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Premier African Minerals (PREM) Share Price Surged 18.2%. Is It a Buy?

Simon Mugo trader
Updated 24 Jun 2022

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Key points:

  • Premier African Minerals (PREM) shares surged 18.2% on a new agreement.
  • PREM just secured funding for its pilot production plant at the Zulu project.
  • Investors cheered the announcement, but should you buy PREM shares?
  • Read on to find out.

The Premier African Minerals Ltd (LON: PREM) share price surged 18.2% after announcing that it had signed a Marketing and Pre-Payment Agreement to construct a pilot production plant at the Zulu Project.

Construction of the pilot plant will commence immediately, with the production of spodumene concentrate 6 (SC6) expected to start in Q1 2023. In addition, Premier signed a binding Heads of Terms agreement with Suzhou TA&A Ultra Clean Technology Co., Ltd (Suzhou TA&A), which will provide the necessary financing for the project.

Also read: The Best Lithium And Lithium Mining Stocks To Buy.

Premier African Minerals expects the construction project to cost US$35 million, which Suzhou TA&A will fund. However, the company will not have to pay interest on the amount if it ships its first batch of SC6 by 31 March 2023. This conduction incentivises PREM to construct the pilot plant and start operations on time quickly.

The pilot plant will initially exclusively produce SC6, a high-purity lithium concentrate used to produce lithium-ion batteries. SC6 typically contains about 6 per cent lithium content when produced as raw material.

Premier African Minerals will store three other byproducts of the extraction and processing stages: a petalite-rich mixed ore, a tantalum concentrate in a magnetic fraction and a mica/lepidolite concentrate which could contain Caesium and Rubidium. These byproducts will be processed later after the completion of additional test work and the construction of a new plant.

In my coverage of PREM shares last week, I mentioned that investors had punished the firm for choosing an accelerated production plan for its Zulu lithium and tantalum mine. At the time, the company had not yet secured funding for the large-scale pilot plant.

However, today’s announcement confirms that PREM was definitely in discussions with Suzhou TA&A regarding the potential funding of the pilot plant since such deals are rarely negotiated and signed in a week.

So, should you buy PREM shares? From my perspective, PREM shares look pretty attractive at current prices, but I am hoping for a further drop towards 0.30p before buying. Still, there are no guarantees that we will get such a decline.

*This is not investment advice. Always do your due diligence before making investment decisions.

PREM share price.

Premier African Minerals share price 24-06-2022
Source: IG

The PREM share price soared 18.18% to trade at 0.39p, rising from Thursday’s closing price of 0.33p.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading