Premier African Minerals/Canmax head to Singapore for arbitration

Premier African Minerals and Canmax Technologies dispute over the termination of the offtake and prepayment agreement may be headed for arbitration in Singapore if the two companies fail to reach consensus in the next few days.

Premier African Minerals, which is a United Kingdom-headquartered company that owns the Zulu Lithium and Tantalum project in Insiza District, Matabeleland South Province last year entered into an offtake and prepayment agreement with Canmax Technologies of China.

Under the agreement, in which Canmax provided US$34,7 million in prefunding to enable the construction and commissioning of a large-scale pilot plant at Zulu, Premier was expected to start shipping spodumene concentrate to Canmax’s operation in China by March 30 this year.

The UK domiciled firm whose massive plant at the Zulu project, commenced production recently has announced that it is not able to produce sufficient spodumene to meet the conditions set out in the offtake agreement due to unforeseen operational challenges encountered at the plant.

Once fully operational, the company is expected to produce 4 000 tonnes of lithium concentrate per month.

Towards the end of last month, Premier, due to the existing operational constraints at Zulu, issued a Force Majeure notice to Canmax.

Force Majeure is a French term that is a common clause in contracts and it exonerates parties involved in a binding agreement from suffering any liability when an extraordinary event beyond the control of the parties occurs.

In an update yesterday, Premier indicated that despite issuing a Force Majeure, Canmax has demanded settlement of the prepayment amount of US$34,7 million within 90 days.

“The company (Premier) has disputed the appropriateness of the notice of termination based on legal advice.

“Subsequently, the company has received and acknowledged, a further written notice from Canmax on 17 July 2023 that there is a dispute under the agreement and notes that both parties are now required to seek to resolve the dispute in good faith by ‘friendly negotiation’

“To the extent that the parties are unable to resolve the dispute in 10 days, then either party may then refer the dispute to arbitration in Singapore.

“These discussions remain ongoing and nothing has been agreed at this time,” it said.

Lithium is a mineral used in the production of batteries and its demand has arisen sharply because of the global demand in electric vehicles, especially in developed countries that are forging ahead with plans to phase out fossil fuels like petrol and diesel in the coming years.

The Zulu project is generally regarded as potentially the largest undeveloped lithium bearing pegmatite in Zimbabwe, covering a surface of about 3,5 kilometres that are prospectively of lithium and tantalum mineralisation.

With regards to plant modification progress at Zulu, Premier said the past three weeks have seen the installation of the UV sorters, a new frame to the EDS mill and the hydro sizer.

The commissioning of the upgrades remains ongoing with the UV sorters expected to increase feed grade with resultant efficiency enhancements to recovery and production.

“Furthermore, the hydro sizer is expected to improve efficiency in recovery of correctly sized milled ore. Whilst the above upgrades may improve throughput of the plant at Zulu, it is unlikely to resolve the formal state of Force Majeure as announced on the 26 June 2023, that is still expected to endure for approximately 14 weeks.

“The Zulu design, procurement, installation, and commissioning contractor, Stark International Projects Limited (Stark), have confirmed that they intend to produce spodumene from the plant at Zulu over the course of July 2023,” it said.

“At this stage and unless Premier is advised otherwise by Stark, the Stark production projections included in the announcement dated 25 May 2023 remain achievable apart from the month of June 2023 as advised on 26 June 2023.”

Based on current spodumene prices and costs estimates, there has been no change to the Premier board’s expectation that Zulu, when fully operational, will operate profitably.

“Zulu is and remains debt free and currently unencumbered by the provisions of the agreement.

“In particular, whilst the company is actively involved in alternative funding negotiations to facilitate ongoing development at Zulu and the substitution of the agreement with Canmax who have made it clear that they seek repayment and cancellation following the remedy of the Force Majeure, there is no certainty at this time that these alternative funding arrangements will be concluded,” said Premier.-ebusinessweekly