held by RHA Tungsten Mauritius Limited.

KME owns surface and underground mining equipment, together with exploration drilling rigs and equipment and support infrastructure and has a Zimbabwe-based executive team that includes mining, engineering and geological expertise, as well as financial, administrative and successful business development experience in Zimbabwe. KME's Zimbabwe-based management team will join Newco on completion.

The Parties have agreed to an initial fair market valuation ("Agreed Valuation") of:

· US$4 million for the KME Assets, based on the valuation before depreciation; and

· US$7 million for the Premier Assets.

The consideration for the Acquisition is to be satisfied by the issue to KME ("Vendors") of new shares in Newco based on the Agreed Valuation, which would represent approximately 20% of Newco's then enlarged issued share capital. The Parties have agreed that additional deferred consideration of up to a further US$3 million would be payable to KME in further Newco shares subject to the successful completion of operational milestones ("Milestone") following completion ("Deferred Consideration") on the following basis:

· A further US$1.5 million on RHA Tungsten Mine achieving a production target of not less than 16,000 tonnes of ore being delivered to the run-of-mine pad within 6 months after the re-commencement of mining operations at RHA Tungsten Mine; and

· A further US$1.5 million on completion of Zulu Lithium Project development including a 20,000 metre drilling programme, road upgrades, general logistics camp mobilisation and establishment, core management and sample preparation, resource compilation and reporting.

The Parties have agreed that the issue price of the additional Newco shares to be issued pursuant to the Deferred Consideration ("Issue Price") shall be calculated as the 5-day Volume Weighted Average Price of Newco shares preceding the day of announcement of each of the respective incentive milestones being achieved. To the extent that the milestones are not achievable by Newco, through no fault of the KME team, the Parties have agreed to issue such number of Newco shares at the relevant Issue Price following an independent assessment of percentage achieved against the amount payable under each milestone. The assessment is to be agreed in good faith by the board members of Newco and in the event that the KME does not agree with valuation, the Newco's auditors will make a decision which shall be binding on the Parties.

Further information on KME Assets and management team

The KME assets include six exploration drill rigs, surface and underground dump trucks, light vehicles and support equipment. KME's assets, which will have a book value of approximately US$4 million, will be used initially solely on the development of Premier's Assets following the completion of the Acquisition. On completion of the establishment of operations at both RHA Tungsten Mine and Zulu Lithium Project, the Newco may generate revenue from the lease and hire of KME's assets to third parties. KME's operational management team, who will join Newco on completion, has significant operating experience and has been involved in developing and operating a large number of mining and exploration projects in Zimbabwe.

Newco Board

On completion of the Acquisition, the Newco Board would be as follows:

· three board members nominated by Premier, including the Chairman (with no casting vote);

· three board members from the management team, including the Chief Executive and Finance Director; and

· such additional appointments (including Independent non-executive directors or technical director) as may be required for the purposes of the Listing. 

Proposed Listing and Funding

The Parties have agreed that they intend to seek a listing of Newco on the London Stock Exchange or such other Bourse as the Parties may agree ("Listing") and Newco intends to raise up to US$6 million, in debt or equity at or prior to Listing ("Funding"), with such assistance as may be required by Premier. The Funding will be used to:

· re-establish the mining operations at RHA Tungsten Mine;

· fund the Zulu Lithium Project development programme;

· cover the listing costs, and provide 18 months working capital for Newco; and

· settle all outstanding payables and debtors of the Parties, capped at US$1 million per Party.

On a Listing the Parties will be awarded warrants to subscribe for new shares in Newco with an exercise price to be set at the admission price of the Newco shares in aggregate with a value of US$2.3 million at the exercise price, with an expiry date of three years following Listing.

Demerger and Premier Shareholder approval

Premier intends immediately on the Listing of Newco to distribute its entire interest in Newco shares to Premier shareholders in the most tax efficient means possible. On completion of the Transaction, which will constitute a fundamental change of business, Premier expects that it will then be classified as an AIM Rule 15 cash shell. Premier will continue to retain its interest in Circum Minerals Limited ("Circum"), the owners of the Danakil Potash Project in Ethiopia. Premier will have no other assets or retained interest in Newco.

The dilution of Premier's interest in Newco on completion of the Acquisition and Funding and the proposed Demerger will require the prior approval of Premier shareholders at a General Meeting to be convened in due course.

Conditions Precedent and exclusivity

Completion of the Proposed Transaction is conditional on the following matters:

· all relevant shareholder approvals being obtained by the Parties;

· to the extent required, approval of the London Stock Exchange;

· the Parties securing the Funding;

· Written confirmation from the Ministry of Industry, Commerce and Enterprise Development of the equity restructure at RHA Tungsten Mine whereby Premier shall hold no less than 90%;

· preparation of a "Fair and Reasonable" statement by an independent expert of the KME Assets;

· agreed adjustment to the values of the KME Assets and Premier Assets in the event of a variation in the values greater than 10%;

· completion of due diligence by each Party in respect of the other and to the satisfaction of each Party independent of the other. In this regard the Parties undertake to cooperate fully to the extent necessary in providing information and access as required;

· completion and execution of comprehensive agreements as required to give effect to the Transaction, including customary warranties;

· completion of the necessary documentation and due diligence to give effect to the Listing; and

· there being no material adverse change in the business, operations, assets, position (financial, trading or otherwise), profits or prospects of either Party between the date of this Heads of Agreement and completion of the transaction agreements.

There will be an initial period of exclusivity from the date of the signature of the Heads of Agreement for a period of 25 days during which neither party shall seek to conclude any agreement in regard to Premier Assets or KME Assets with another party who is not party to the Heads of Agreement. Thereby allowing both parties to conclude their due diligence and finalise a timeline for conclusion of the acquisition.

Webinar

In order to discuss this transaction, a webinar is planned for Friday 9 November 2018 at 13:00 pm (UTC+1). Please find the link to register for the event here: https://zoom.us/j/749260164.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014. The person who arranged the release of this announcement on behalf of the Company was George Roach.

Enquiries:

Notes to Editors:

Premier African Minerals Limited (AIM: PREM) is a multi-commodity mining and natural resource development company focused on Southern Africa with its RHA and Zulu projects in Zimbabwe.

The Company has a diverse portfolio of projects, which include tungsten, rare earth elements, lithium and tantalum in Zimbabwe, encompassing brownfield projects with near-term production potential to grass-roots exploration. In addition, the Company holds 5,010,333 shares in Circum Minerals Limited ("Circum"), the owners of the Danakil Potash Project in Ethiopia, which has the potential to be a world class asset. Premier also has an interest in Arc Minerals that has a number of mineral assets in Europe and Africa.