ALTERNATIVE Investment Market (AIM) listed Premier African Minerals, has concluded shareholder and management agreements for its flagship RHA tungsten project in Zimbabwe with the National Indigenisation and Economic Empowerment Fund (Nieef), which represents the Zimbabwean government.
Under the agreement, 49:51 of RHA will officially be owned by Premier African Minerals (Prem) and Nieef, while the former will be appointed project manager for an initial five-year term.
Nieef will receive US$0,75 million of the company's shares on RHA achieving commercial production.
"As of the first of September 2013, RHA would be responsible for procuring its own funding. Neither Prem nor Nieef will have any obligation to provide any financing, although Prem has undertaken to provide interim assistance for on-going operations until alternative finance is in place," Shore Capital, which acts as broker to Premier African Minerals, said.
Exploration costs incurred by Prem as at the end of August 2013 would also accrue as an interest-bearing loan due to Prem.
The RHA Project is located approximately 270 km northwest of Bulawayo.
"Importantly, in our opinion, there is 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," said the broker. "For the purposes of modelling, despite the above, we have assumed that Prem will provide 100% of the requisite funding and that Nieef's share will be recouped from project cash inflows."
The company has prioritised mining tungsten in the country for quite some time, given the resource's critical value on the market.
Tungsten is a very dense, hard, whitish-grey metal that has a broad range of essential commercial, industrial and military applications. This is due to its many unique properties, chief among them being the highest melting point of any metallic element (3,422ºC) and the highest tensile strength of any metallic elements at above 1,650ºC.
Pure or doped tungsten metal is commonly used in mill products such as rods, sheets and wires for electrical, electronic, heating, and lighting, as well as in welding applications.
Said Chore Capital, "Prem has adopted an understanding, sympathetic and cooperative approach to the subject of indigenisation, which we believe has been appreciated by the authorities. Indeed, we understand that the first indigenisation certificates were issued to Prem."