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

For immediate release

31 July 2017

Premier African Minerals Limited

("Premier" or the "Company")

New Funding, Project Updates and Increased Interest in Circum

Summary

Premier African Minerals Limited, the AIM-traded, multi-commodity mining and natural resource development company focused in Southern and Western Africa, is pleased to announce a new US$2.9 million loan agreement ("Loan Agreement"), direct subscription for new ordinary shares to raise £4,800,000 before costs (the "Subscription") and £3,300,000 equity sharing agreement ("Equity Sharing Agreement") (together the "Funding"). The Company has also today agreed to purchase an additional interest in Circum of approximately 1% for a cash consideration of approximately US$1,294,998. The proceeds of the Funding will be used towards the acquisition of a further 1% in Circum and to provide general working capital as set out herein.

Highlights

·     Loan facility of up to US$2.9 million

·     £4.8 million Equity Subscription at 0.7 pence per Ordinary Share and associated £3.3 million Equity Sharing Agreement 

·     Acquisition of a further interest in Circum of approximately 1%

·     Acceleration of exploration effort and value accretion at Zulu Lithium before finalising any other  development agreement

·     Commencement of a PEA study at Zulu

·     General working capital requirements funded into the immediately foreseeable future

George Roach, CEO commented: "This new funding completed at a significantly higher share price since our last placing, allows us to secure the working capital requirements for Premier for the immediate future as well as secure a further interest in Circum at an improved price based on a cash settlement.     

Regarding Zulu Lithium and Tantalum, significant lithium bearing mineral intersections identified in the current drilling programme support our view that this deposit has the potential to be a tier-one lithium project and the Board has been advised to progress the project further before accepting any of the approaches that have been made to either acquire the project or to joint venture. Part of the finance now raised will allow Premier to expedite the exploration effort as well as continue further metallurgical test work and engineering studies which will form part of a Preliminary Economic Assessment ("PEA") at Zulu. Negotiations will be ongoing and our objective remains to maximise shareholder value.

In terms of our increased interest in Circum, we firmly believe in the demand growth for fertiliser products and that Circum's wholly-owned Danakil Potash Project, a world class and low-cost potash project is well placed to benefit from this. The opportunity to acquire a further 1% in Circum for a cash consideration of US$1.25 per share is an attractive opportunity given the last placement at US$2 per share, after which Circum subsequently optimised its Definitive Feasibility Study which resulted in even more compelling economics as well as received its mining license. Increasing our stake in Circum underwrites our asset base further.

I am pleased to report that the plant and operations at RHA are stabilising after an initially challenging period of optimisation. The plant is currently processing ore at approximately 55% of the XRT sorter capacity and the throughput is only constrained by limitations in the primary crusher feeder. The required modification to increase throughput is expected to be commissioned in eight weeks at a cost for the modification of US$30,000.  Breakeven production occurs at approximately 1,400 kilograms of wolframite concentrate per day and the plant has demonstrated this capability. Underground development has been slower than anticipated and to achieve profitable operations at the currently constrained plant throughput, a larger portion of the plant feed needs to be higher grade underground ore. Development to open additional stope faces will complete in October 2017 and this together with the feeder modification will see RHA finally contributing to Premier as previously projected.  The next shipment is expected shortly and RHA is expected to see a steady increase in shipment frequency."

Loan Funding

The Company has today entered into a secured US$2.9 million loan agreement ("Loan Agreement") before costs with YA II PN Limited ("YA II") with a repayment date of 27 April 2018. The annual interest rate payable on the outstanding loan amount is 18%. The principal amount will be made available to the Company in two tranches as follows:

·     Tranche One - US$1,650,000 - on signing of the Loan Agreement;

·    Tranche Two - US$1,250,000 - the later of RHA achieving a production run rate of at least 30 tonnes of saleable Wolframite per month and 30 days after Tranche One and upon mutual consent of the parties to the Loan Agreement.

The principal amount of Tranche One (plus any accrued interest) is repayable at the rate US$235,714.29 per month from the 28 October 2017. This repayment has been provided for under the terms of the Equity Sharing Agreement, and failing that or direct repayment by Premier, may be converted by YA II at its sole discretion into new Premier shares at a conversion price equal to 90 per cent. of the lowest daily volume weighted average price ("VWAP") during the five days trading days immediately prior to the relevant repayment date.

The Company has provided a number of warranties and undertakings to YA II in respect of the Group. The Loan Agreement is secured over the Group's assets. YA II has also entered into a participation agreement under the Loan Agreement which provides Cuart Investment PCC Ltd - Cell A - Cuart Growth Capital Fund I ("Cuart") with the right to co-invest under the Loan Agreement.

No warrants have been issued to YA II under Loan Agreement. The Company has agreed a loan bonus structure that is aligned with the Company's corporate strategy of acquiring a further 10% in Circum Minerals Limited ("Circum'). The loan bonus structure provides for the payment of US$75,000 to YA II for each 1% acquired in Circum over and above an interest of 7.55% in Circum (excluding the Company's initial interest of 2% in Circum).

Equity Funding Summary

Premier has also today entered into an equity funding facility consisting of two parts. The first part is a subscription to raise £4.8 million, before costs (the "Subscription"), by way of a subscription for 685,714,286  ordinary shares of 0.7 pence each (the "Subscription Shares") by Delta-Beta One EQ Ltd ("D-Beta") at a subscription price of 0.7 pence per Ordinary Share (the "Subscription Price"). The Subscription Shares will represent approximately 13% of the enlarged ordinary share capital of the Company.

Out of the proceeds of the Subscription £3.3 million will be returned by the Company to D-Beta as payment ("Sharing Payment") under the equity sharing agreement (the "Equity Sharing Agreement") and the balance of £1.5 million will be retained by the Company ("Net Subscription Proceeds").

The Net Subscription Proceeds (net of costs and commissions), will be used to provide additional funding for the Company's continuing operations and general working capital. In respect of monthly receipts from the Equity Sharing Agreement (as described further below) the Company has agreed that the first £900,000 and 50% of all receipts in excess of £900,000 will be used first to repay any amounts owing under the Loan Agreement. Any balance of receipts will be used by the Company for general working capital purposes.

The Equity Sharing Agreement entitles the Company to receive back the Sharing Payment on a pro rata monthly basis over a period of 12 months, subject to adjustment upwards or downwards each month depending on the Company's share price during the previous month, as explained in more detail below. The Equity Sharing Agreement provides the opportunity for the Company to benefit from positive future share performance. However, should the Company's share price not perform positively, then the Company may receive less than the £3.3 million Sharing Payment, and if its share price falls substantially, the Company may have to return some of the proceeds of the Subscription to D-Beta.

In no event, will fluctuations in the Company's share price result in any increase in the number of the Subscription Shares issued by the Company or received by D-Beta.

Further details of the Equity Sharing Agreement

On completion of the Subscription, the Company shall pay D-Beta the Sharing Payment of £3.3 million. The Equity Sharing Agreement provides for a monthly payment to be made by D-Beta to the Company, being £275,000 for 12 months (the "Monthly Payment"). Each Monthly Payment may be adjusted up or down depending on whether the average of the lowest ten daily VWAPs of the Ordinary Shares of the Company during the preceding month (the "Monthly Price") is above or below 0.77 pence per Ordinary Share (the "Benchmark Price").

If the Monthly Price is below the Benchmark Price, then the Monthly Payment is reduced based on the following formula:

 -(57,142,857 Ordinary Shares x (Benchmark Price-Market Price))

If the Monthly Price is above the Benchmark Price, then the Monthly Payment is increased based on the following formula:

  (57,142,857 Ordinary Shares x (Market Price- Benchmark Price) x 0.75)

Note: The Monthly Payment and number of Ordinary Shares used in the above calculations is the monthly equivalent of £3.3 million and 685,714,286 shares respectively. 

The Equity Sharing Agreement has an initial 30-day lock up during which D-Beta will not deal in the Company's shares. Cuart may also participate in the Equity Sharing Agreement.

The Company will announce the monthly receipts under the Equity Sharing Agreement.

Acquisition of additional interest in Circum

The Company has today conditionally acquired from First Island Trustees (Guernsey) Limited an additional 1,035,999 shares in Circum Minerals Limited ("Circum"), representing approximately 1% of the issued share capital of Circum at a cash value of US$1.25 per Circum share for a consideration of US$1,294,998.75 in cash ("Purchase"). Following completion of the Purchase, Premier's holding in Circum will amount to 3,685,332 Circum shares in aggregate, representing approximately 3.7% of issued share capital of Circum. The Purchase is being funded from the proceeds of the Loan Agreement and Subscription described further above.

Today's Purchase of additional shares in Circum is part of part of a broader proposal that Premier made to certain small Circum shareholders (as announced on 18 July 2017) who are willing.  Premier proposes to acquire, at its discretion, up to a further 9.3% interest in aggregate (including today's Purchase) in Circum at a price of US$1.50 in exchange for Premier shares share or US$1.25 per share for a cash consideration, which together with Premier's existing 3.7% interest in Circum, will increase Premier's holding in Circum to 12%, The maximum consideration would amount to approximately US$14.5 million in the event that the Company completes the purchase of full 10% interest in Circum.

Further information on Circum

The information on Circum set out below has been extracted from previously reported public disclosures in respect of Circum and which are available from Circum's website and is reproduced from the Company's announcement released on 18 July 2017.

Circum is a privately-owned potash development company which operates the Danakil Potash project in Ethiopia. The project has a NI 43-101 compliant resource of 4.9 billion tonnes potassium in a very prolific potash basin in Ethiopia. In July 2015, the Definitive Feasibility Study ("DFS") was completed to the standard of a NI 43-101 Canadian securities code compliant Feasibility Study under the overall supervision of Senet (Pty) Ltd of South Africa ("Senet"). K-UTEC AG Salt Technologies of Germany ("K-UTEC") provided resource definition and wellfield and plant design. Umvoto Africa (Pty) Ltd. provided water resource modelling and Environmental Resource Management (ERM) conducted the Environmental and Social Impact Assessment.

In February 2016, Circum, together with its independent consultants Senet and K-UTEC, reviewed the costs in the DFS. Through their analysis, development capital costs were reduced by US$276 million and operating costs were reduced by approximately US$3 per tonne.

Circum is targeting production of 2.0 million tonnes per annum of Muriate of Potash ("MOP"), the most common form of potash fertilizer, and 0.75 million tonnes per annum of Sulfate of Potash ("SOP"), a premium fertilizer product, with production anticipated to start in 2022.

Due to the shallow nature of the deposit, the Danakil Potash Project will be amenable to low-cost, low-risk, in-situ leaching. Also, the extremely hot surface temperatures and high evaporation rates will allow the use of solar evaporation all year round. As a result, mine gate cash costs are projected to be among the lowest in the potash industry, estimated at US$38 per tonne MOP and US$112 per tonne SOP. Total operating costs (FOB Tadjoura Port, Djibouti) are forecast at US$81 per tonne of MOP and US$156 per tonne of SOP (before the inclusion of royalties payable to the Ethiopian government which are levied at 4%t of the Djibouti FOB price minus transport costs from mine gate to port).

The Danakil Potash Project has a low capital intensity due to its shallow potash horizons and proximity to planned infrastructure. Total initial development capital is estimated at US$2.3 billion, including contingencies. Due to revenue from the ramp up in initial production (estimated at close to US$500 million), peak funding is currently planned at just over US$1.8 billion. Given the scale of the Project, at an implied capital intensity of US$838 per tonne, Circum's Danakil Project will be one of the most capital efficient potash projects in the world.

The optimized DFS reported a pre-tax net present value (NPV) for the Danakil Project of US$2.8 billion and a pre-tax nominal internal rate of return (IRR) of 29%pr. The after-tax NPV and nominal IRR were US$2.1 billion and 26%, respectively.

In the year ended 31 December 2016, Circum's reported loss before taxation amounted to US$323,305 and total assets as at 31 December 2016 amounted to US$59,739,438.

For further detail, please click on the link to the Circum presentation

www.circumminerals.com/presentations.

Admission and Total Voting Rights

Application will be made for the Subscription Shares, which will rank pari passu with the existing ordinary shares in issue, to be admitted to trading on AIM and admission is expected to take place on or around 3 August 2017.

Following the issue of the New Shares, the Company's issued share capital consists of 5,266,228,055 ordinary shares, with voting rights. This figure may be used by shareholders in the Company as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014

Special note concerning the Market Abuse Regulation

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 ("MAR"). Market soundings, as defined in MAR, were taken in respect of the Placing, with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

Forward Looking Statements:

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors, many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Enquiries:

Notes to Editors:

Premier African Minerals Limited (AIM: PREM) is a multi-commodity mining and natural resource development company focused in Southern and Western Africa with production started at its flagship RHA project in Zimbabwe.

The Company has a diverse portfolio of projects, which include tungsten, rare earth elements, gold, lithium and tantalum in Zimbabwe and Benin, encompassing brownfield projects with near-term production potential to grass-roots exploration. The Company recently acquired a 52 per cent controlling stake in Mozambique-based TCT Industrias Florestais Limitada, which owns a substantial limestone deposit and forestry business located on rail in the Sofala Province of Mozambique. In addition, the Company holds 3,685,332 million 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. At present those shares are valued at US$7.3 million based on the latest price at which Circum has accepted subscriptions. Premier also has an interest in Casa Mining Limited, a privately-owned exploration company that has a 71.25 per cent interest in the 1.2 million ounce inferred resource Akyanga gold deposit in the DRC.

Glossary

KCI:   Potassium Chloride

MOP: Muriate of Potash

SOP: Sulphate of Potash

ENDS