Published: 02 October 2013

Shares in Premier African Minerals shot ahead as it concluded an indigenisation agreement with the Zimbabwe authorities for tungsten arm RHA.

Zimbabwe's National Indigenisation and Economic Empowerment Fund (NIEEF) will hold 51% of RHS after the deal, though Premier's subsidiary ZimDiv will manage the project for an initial 5 years, Proactiveinvestors reported.

Premier will convert all expenditure so far into a loan. RHA is also now responsible for all of its own funding and Premier and NIEEF are under no obligation to pay for any of its future exploration and development costs.

Once RHA has moved in to commercial production, Premier will issue $750,000 worth of shares to NIEFF.

George Roach. Premier's chief executive, said: "The early completion of the agreements is indicative of the excellent relationship and mutual understanding that we have enjoyed with NIEEF for some time now.

"In particular, that RHA is responsible for its own development costs both eases the burden on Premier and broadens the sources from which finance will be available to develop the project into a low-capex tungsten mine in the near-term.

"We are in advanced negotiations on an off-take and project finance and we have committed to the additional confirmatory work suggested in the recently published Mining Study and Preliminary Economic Assessment."

Premier African Minerals' indigenisation agreement at its RHA tungsten project in Zimbabwe is good news, Shore Capital asserts.

The broker expects there will be an entrenched dividend policy that stipulates that any agreed debt repayments must be met before project dividends can be paid out, or put towards future development.

A preliminary economic assessment in August alongside a concept mining study envisaged a six-year operation at the project.

Pre-tax net present value was estimated at $117.7mln and the internal rate of return (IRR) at 316%. Subsequent pit optimisation improved these figures to $120mln and 378%, respectively.

Shore, which is house broker, said the results supported the company's belief that RHA could be rapidly brought into production as a low capex and opex mine.

Premier also said on Monday it was "in advanced negotiations over an off-take and project finance" agreement. It hopes to be able to commence construction and production by end 2013 and 2014, respectively, subject to availability of funding.
- Philip Whiterow I Proactiveinvestors

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