Premier African Minerals Share Discussion Threads

[bestofbest] 02/2/2018 07:39

No time frame given for the next drilling programme. At least he cant be fashionably late with updating the market!

[dplewis1] 02/2/2018 07:26

Despite the bad language he appears to be correct. That RNS is utter plop..

[the bull] 02/2/2018 00:19

you little charmer

[jungmana] 31/1/2018 22:56

I hold 8m ( having trimmed ) at about 0.4p average. Will be happy to get my money back and some .Have no faith in GR. I can list half a dozen calamitous decisions he has made in last 2 years and that tells me is best for him to step aside.

[dmitribollokov] 31/1/2018 22:50

So you would be happy if the share price only trebles from here? sounds like you should to buy an enormous amount more...

[jungmana] 31/1/2018 22:30

Ihnc - top class posts there. Exactly my view too and could not have written it better. As i said earlier am just fed up with GRs endless stories. 0.6p and am gone from here for good.

[ihavenoclue] 31/1/2018 20:37

It's all good looking at what Zulu could earn when in production but let's look at some other figures.

In July 2015, when the share price was 0.75p, PREM said the share price should 10 bag in a year. For it to do that the price has to 33 bag in 6 months.

In November 2015, before the newest Zulu results and with the 0.5p a share, GR was complaining that we should be valued at £150m MINIMUM. The price has to 9 bag just to get what GR said should be the minimum price.

GR has FAILED to show the market the true value of PREM and his solution was to split Zulu and float another company ????

Surely for PREM to stand a chance of realising true value GR HAS to stand down ? It is the ONLY solution I can see as GR in charge does NOT work.

[ihavenoclue] 31/1/2018 19:17

tedoby231 Jan '18 - 10:26 - 8151 of 8152
0 1 0
From the investors meeting last week we now know that drilling on site at Zulu continues apace with a view to drilling out as much as is needed to get to a DFS stage as soon as practically possible and we were told 5,000m has already been drilled.

===============================

Has it even been confirmed when they will have completed enough drills to be able to complete a DFS ? I just want a clear timeline from here to completion of DFS.

Also the talk of "deals" - it seems like we have heard this promise of "offers" and "deals" for a LONG time now but have never heard any of them. GR just throws out little crumbs of "deals" and "offers" he has turned down. It is no wonder the market isn't a fan of PREM when NOTHING has materialised from these talks. It seems to be brought out time and time again to appease shareholders ... what I want to see if the deals actually being finalised. Imagine that ... a deal that leads somewhere !!

GR keeps repeating the same line and the same excuse time and time again and expects a different reaction from the market. It worked early on but now the market is tired of it so will no longer react the way GR wants it to.

Also it is NO good spinning out parts of the company when the same thing that caused the disconnect is controlling the new spin offs. GR needs to step aside and let someone who can talk the talk AND walk the walk take over our investment then maybe the disconnect in asset value to market cap can be reduced/eliminated.

All IMHO
Regards
IHNC

[doctor 69] 31/1/2018 12:02

Yes staggering potential

[tedoby2] 31/1/2018 10:26

From the investors meeting last week we now know that drilling on site at Zulu continues apace with a view to drilling out as much as is needed to get to a DFS stage as soon as practically possible and we were told 5,000m has already been drilled. Although GR would like to get to a total of around 20,000m to establish an accurate final resource in the campaign eventually having checked I believe very little more 10,000m might be all that's needed to give the necessary information to get to a DFS.

I'm sure most of us know this but if anyone didn't it's important to note that the drilling company is bearing the cost of drilling in exchange for equity and therefore it has no affect on Prems cash position.

It's also important to be aware that although a deal hasn't been finalised yet Prem have received offers from interested parties to pay for the cost of getting Zulu to it's DFS stage on the same basis. It seems to me very likely GR will be accepting one of those proposals if it offers best value which it almost will I'm sure. So the exercise is unlikely to put pressure on Prems cash position and forecasts either.

Attendees at the meeting were also told that drilling was now focussed and being categorised in zones in zones currently divided into 7 if I recall that correctly. Not a bad idea I thought at the time as the current categorisation is a little confusing. Some drilling has been done to define the extremities of the resource and to get a clearer picture of the physical size the prospect is but we weren't given any information and unfortunately there wasn't enough time to get into that level of detail.

Setting aside the Tantalum which in itself is not insignificant I can still envisage the new Zuluco easily having a ROM of around 1.5m to 2.0m tonnes p.a when at "steady state" early in the production period and initially adopting the Lithium Concentrate route to market whilst the new carbonate plant is being built in Bulawayo's Enterprise Zone .

Interestingly Pilbara Minerals who Zulu is sometimes benchmarked against had an initial ROM target of 2.0m tonnes p.a. in their mining plan have subsequently increased their target and it now stands at 4.0m tonnes p.a.

At 1.5m tonnes ROM Zuluco would produce around 15k to 20k tonnes of Li2O which would convert into roughly 175k to 235k tonnes of Spodumene Concentrate and 75k to 100k tonnes of Petalite Concentrate at the anticipated 70/30 split and just over a 1.06% grade.

Using the "earnings metric" the lower figures would give the company a revenue of around $220m p.a at current off-take rates ($900/1000/t for > 6% Spodumene). With AISC's at say $90m p.a that would give us the key "earnings" figure of $130m. A sensible P/E ratio could be said to be not less than 5 which would produce a Market Cap of $650m - another key figure. Some would see that as very conservative given Zuluco could have a LOM of 100 years or more if current unofficial resource estimates are anywhere near right. They might think under those circumstances double that so a P/E of 10 would be more realistic.

Staying with the concentrate option and a P/E of 5 would give Zuluco a Market Cap of around $1.0bn. That looks about right if you benchmark it against it's competitors and piers.

Once the Carbonate plant in Bulawayo has been completed and becomes operational Zuluco's fundamentals change dramatically. Using a factor of 2.473 15k tonnes of Li2O converts to approximately 37k tonnes of LCE and 20k tonnes of converts to just under 50k tonnes.

Assuming a revenue of $13,000/tonne after off-takers commissions that would give the new Zuluco a revenue of $481m and $650m at the two production run rates under consideration. Also assuming AISC's at say $150m p.a that would give us the key "Earnings" figures of $331m and $500m p.a. and produce a Market Cap for Zuluco of $1.65bn and $2.5bn respectively. But still inly using a P/E ratio of 5. If that's right that would give Prem a notional Market Cap from Zuluco of somewhere between $825m and and $1.25bn based upon a j.v split of 50/50 and it's currently less than $15m!

As we all not been finally decided yet how Zulu will be handled. Whether it's kept under the Prem umbrella or it's spun off clearly an opportunity of this magnitude needs to be given very careful and due consideration. I respect and understand that if it allows Prem's shareholders to gain the very best rewards.

There's no way of knowing what proportion on a new Zuluco Prem investors will be awarded if it's spun off or what the Market Cap will be at launch. I believe anything between $60m and $100m launch price would be about right with say 60% assigned to Prem shareholders, 30% to a partner or partners and the rest to make a market etc in that case. If any of the these figures are anywhere near right Prem investors are going to be very handsomely rewarded indeed. Perhaps by a factor of 3x their current investment on launch and as much as 30x (30 bagger) or more within 3 years or so if all goes well. No doubt there'll be a cut-off date when the shares in Prem's shareholders hands will be "frozen" whilst counted in order to qualify. So "you would need to be in it to win it!" as they say

You may chose to downgrade or adjust the figures. They're only meant to be approximate and I accept they're just based upon my opinion. But given at the higher output we could still be looking at a LOM several decades as I say some might argue they could even be conservative - especially the P/E ratio of 5 I've used.

AIMHO.

GLA

[doctor 69] 31/1/2018 08:44

Impressive buy 9.6 m

[tedoby2] 31/1/2018 07:40

Bull I wasn't expecting you to "charge" quite so much!

But then again feisty Bulls generally do so I suppose so I should have expected it.

GLA

[the bull] 30/1/2018 22:47

Guesses then. Prem get all back bar 10%, so keep 50% and sell 40% to JV partner

That'll be £750.00 for the advice, business class out to Harare and back and a spot of sightseeing thrown in. I was going to say a spot of tennis at the Bulawayo Club with George but I don't think they have a court, so will settle for a Ramon Allones on the terrace

[doctor 69] 30/1/2018 20:34

i have a clue @ interesting this one to see where we go .

Firstly Get 25% plus of RHA back

then find someone to put in i guess £5m .

get drills going for 20,000m and then circum comes in at modest £10m .

then build a mine , then shares 10p plus .

pretty logical and not simple , but who knows

[ihavenoclue] 30/1/2018 20:10

Yes Bull ... it is currently killing a one bag :)

[vitec] 30/1/2018 18:48

Bull, every time I go away there is some action. I am relaxed my friend as I am going to be spending 5 weeks in the Caribbean and the USA, so no complaints from me. I am going to forget about PREM and not be tempted to check the share price I will not be able to set any orders for 1p as the share price is so low my broker will only accept orders at a maximum of 150% of the current share price To that end Bull you are correct that I could do with the share price being double its current status.

[jungmana] 30/1/2018 18:43

Today i will take a 2 bag from here . Had enough of George and his endless stories.

[the bull] 30/1/2018 18:38

I would imagine vitec could relax on his hols if it at least got back to 0.4 after the recent dissapointment

[the bull] 30/1/2018 18:36

just a one bag at the moment would lower my blood pressure, or is that two bag to double, yes two bag then

[ihavenoclue] 30/1/2018 17:57

Doctor ... if PREM 20 bagged from here it would still be 40% below the estimate in July 2017 of what PREM would be worth in a year.

[vitec] 30/1/2018 13:02

Tedoby that would fit with George being advised by a close friend not to separately list Zulu. We know who the close friend is and if Circum was to have a corporate event then PREM would not need a separate listing or monies from a JV partner even though I would like to see some other mining expertise imported into PREM.

[doctor 69] 30/1/2018 09:53

Tedoby Thanks most helpful . With time prem will 20 bag

[tedoby2] 30/1/2018 09:45

Circum as a private company understandably operates under stringent privacy policies. What that means for us as shareholders in Prem and indirectly in Circum though in the main is that we have great difficulty in obtaining the basic information we would normally be given and would normally need before investing. Understandably that can be a little frustrating at times.

At the meeting last week there were questions and answers following a brief update by GR on each of Prems three main assets RHA Zulu & Circum. But when it was time to talk about Circum GR seemed to me to go decidedly coy. Prem was then and is now almost certainly in a "close period" and as such GR was restricted in what he could say to those in the room. Whilst I was aware of that even so he seemed overly cautious to me at that juncture and I don't think I imagined it. I saw him fidgeting before saying words to the effect "I'd love to tell you all more if I could but I can't. I just can't". He said it more than once. So I was left wondering why would he be feeling so awkward about discussing it when he seemed far more relaxed when talking about everything else.

I can only think of one reason and that is that Circums impending "corporate event" (in whatever form that may take) isn't far away now. I know we've all heard that many times before but lets look at what we know on timing with perhaps one or two reasonable assumptions thrown in to see if on the balance of probability this time it may be right.

Circum was awarded the Mining Licence for their Danakil Mine in March 2017. I believe the Mining Licence was the last of three of the prerequisite permits before starting. From that I've formed the view that permitting couldn't be the cause of any slow progress or delay - if indeed there is one. In its license applications Circum would have been required to submit details on timing. Financing would also have been an integral part of that and raising it one of the main milestones agreed. Permitting would have been issued conditional upon Circum adhering to the agreed timetable so I'm firmly of the view that the Ethiopian government will be monitoring progress very closely indeed.

We know that the Ethiopian government has a considerable vested interest in the mine and as part of the normal protocol I've no doubt they will be having regular meetings with Circum to ensue all things agreed are going to plan. I feel sure they won't be accommodating any slips and the posibility having it's licensing rescinded because it's running behind an agreed schedule will be the last thing Circum wants. This isn't a case where the government have said "Here's your License now get on with it" you can be sure of that.

We also know that Morgan Stanley have been engaged in March 2016. Originally to conduct a strategic review of the project. But then a few months later in the summer last year they were also instructed to look for a suitable strategic investment partner for Circum.

Previously by August 2015 Circum had received several approaches from suitable partners with particular interest from China but whether they've fallen by the wayside now we're not told. I suspect not and who knows Morgan Stanley could well be short listing suitable partners as I write otherwise I think we would have heard there was an issue. It's a case of an awful lot's said by silence here.

The $30m finance raised from the last Circum placing to pay for local infrastructure costs could well be running out by now and that could be putting additional pressure on Circum to raise the main finace needed for the mines Capex . This is what Circums COO Chris Gilchrist said in June "Moving forward, the project has now reached a critical point - and requires a strategic investment partner to help fund its construction and development". Emphasis placed on "now"!

The fact that GR has stopped acquiring Circums shares should not in anyway be considered as any indication on timing in my view. The arrangement has always been a share swap and GR doesn't have sufficient shares to trade at the moment. Moreover perhaps at the current share price level the proposition doesn't look particularly attractive.

So what could Circums Danakil project be worth and moreover what could Prems investment in it be worth in Prems share price terms. Well that obviously would depend upon several fundamentals not least of all the market price of MOP & SOP at the date of valuation verses Circums costs & production rates

I'd like to share several ways of valuing Prems investment in Circum in share price terms at three different times in Danakils development. One at the time of an IPO or an outright sale - in theory they should be the same. One when the mine will be producing it's initial target of 2mt's MOP and 0.75mt's SOP in say 2022. And finally one when the mine is producing 5mt's of potash of the same proportions in say 2024 which in fact is also a milestone noted on Circums website.

Other than an outright sale I've assumed Circum will enter into a 50/50 j.v. with a strtegic partner. I've also assumed DenakilCo's AISC's will stay the same as will the sale prices of potash which are roughly $230/t for MOP and $270/t for SOP at the moment I believe.

I'm aware there are several ways to value the mine and the most appropriate will depend upon what stage the mine is at in it's development. I am going to do my best to show three. Firstly the simplest one calculated on the "in-ground" value of the resource. This is the least accurate and of little use in my view but still worth a look. Of the other two one is based upon a "earnings metric" principle but discounted because of timing and the other by benchmarking a DenakilCo against similar companies.

The total measured and indicated resource that's currently NI43-101 compliant is 2.8bnt's of MOP & SOP combined. Although studies have suggested there is a total 12bnt's on site for the purpose of an in-ground valuation the uncertified quantity shouldn't be counted at present. A Danakil mine valuation on this basis could be said to be combined resource x ave price of MOP & SOP x a factor of say 2% (2.8bnt's x $250/t x 2%) which would give us $1.4bn (for an IPO or sale price in the near future).

Again for an impending IPO or sale a valuation using a discounted earnings metric could look something like 2.75mt's x say ($250 - $120) x 10 x 40% = $1.4bn. 10 is the P/E ratio I've used and 40% represents the discount for timing assuming a ROI of 30% is reasonable. The other figures represent revenue and AISC's. The results from the two calculations so far are notably similar and would produce an immediate revenue to Circum and Prem of roughly $14 a share for which Prem effectively paid $1.50 for it's 5.2m or so.

As an operating mine in 2022 producing 2.75mt's of MOP & SOP using an earnings metric the valuation may look something like 2.75mt's x say ($250/t revenue - $120/t AISC's) x 10 = $3.6bn. Using this example Circums share in a 50/50 j.v. would therefore produce a notional Market Cap for it of $1.8bn and a comparable share price of roughly $18

As an operating mine in say 2024 producing 5.5mt's of MOP & SOp combined on an earnings metric basis the valuation would give us approximately $6.5bn. Using this example Circums share in a 50/50 j.v. would therefore produce a notional Market Cap for it of $3.6bn and a comparable share price of roughly $36

Finally to the one I believe Analysts would favour i.e benchmarking using projects where costs and values have already been determined. Circum has already done the exercise and Prem RNS'd this information in December 2015. The benchmark came from Liberty Mutual Insurance's ("LMM") investment inYara Dallol ("Yara") which although a much smaller project neverthelss is a useful comparison. I don't intend to repeat the details but extrapolating those details would give Danakil a valuation of at least $1bn for an impending IPO or sale

So to summarise having done the best I can to research and value Danakil three different ways at three different timing points I have a feeling the "corporate event" we've been waiting for could happen any time soon.

I believe the launch price of an IPO or an outright sale could be anything from $500m to $1,4bn which would put the price of Circums shares at anything between $5 & $14 each (Prem owns over 5.2m shares at the moment).

I also believe we could be looking at a "DanakilCo" Market Cap of around $4bn by producing 2.75mt of potash in say 2022 growing to a Market Cap of roughly $8bn in say 2024. Based upon a 50/50 j.v. That would give Circum a notional Market Cap of $2bn in 2022 and $4bn in 2024 in a 50/50 j.v. if I'm right and it all goes to plan.

Under the circumstances Prem could receive as much as a $70m cash injection if it sells its current holding after the "corporate action" or alternately roughly $100m contribution to its Market Cap by 2022 and over $200m on the same basis by 2024. That is if Prem keeps its current holding. If Prem increases it these figures would be proportionately more in theory. Prems investment cap in Circum stands at 12% I believe.

AIMHO and just my view which may be of interest FWIW

GLA