Key points:
- Premier African Minerals shares plunged 12.5% despite positive news.
- The lithium miner unveiled a proposal for accelerated production at Zulu.
- Investors punished the firm for choosing the accelerated plan.
The Premier African Minerals Ltd (LON: PREM) share price plunged 12.5% despite the company announcing an accelerated plan that could see it start production activities at its Zulu lithium and tantalum project by Q1 2023.
It is unclear why investors reacted negatively to the news. Still, one of the reasons could be because it is a more risky plan than if the company stuck to its original plan of completing a definitive feasibility study (DFS) to determine the best way forward.
Also read: The Best Lithium And Lithium Mining Stocks To Buy.
The lithium mining company said it could secure funding to build a large-scale pilot production plant using an interest-free prepurchase payment for spodumene concentrate from an interested buyer. The firm is looking to capitalise on the enormous demand for spodumene concentrate globally.
Premier African Minerals shareholders may have overreacted to the announcement, despite its positive nature, given that the building of the pilot production plant would help the company complete sections of its DFS, which is a significant bonus. The firm also revealed that high demand for spodumene significantly de-risks the proposal.
Today’s adverse reaction is a classic case of “buy the rumour, sell the news”, where positive news leads to an adverse reaction, while expectations of the positive announcement could fuel a rally higher.
Premier noted that its current drilling programme was focused on exclusively targeting high-grade spodumene zones at different resource levels within the ore body and on aspects of the DFS that are crucial to the development of the pilot plant.
The company has drilled over 18,000 metres and the Zulu lithium and tantalum mine. It will be releasing assay testing results in due course, highlighting the zones with high concentrations of spodumene concentrate, tantalum and petalite.
Premier African Minerals should not be punished for choosing an accelerated production plan that will allow it to capitalise on the current high demand for lithium and spodumene concentrate, which is what happened today.
*This is not investment advice. Always do your due diligence before making investment decisions.
Premier African Minerals share price.
Premier African Minerals’ share price plunged 12.5% to trade at 0.35p, falling from Friday’s closing price of 0.40p.