ANNUAL REPORT & ACCOUNTS
YEAR ENDED 31 DECEMBER 2016
Contents
1 Highlights
2
3
4
Chairman & CEO Statement
Directors
Strategic Report
13
Principal Activities and Strategic Review of the Business
14
Principal Risks and Uncertainties
16
Directors’ Report
19 Non-statutory Independent Auditor’s Report to the
Members of Premier African Minerals Limited
20
21
Consolidated Statement of Comprehensive Income
Consolidated statement of Financial Position
22
Consolidated Statement of Cash Flows
23
Consolidated Statement of Changes in Equity
24 Notes to the Consolidated Financial Statements
61
Company Information
HIGHLIGHTS
Striking the right balance
Delivering value from future
production & cash generation
Building value from exploration,
investments & transactions
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Chairman & CEO Statement
The year under review has continued to be transformational
for Premier African Minerals Limited (“Premier” or “PREM”)
as we progress along the development path from exploration
to development and production. A year of review and further
development at RHA, the acquisition of an interest in TCT
in Mozambique and the confirmation of our expectations
at Zulu Lithium serve both as a template for our business
model and a pillar of our resilience and determination
to complete the transformation cycle and see Premier
as self-sustaining and cash generative later in 2017.
As we move into 2017, PREM is well positioned to continue
to offer our shareholders a balanced risk portfolio of
strategic metals and resources that are at different stages
of the development curve, but in all cases, have solid
supply, demand and pricing fundamentals behind them.
The year under review is one where your board and management
team have proven that we can deliver on our stated strategy and
we look forward to the year ahead with significant optimism.
The London AIM market is an incubator market that serves to
provide companies like PREM, with access to capital to help
enable our projects to be advanced through capital market
funding facilities, to the point where like RHA, they can become
sustainable or be advanced to the point where they become
attractive to another strategic investor that can create an event
that will serve to return value back to our shareholders.
Naturally, as we engage in our business strategy, we inevitably
have to raise capital in a process which can often serve to dilute
our shareholders and or depending on the type of funding
we undertake, have the impact to dampen our share price.
I can assure you that as your chairman, and someone who has a
significant shareholding in PREM, I am completely motivated to
make sure all the funding arrangements we secure are designed
to lead to the creation of value, rather than depress value. I take
the opportunity of this year’s Annual Report to make this point
to both our existing shareholders and also to any new potential
shareholders and that as we progress and develop value in our
assets, finance through debt will become the preferred option.
Since the global financial crisis and following a slowing
of economic growth in China, the mining sector has
faced some difficult challenges when it comes to
managing a depressed commodity pricing market.
Premier African Minerals joined London’s AIM market in
December 2012 and we have managed to ride this difficult
cycle within the market, to emerge as a company that offers
investors and our shareholders a bright future, where our
portfolio of assets is now beginning to benefit from increased
market demand and pricing upturn, especially across
the tungsten, lithium and associated automotive battery
metals market, and also where during the period under
review we added gold and limestone to our portfolio.
I take this opportunity of thanking our shareholders for their
support and also to Pamela Hueston, our former finance
director who did a sterling job during her tenure and also
to Mr. Russel Swarts who has joined the board for his work
in supporting a smooth transition within this vital function
of our company. I also wish to thank Anthony Michalec for
joining us and taking up the helm as our new Chief Operating
Officer at RHA. In addition I want to pay tribute to all our
contractors and consultants, particularly those working at RHA,
who have tirelessly worked on helping to deliver a producing
tungsten mine and who have played a huge role in making
this annual reporting period a notable one in our history.
Fundraising and Capital
During the reporting period we raised gross
proceeds of US$5,528,000, including;
- US$3,178,000 in direct subscriptions, and
- US$2,350,000 through the issue of Loan Notes,
In addition US$247,000 of outstanding loans to
George Roach were converted to shares.
RHA also increased its working capital facilities by the
granting of a US$200,000 general credit facility from a local
bank, which can be utilised for payment of direct operating
expenses associated with the production of wolframite
concentrates. The facility bears interest at the bank’s costs of
funds plus a margin of 8.75% and is guaranteed by Premier.
George Roach
Chief Executive Officer & Executive Chairman
7 July 2017
2 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Directors
“The team that leads Premier combines extensive
experience in the international mining and resource
development sector with strong Africa-wide knowledge
and a reputation for responsible operations.”
George Roach
Chief Executive Officer & Executive Chairman
Michael Foster
Non-Executive Director
George Roach has extensive experience in natural resource
business development in Africa. He has successfully obtained
licences and concluded mineral exploration and exploitation
agreements in the entire SADC region, Ethiopia and most
of the CEMAC and ECOWAS regions. Under the auspices of
Exploration Services, he provided consultancy to prospective
exploration companies and has acted in significant capacities
for a number of start-ups that have subsequently listed on
AIM and TSX-V, most recently as Managing Director Africa
for Uramin Inc. and Chairman and CEO for Premier African
Minerals. George Roach maintains a number of other
interests in start-up companies that include Anglo African
Agriculture that has recently acquired the Southern Africa
based business of Dynamic Intertrade, a food manufacturing
and trading company and Agriminco Inc., focussed on
African Agricultural and Industrial Mineral development.
Mr Foster is a graduate geologist from St Andrews University
in Scotland with a MBA in Business Administration from
London Business School. He has over 30 years’ experience
of all aspects of the mining industry, including exploration,
mine development, operations and finance in a variety of
commodities. He was a founding shareholder and Director of
the AIM traded ZincOx Resources plc until 2008. More recently
he served as Non-Executive Chairman of Copperbelt Minerals
Limited, a company that discovered a new copper-cobalt
deposit in the Democratic Republic of Congo. Mr Foster is
currently a Director of CASA Mining Limited, a private company
with interest in exploration licences in the DR Congo.
Ian Stalker
Non-Executive Director
Russel Swarts
Non-Executive Director
Mr Stalker is a seasoned mining executive and current
Chairman and Director of Azincourt Uranium (TSXV: AAZ)
a TSX Venture Exchange quoted company. He has over 40
years of development and operational mining experience in
Europe, Africa and Australia. He has undertaken operational
roles in the base and precious metals arenas and executive
positions in some of the largest mining companies in the
world. From 2009 to 2011 he was CEO of Berkeley Resources
Ltd, an ASX and AIM quoted company with its main asset
being a uranium development project in Spain. He was CEO
of UraMin Inc. from 2005 until its acquisition by Areva in 2007.
Prior to joining UraMin, between 2005 and 2007 Mr Stalker
was a Vice President of Gold Fields Ltd., the fourth largest
gold producer in the world at the time. Ian was also the CEO
of former TSX V listed Brazilian Gold Corporation until its
merger and acquisition in September 2013 by Brazil Resources
(TSXV:BRI) ). He is currently CEO of K92 a TSX V listed gold
company and Chairman of Plateau Uranium (PLU TSX V).
Russel qualified as a Chartered Accountant (South Africa)
in 1989, after serving articles with Price Waterhouse in
Johannesburg. After leaving the profession in 1991, Russel
took up senior financial roles within a number of JSE listed
South African companies. Subsequently, Russel was appointed
as CEO of the largest specialist telecommunications group in
South Africa before taking on a director role at a private equity
investment group involved in energy and natural resources.
Russel spent five years as CFO of AIM-traded URU Metals Ltd
before consulting in his areas of expertise. Russel has extensive
experience in Southern African and international listed entity
reporting, rules and regulations, corporate governance,
mergers and acquisitions, specialist financing, strategic planning
and group reporting planning and structuring. Russel has
been involved in auditing, group reporting, budgeting and
forecasting, systems implementations and restructuring.
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Strategic Report
The strategic report provides a detailed assessment of
the activities of the company during the period under
review. It also details the main objectives of the company
related to our portfolio of assets. The principal risks
and uncertainties associated with our activities are
outlined in a specific principal risks and uncertainties
section. This section of the Annual Report is produced
in accordance with Guidance on the Strategic Report,
June 2014 issued by the Financial Reporting Council.
Funding Update
During the reporting period we raised gross proceeds
of US$5,528,000 and also saw a number of outstanding
Darwin Loan Notes converted to equity. RHA also secured
a US$200,000 general credit facility from a local bank, which
can be utilised for payment of direct operating expenses
associated with the production of wolframite concentrates.
The facility bears interest at the bank’s costs of funds
plus a margin of 8.75% and is guaranteed by Premier.
4 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
RHA Tungsten Mine
Zambia
Mozambique
RHA Tungsten Mine
Zimbabwe
Botswana
The year began with the completion of an underground mining
implementation study with input provided by Whaleside
Shaft Sinkers Zimbabwe. The completion of the internal study
by the RHA on site team supported the board’s decision to
investigate and accelerate underground development as
discussed in previous announcements we reported on back
in 2015. The study included a six-month underground mining
plan on 926 level while re-equipping a vertical shaft to 870.
Estimated capital cost of US$406,000 would cover a schedule
for equipping a vertical shaft hoist and commissioning of
operations on 870. Positive operating cash flows would be
secured on commencement of underground mining operations.
In addition to study work on underground operations, we
also provided the market with an interim update on our
open pit SAMREC compliant Mineral Resource review which
was commissioned to support a bulk mining approach and
the use of XRT technology to achieve material upgrading.
From this investigation we established a significant increase
in mining inventory and tonnages of contained tungsten
within the pit boundary, and importantly we reported depth
and on strike continuity outside the pit boundary, which
has the potential of adding further resources to RHA.
In order to help advance RHA financially, we secured a
US$200,000 general credit facility from a local bank which is a
positive sign of the support RHA is securing from stakeholders
in Zimbabwe. In February of the reporting period we announced
to the market that RHA had begun processing underground
ore, following the suspension of operations in early November
2015. In May, we announced that the equipping of the 120m
vertical shaft was complete. This followed the announcement
that first ore would be secured from 870 level and that we were
seeing improving grades from 926 level. At about this time, it
became apparent that to fully exploit the potential of RHA and
achieve levels of profitability anticipated before the collapse
of commodity prices, that we would have to complete certain
modifications to the crushing circuit, which was done and
subsequently, we should further modify the circuit to include
X-ray based mineral sorting that would facilitate increased
mining rates and would pre-concentrate ore before delivery
of material to the gravity recovery circuits of the plant.
In July, Chairman and CEO George Roach agreed to provide
a guarantee in respect of amounts owing under a proposed
Memorandum of Agreement with JR Goddard Contracting (Pvt)
Ltd (JRG), the contractor for the open pit mining at RHA Tungsten
(Private) Limited.
The amount owing to JRG as at 11 March 2016 of US$851,312
is being settled by Premier at a rate of US$54,626 per month
for a period of 20 months. Under the JRG Memorandum,
should the Company recommence open pit mining operations
through the direct engagement of JRG during the 20-month
period, US$247,000 will be recovered by the Company
by way of equal monthly payments against JRG’s mining
certificates over the duration of the new agreement.
In consideration for providing the surety, Premier entered
into a put option agreement in respect of its holding of
shares in Circum Minerals Limited (Circum) with George
Roach. Under the Circum Agreement, in the event that:
• Premier fails to meet its obligations under the
JRG Memorandum;
• JRG exercises its rights under the surety against
George Roach and;
• Premier fails to find an alternative buyer for its
Circum shares,
Then the company may require George Roach to purchase
such number of Circum shares at a price of US$2 per Circum
Share (being the fair market value of the Circum shares in
the audited results for the year ended 31 December 2015)
equal to the total amount then owed to JRG. Following this
agreement, we announced to the market in July that production
at RHA had re-commenced in phased process. Screens, plant
modifications as well as the electrical reticulation works had
been completed and the plant was undergoing a phased
commissioning and optimisation process to achieve the
anticipated recoveries and operational throughput. Wolframite
concentrate from ore from the underground mine had been
produced. The throughput of the plant would be steadily
increased to the plant’s design capacity of 16 tonnes per hour.
APT prices have generally been moving upwards since
January 2016 from a low of $162 mtu, to pricing of
$220-$225 mtu at circa the publishing of our Annual
Report and accounts. Tungsten concentrate prices are
generally quoted as US dollars per mtu discounted off the
European price for ammonium Para-tungstate (APT).
Further work at RHA saw major sections of underground
development channel sampled, geology mapped and drill cores
re-examined with further assays on these cores completed and
trench data from the benches within the open pit re-assayed
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Strategic Report continued
and re-evaluated. We discovered that whilst the mineralised
quartz veins are identifiable and exhibit strike continuity
within the existing underground development, the wolframite
mineralisation does not show the same level of consistency.
Tungsten grades show extreme variability and range from
sub-economic to more than 300kg per ton over short strike
distances. This variability in wolframite mineralisation may
make application of normal geostatistical methodologies
unreliable and this has resulted in the extended sampling
and re-evaluation process described above, which is vital to
ensure our financial modelling of RHA remains accurate.
About Afmine
Afmine is a leading mining and exploration services company
operating in Zimbabwe which handles over 400 kilotons of
ore on a monthly basis. The company specialises in both
underground mining and specialised haulage solutions and has
a good reputation for safety and efficiency. Afmine has worked
for major projects and its clients include ASA Resources Limited
(Freda Rebecca Gold Mine and Bindura Nickel Corporation)
and Metallon Gold (Private) Limited (Shamva Gold Mine).
Information on Afmine can be found at www.afmine.com.
Following a review of immediately available tungsten rich
material at RHA, we reported in October that sufficient tonnage
was immediately available both in the open pit and underground
operations to support an initial 3 years’ of operations at up
to 40,000 tons per month with the installation of the X-Ray
Transmission (XRT) system for ore sorting.
At the planned 40,000 tonnes per month of ore mined, it is
estimated that RHA should be producing about 10,000-11,500 metric
ton units (mtu) of tungsten trioxide concentrate per month. A mtu is
equal to ten kilograms of tungsten tri-oxide equivalent contained in a
concentrate and is the standard weight measure of wolframite.
Budgeting
When the TOMRA sorter is installed and commissioned in 2017,
and all other upgrades completed, RHA projects expenditure
on an EBITDA basis to reduce to approximately US$682,000
per month from the US$825,000 as originally estimated.
In November we announced the appointment of African Mining
and Exploration (Afmine) as our principal mining contractor for
the upgrades, development of the underground operations
and the re-appointment of JRG for the re-establishment of
open pit mining. The terms of the underground contract
require certain mining targets to be met which included;
• 16,000s tonne per month from underground operations and
delivery of not less than 12,000 tonnes of ore to the run-of-
mine (ROM) pad by 31 January 2017.
Negotiations for phase two mining are underway which
centre around a mining target of up to 28,000 tonnes but not
less than 23,000 tonnes per month from the open pit and
subject to current performance and operational outcomes
being met, we will negotiate a longer term mining contract
with Afmine in regard to the underground in due course.
The initial underground contract required a payment of
a one-off mobilisation cost of US$50,000. Thereafter two
milestone payments each amounting to US$75,000 are
due when the agreed milestones are met. Premier granted
discretionary conversion rights for five days starting from the
date of completion to convert the two milestone payments into
shares of no par value. The contract is structured to ensure
the delivery of a minimum of 12,000 tonnes at a fixed cost
per tonne. Any delivery beyond such 12,000 tonnes of mined
material shall be at an incremental rate per tonne, with the
motivation being to reduce the final processed cost per tonne.
Improved Off-take Terms and Appointment
of Chief Operating Officer
As the year drew to a close we announced an improved
off-take agreement with Noble Resources International
Pts Limited (Noble) and the appointment of Anthony John
Michalec as Chief Operating Officer, in a move designed
to strengthen the management team at RHA.
Under the amended agreement, Premier will supply the first
4,100 metric tonnes of wolframite concentrate produced by
the mine to Noble over an anticipated two year period on
favourable pricing terms. Pricing for concentrates will be based
at a discount to the European Ammonium Para-Tungstate
APT price published by Metal Bulletin. Concentrates are sold
in metric tonne units (mtu) where one mtu equates to ten
kilograms of tungsten trioxide (WO3) contained in a concentrate
at a declared percentage, normally between 60% and 65%.
About Noble Group
Noble Group (SGX: N21) manages a portfolio of global supply
chains covering a range of industrial and energy products.
Operating from over 60 locations and employing more than 40
nationalities, Noble facilitates the marketing, processing, financing
and transportation of essential raw materials. Sourcing bulk
commodities from low cost regions such as South America, South
Africa, Australia and Indonesia, the Group supplies high growth
demand markets, particularly in Asia and the Middle East. More
information on Noble can be found at www.thisisnoble.com.
At the close of the reporting period, progress at RHA had been
good in certain aspects but slower than planned in others.
Of note was the updated open pit resource statement and
maiden underground resource. Work continues in further
defining the underground resource and identifying the
high-grade areas that could be mined most efficiently now.
Significant high grade target opportunities have been identified
located off the 926 adit access level that does not need shaft
haulage. Delays were experienced in the completion of the
shaft upgrades, which were eventually completed post the
reporting period. Premier also elected to own the XRT sorter
rather than to operate the XRT sorter on a toll processing basis.
The financial benefits of owning significantly outweigh the
cost of running the XRT on a toll basis and more than justified
a short delay in the supply and installation of the system.
In order to oversee the successful transition to commercial
production at RHA, the appointment of Anthony John Michalec
6 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
the past two years and the developments in our resource
estimations and underground mining, add a level of confidence
to this expectation. RHA has been a drain on cash resources
but we continue to believe that this is at a turning point and we
expect strong cash flows from this operation later in 2017.
as Chief Operating Officer (non-Board) was undertaken
to strengthen the key management team. Anthony is a
first class mining professional with in excess of 35 years
of experience in mining engineering gained at both open
pit as well as underground operations across Africa with
companies like Shanta Gold and First Quantum Minerals.
RHA also reviewed the financial model incorporating the
X-ray transmission sorter on a toll process basis and concluded
that the financial arguments for an owner-operation justify a
change of strategy and created a short delay in the installation
of the system. Premier engaged an Engineering, Procurement,
Construction and Management (EPCM) contractor who
provided detailed engineering designs, installation support
and quotation for a TOMRA sorter, planned for commissioning
during 2017. The sorter and installation is part financed
on a plant rental contract and part through Premier direct.
Total cost of the sorter and installation is US$1.03m.
In November, we were delighted to report a 300% increase in
open pit resources with an increase to 20.8 million tonnes at
increased grade of 2.34kg per tonne, Maiden Underground
Resource in developed areas of 1.3 million tonnes at 4.25kg
per tonne, and up to a 40-year mine life indicated.
Post Reporting Period
Installation of the XRT sorter and additional upgrades to the
crushing circuit completed in March 2017 and production
commenced again thereafter. Having received all documentation
and permits for exporting, RHA set in place arrangements for the
first export shipments of concentrate to the port of Durban, South
Africa. First shipment of concentrates of 20 ton grading at 60%
wolframite was completed in late May 2017 and has been paid
for. RHA forecast an optimisation period and anticipated increase
in production to 10,000-11,500 metric ton units of wolframite
during Q4 2017 subject always to attainment of anticipated
grade and recoveries from the plant. During the optimisation
process to date, the mine has demonstrated the capability to
operate at profitable production levels on an instantaneous
basis. More importantly, development in the open pit mining
operation has now progressed through the heavily weathered
upper layers in some areas and we are now able to identify and
track grade from the pit, through the ROM pad and into the plant.
This is a most significant development and is a tribute to very
substantial effort that has been made by our geological team
and mining engineers, particularly when faced with the extremely
“spotty” nature of wolframite mineralisation. By its nature, the
optimisation process is not necessarily a time of continuous
operation and this has been the case at RHA. Certain issues have
been identified during the optimisation phase and these are in
the process of being attended to. These include minor upgrades
to certain components to allow continuous operation at the
higher tonnages now possible following the commissioning of
the X-ray sorting system. These are expected to complete toward
the end of August 2017 and we then expect to see production
accelerate to the predicted levels of up to 10,000-11,500 metric
ton units per month in the later part of 2017. Whilst attainment
of this production level remains dependent on continuity of
grade and plant recovery, the experiences we have had over
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Strategic Report continued
Zulu Lithium and Tantalum Project
Zambia
Mozambique
Zimbabwe
Zulu Lithium and
Tantalum Project
Botswana
Zulu is located at Fort Rixon in Zimbabwe, 80km east of Bulawayo
and easily accessible by road. The project comprises 14 claims
covering a surface area of 3.5km2.
Zulu is regarded generally as potentially the largest undeveloped
lithium bearing pegmatite in Zimbabwe. It was first pegged in
1955 and intensely explored until the early 1960s. Minor petalite
production was reported for 1961 and 1962. The pegmatite
bodies intruded along serpentine and sedimentary rocks over a
strike length of several kilometres. The width varies between 10
and 25 m. The bigger pegmatites to the north of the Machakwe
River are rich in spodumene and lepidolite, the smaller pegmatites
south of the river are rich in petalite. The pegmatite bodies strike
N20° and dip with 70° to 90° to the west. Parts of the pegmatite
are quite rich in tantalite-(Mn).
Zimbabwe is the only African country with a history of successful
exploitation of lithium bearing mineralisation. Zimbabwe is the
world’s fifth largest lithium producer.
On Zulu, Premier has completed drilling work which confirmed the
presence of mineralised pegmatites at depth. Pitting and sampling
of the eluvial cover confirmed the presence of discrete grains of
tantalite and scheelite in the overburden. To date, trenching and
outcrop sampling by Premier have extended the length of the
lithium pegmatite bodies to 3,500m underlining the potential for
industrial scale mining.
Besides the obvious production of lithium minerals (petalite,
spodumene and lepidolite), the Zulu Pegmatite offers the
potential to produce tantalite from hard rock and alluvial
resources and feldspar and high purity quartz for the ceramic
industry from the pegmatite. Yet unproven is the existence of
pollucite, the only major caesium ore, and coloured gemstones
like, for example, emerald.
In June 2016 we reported initial test results of Zulu
samples provided by Dorfner Analysenzentrum und
Anlagenplanungsgesellschaft mbH. These included;
• 1.55% Li2O reported in spodumene/lepidolite ore sample
taken from the exploration adit.
• 1.23% Li2O reported in petalite ore sample.
These high Li2O grades contained in the bulk samples are in
line with exploration data. The process development being
undertaken in Germany is directed to production of marketable
spodumene and petalite concentrates, both of which are in
demand particularly in the ceramics and glass industries and as
a source for low impurity lithium. Premier is now concentrating
efforts to better understand the complexities of this substantial
multi-phase pegmatite and further develop the resource model.
To remind shareholders, in late 2015, PREM undertook a mini-
bulk sampling programme where three composite samples,
each weighing between 250 and 285kg were taken in the
respective pegmatites zones (petalite, spodumene-lepidolite at
surface and in spodumene-lepidolite in the exploration adit).
We also announced in July 2016 that we had discovered excellent
correlation between historic and current exploration programs
that confirmed potential for massive lithium rich mineralisation.
The completed 3D modelling of the Zulu pegmatite indicated
a direct correlation of both historic data from Rhodesian
Selection Trust (RST) with surface and drilling results from
Premier’s more recent exploration activities. RST suggested a
mineralised ore body over some 460 meters and to a depth of
some 50 meters. Premier’s exploration on surface has extended
the strike of the pegmatite to 3,500 meters and in limited
drilling to test depth extension, has indicated continuity to 200
meters. This represents a seven times increase on strike and
a four times increase in depth and potentially increases RST’s
exploration target most substantially. The ore body remains
open on strike and depth. An exploration programme at Zulu
will test the strike extensions to a limited depth and focus
on establishing an initial code-compliant resource for Zulu.
Bulk samples for flow sheet development are already at the
laboratory and our intention is to target production of a saleable
bulk concentrate in as low a capex operation as possible.
In September 2016, we announced to the market that we had
commenced an extensive diamond drilling programme on Zulu.
The drilling programme had two objectives. Firstly, to test for
strike and depth extensions of the current known 3.5 kilometre
surface strike length and secondly establish a maiden resource.
In addition, we began a review of the strategic options for
the development of Zulu and potential monetisation of value,
including possible strategic partnerships and / or the possibility
of a separate listing for Zulu.
We believe that the potential scale and size of Zulu is analogue
to other world-class spodumene/pegmatite deposits hence
we believe that Zulu has the potential to be a company making
asset. Premier will also progress its review of strategic options
8 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
for the development of Zulu and the options for unlocking
value for the Company and its shareholders, including possible
strategic partnerships and / or the possibility of a separate
listing for Zulu Lithium. Separately, Zulu Lithium Mauritius
Limited (Zulu Lithium) agreed terms with Mr. David Lenigas to
conduct a consultant’s review of Zulu based on his expertise
in the lithium development sector. The review will focus on the
potential introduction to Zulu Lithium of third-party strategic
investors and joint-venture partners at a corporate or project
level as well as corporate or project-level debt and / or equity
investments. Mr. David Lenigas will not have any involvement in
the Group’s flagship tungsten operations at RHA nor its other
projects. His appointment is advisory only and non-exclusive.
Zulu Lithium agreed to pay Mr. David Lenigas in relation to the
services a fee of £500 per month together with a warrant to
subscribe for twenty-three million new ordinary shares in Premier
African Minerals Limited. The warrant was exercisable from 1st
February 2017 and valid for 3 years at a strike price 0.8 pence.
Mr Lenigas is a seasoned natural resources executive with specific
experience in helping unlock value from natural resources and we
look forward to a successful outcome following this appointment.
The Zulu drilling programme consisting of 20-hole, 2,500m
diamond drilling is underway. An initial 600m focused on the
currently known strike boundaries in the north and south areas of
Zulu. The remaining 1,900m targeted the spodumene zone in the
south-centre in order to better define the main ore body, both
along strike and at depth.
Premier contracted Geodrill Private Limited, a local drilling
contractor based in Bulawayo, to conduct the drilling programme.
Logging and sample preparation will be conducted at RHA and
the prepared pulps will be sent to SGS South Africa (Pty) Ltd for
multi-element assays (sodium peroxide fusion followed by acid
digestion and ICP-OES/ICP-MS).
The first diamond core hole (ZDD-14) drilled at Zulu intersected
9.5 metres of visual spodumene petalite lithium mineralisation,
from a down hole depth of 10.5 metres Hole ZDD14 also
intersected 14 meters of mineralisation from 11 meters down
hole to 46 meters; and Hole ZDD16, 26 meters of mineralisation
from 18 meters to 58 meters down hole. ZDD14 is located
200 metres from the surface bulk sample area that previously
reported grades of 1.55% Li2O.
In October and November 2016 we reported to the market the
results of the drill campaign at Zulu.
Significantly elevated tantalum (Ta2O5) grades were encountered
in all holes sampled, with grades reported as high as 706 ppm
Ta2O5 in borehole ZDD 14. Massive lithium enriched mineralised
intersections in excess of 40 meters in hole ZDD-05, were also
discovered. Greater than 2% lithium (as Li2O) grades were
reported over bore hole intersections of up to 20 metres. Massive
lithium enriched mineralised intersections in all 8 holes drilled
were detected.
Zulu is shaping up to be a world-class asset with the interim
results proving extremely encouraging and support the company’s
view that Zulu has the potential to be one of the best hard rock
lithium projects today. The tantalum grades proved even more
significant when compared to the bell-weather Pilgangoora
Lithium-Tantalum deposit, which is currently being developed
in Australia by Pilbara Minerals Ltd and has reported generally
lower tantalum grades than the current Zulu results received
to date in their latest reserve statement in August 2016. Pilbara
Minerals report that their Proved and Probable Ore Reserve
are 69.8 million tonnes grading 1.26% Li2O (Spodumene) and
132 ppm Ta2O5.
Elevated Tantalum Results
The Niobium (Nb2O5) and Tantalum (Ta2O5) results were assayed
for niobium and tantalum at the company’s laboratory using
a calibrated desk mounted XRF. The fact that Ta2O5 grade is
significantly higher than Nb2O5 indicated that the Zulu pegmatites
are highly differentiated pegmatites. Highly differentiated
pegmatites have the best potential for high-grade Lithium,
Tantalum and Cesium mineralisation.
We experienced some interruption of our drilling activity because
of unseasonal heavy rains, which served to delay reporting of the
drill and assay results. However, we managed post reporting period
to complete the 2,500 metre drilling programme. Operationally,
we also intend to commence a Mobile Metals Ions (MMI) survey
which is an innovative soil geochemical survey to detect hidden
mineralisation in areas where the mineralisation isn’t outcropping.
We hope that this innovation will help us gain more geological
knowledge of Zulu as we begin to re-focus exploration efforts, now
that RHA has moved into full operational phase.
Post Reporting Period
We released a maiden resource statement on the 6th June
2017, reporting a SAMREC compliant inferred mineral resource
estimate for Zulu of 20.1 million tonnes @ 1.06 % Li2O and
51 ppm Ta2O5 using a cut-off grade of 0.5% Li2O, including
7,159,048 tonnes @1.5% Li2O.
The resource estimate contained 526,000 tonnes of lithium
carbonate equivalent (LCE) and 1,025 tonnes of tantalum pentoxide.
The maiden resource estimate covered only 35% of Zulu’s known
3.5km surface strike length and drilling continues in order to
potentially upgrade and expand the mineral resource estimate.
Metallurgical test results from test work conducted in Germany
by Dorfner Anzaplan are particularly pleasing both in the
projected grades of concentrates that will be available, but also
in the very low iron content that offers additional markets not
only for spodumene and petatlite but also the potential for high
grade feldspar and high purity quartz. Ongoing drilling at Zulu
has yielded most encouraging mineralisation in the core and we
confidently await assay results in the expectation that this will
expand the compliant resource and add substantially to our initial
confidence in this world class deposit.
WWW.PREMIERAFRICANMINERALS.COM 9
Strategic Report continued
Circum Minerals Limited
• Lowest quartile mine gate cash costs of US$38 per tonne of
MOP and US$112 per tonne of SOP
• Total operating costs (FOB Djibouti) of US$81 per tonne of
Yemen
MOP and US$156 per tonne of SOP
• Substantial transportation advantages to India, Southeast Asia
and China
Sudan
Eritrea
Circum
Minerals
Ethiopia
• After-tax Net Present Value of US$2.1 billion, at a 10% real
discount rate
• After-tax nominal Internal Rate of Return of 25.8%
Circum, together with their independent consultants Senet
(Pty) Ltd of South Africa and K- UTEC AG Salt Technologies,
reviewed the costs in the 2015 DFS. Through their work on
the Optimized DFS, development, capital costs were reduced
by US$276 million and projected operating costs were
reduced by approximately US$3 per tonne. These reductions
have had a favourable impact on the project economics.
Post Reporting Period
Post reporting period we were delighted to learn that
Circum’s application for a mining license for the Danakil
Potash Project had been approved by the Council of
Ministers of the Federal Democratic Republic of Ethiopia.
The mining agreement provides exclusive access over the
4.9 billion tonnes NI 43-101 compliant potassium resource
contained within the 365km2 license area for an initial period of
20 years and is renewable indefinitely for further 10 year periods,
provided that financial viability continues to be demonstrated.
The License allows the exploitation of potassium-bearing
minerals which exist at relatively shallow depths within the
vast license area. The minerals will be exploited by solution
mining, the lowest risk mining method suitable to this region,
and will be processed by crystallization in solar ponds prior
to final refining in a process plant. The combination of these
techniques, which have already been proven by field trials
in the license area, will return operating costs projected to
be among the lowest in the global potash industry for both
potassium chloride (MOP) and potassium sulphate (SOP).
The award of the License follows the submission of a
comprehensive set of pre-requisite data which included
a definitive feasibility study, a social and environmental
impact assessment (ESIA) and associated management
plans and detailed production and financial models.
With the mining license now in place our investment in Circum
has been strengthened strategically. In value comparative
terms, the much smaller Yara project to the south of Circum
was recently funded on a valuation of US$200 million (i.e.
equivalent to Circum at US$2 per Circum share). It is reasonable
to conclude that Circum is likely to achieve a significantly higher
value on its much bigger project. We remain a supportive
shareholder of Circum and we are encouraged by the
progress Circum is making in this reporting period where we
consider our investment in Circum to be one that could help
generate a positive liquidity event for our shareholders.
Somalia
Uganda
Kenya
2% Interest
Premier holds 2 million shares in Circum Minerals Limited, the
owners of the Danakil Potash Project in Ethiopia. At present
those shares are valued at US$4 million and this valuation is
strongly supported by project fundamentals set out below.
In March 2017 we reported that we had been advised by Circum
Minerals Ltd (Circum) that they had appointed Morgan Stanley to
conduct a Strategic Review for the Danakil Project. This coincided
with the release of results by Circum of the Optimized Definitive
Feasibility Study for the Danakil project. The Optimized DFS
improves a number of the project parameters set out in the
original Definitive Feasibility Study completed in August 2015.
The Optimized DFS confirms that the company’s Danakil
Project is expected to be a world-class project in terms of size
and could potentially become the world’s lowest cost potash
producer and a major supplier to the Asia Pacific markets.
We take this opportunity of reminding shareholders of the
key highlights of the Optimized Definitive Feasibility Study.
• Measured, Indicated and Inferred Resources of 4.9 billion
tonnes at 18.1% KCl
• Seismic data suggests a potential total resource of 12 to
14 billion tonnes
• Proven and Probable Reserves of 107.8 million tonnes of
KCl equivalent
• Expected annual production of 2 million tonnes of MOP and
750,000 tonnes of SOP for Phase I
• Reserves support 26 year mine life for Phase I, including a
three year ramp-up period
• Development capital for Phase I of US$2.3 billion (including
contingency) with peak funding of US$1.8 billion due to early
revenue from initial production
• Low capital intensity per tonne of annual production at
US$838 per tonne
10 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
TCT Industrias Florestais Limitada
52% Interest
opportunity in a region that the company currently operates
and that TCT’s limestone and timber interests complement the
company’s current portfolio of natural resource interests.
In April 2016, we announced a major transaction and addition to
our portfolio through the terms to acquire an initial 52% interest
in Mozambique-based TCT Industrias Florestais Limitada (TCT).
We subsequently successfully completed the acquisition at the
end of October 2016.
TCT owns a substantial limestone deposit located on rail in
the Sofala Province of Mozambique and is the holder of the
exploration licence together with significant forestry operations.
Main Limestone Asset
TCT holds exploration rights over a limestone deposit that covers
27km2. The limestone deposit is situated 20 km southwest of
Caia. The Tete/Beira rail link, complete with 3-line siding, runs
adjacent to the northern boundary of the property. Early test
work on surface material indicates acceptable grades of CaCO3
for limestone for cement production; solubility suitable for Agri-
lime; and material that is expected to be suitable for aggregates
production. An existing market and available infrastructure
significantly adds to the early development potential of the
deposit. Import replacement supports local demand for lime for
cement production, agricultural applications and aggregates.
Tanzania
Malawi
Mozambique
TCT Industrias Florestais
Zambia
Zimbabwe
Rationale
South
Africa
TCT’s current operating and award winning forest operations
provide a hedge for exploration risk and when the forest and
tourism operations are cash generative, will also mitigate
exploration expenditure. TCT operations are expected to be self-
sustaining from an early stage.
Background to the Acquisition
In accordance with our stated strategy, Premier’s business
objective is to find, invest and acquire interests in low capex
potentially near-term production assets. The Board of
Premier believes that the TCT limestone project provides this
TCT in Detail
TCT is an unlisted Mozambique natural resources company,
which has an early stage 27km2 limestone exploration license in
Mozambique. In addition, TCT has a 24,821 hectare hardwood
forestry concession located in central Mozambique, with allied
milling and furniture manufacture and semi-finished goods export.
TCT is the operator of the limestone exploration license and
this is valid for 2 years from the date of formal grant in March
2016, and is renewable for up to 10 years in total. The work
commitments under the exploration license are set out in
an approved exploration programme that is budgeted at
US$200,000. There has been limited exploration work to date
on the limestone deposit and there is no current resource,
although there is evidence of historic small scale mining
activity. The company plans to commence an initial exploration
and assessment work programme on the limestone deposit.
The approved exploration programme is fully funded.
In addition to its limestone project, TCT also has existing forestry
operations that are expected to contribute significantly to cash
flows from an early stage. The Forestry concession is valid
for another 10 years and is permitted to cut up to 3,000 m3
per annum, over and above historically cut and dead timber.
At present TCT produces a range of Mozambique hardwoods
and either exports top grade kiln dried timber in unfinished or
semi-finished form. Bespoke furniture and a number of allied
timber items are produced from timbers that are highly rated
in both Germany and the UK. Located within the forest area,
TCT operates a 32 bed lodge and a 9,963- hectare game farm
and hunting concession. This concession is valid until 2065.
TCT is a private Mozambique company and its accounts are
un-audited. The most recent available accounts for TCT are for
the year ended 31 December 2014. TCT’s turnover for the year
ended 31 December 2014 amounted to US$1 million, principally
comprising sales of timber and wood-based products under
the Dalmann brand. No sales of limestone aggregate were
reported as the limestone project is at an exploration stage of
development. TCT’s loss before taxation for the same period
amounted to US$128,000. Total assets as at 31 December 2014
amounted to US$537,000. Further details on TCT’s activities
are available from their website at www.dalmann.com.
Deal Structure
The agreement to acquire was secured through an initial
26% interest in TCT from Transport Commodity Trading
Mozambique Limitada (TCTM) and a further 26% interest from
GAPI Sociedade de Investimentos S.A. (GAPI), in aggregate
amounting to 52% for a total consideration of US$2.1 million.
Pursuant to the agreement with TCTM, the Company conditionally
agreed to acquire TCTM’s 26% interest in TCT (the TCT
Agreement) for a consideration of US$1.1 million, payable in
WWW.PREMIERAFRICANMINERALS.COM 11
Strategic Report continued
4 tranches in either new Premier Ordinary Shares or cash (at
the discretion of TCTM). The first tranche of the consideration
amounts to US$440,000 and is payable to TCTM on satisfaction
of the conditions precedent to the transaction. The remaining
US$560,000 payable in three equal instalments 60, 90 and
120 days after the date of completion of the acquisition.
Prem also entered into a conditional Promise of Sale and
Purchase Agreement with GAPI pursuant to which the company
agreed to acquire GAPI’s 26% interest in TCT (the GAPI
Agreement). The consideration payable to GAPI amounts to
US$1.0 million and is payable in five tranches. The initial tranche
of the consideration amounts to US$220,000 in cash and
payable to GAPI on satisfaction of the conditions precedent to
the transaction and will be held in escrow pending completion.
The balance of US$780,000 is payable in four equal instalments
of US$195,000 in either new Premier Ordinary Shares or cash
(at the discretion of GAPI) (GAPI Deferred Payments) with
the first GAPI Deferred Payment of US$190,000 due on the
thirteenth (13th) month following completion and the next
payment every six months thereafter. The GAPI Deferred
Payments bear interest at the rate of LIBOR plus 2%. The GAPI
Agreement is conditional, inter alia, on no material adverse
change in either TCT or Premier’s business or operations,
third party consents and Bank of Mozambique approval.
The total consideration payable under the TCTM Agreement
and the GAPI Agreement amounts in aggregate to US$2.1 million
(equivalent to approximately £1,460,000).
Premier has also entered into a binding memorandum of
understanding with TCTM, GAPI and the other shareholders
of TCT (the MOU) which set out the relationship between the
shareholders and certain rights and obligations. Under the MOU,
and entirely at Premier’s sole discretion, Premier agreed to fund
the limestone exploration programme and TCT’s operations
by way of a loan of up to US$1 million, subject to receiving
necessary Mozambique central bank consent. Premier will have
the right to convert amounts provided under the TCT loan into
TCT equity as and when the loan totals US$1 million. When the
TCT loan is converted, Premier’s maximum interest in aggregate
in TCT would increase to 68%. For so long as any GAPI Deferred
Payments remain outstanding, conversion of the TCT Loan
would be conditional on the prior written consent of GAPI.
Pursuant to the MOU, Premier also has a right of first refusal over
the remaining TCT shares on terms to be determined at such time
that it exercises the right.
CASA Mining Limited
Democratic
Republic of
Congo
CASA Mining
Limited
4.5% Interest
In October of the reporting period, we announced that we had
acquired a 4.5% stake in Casa Mining Limited (CASA), a private
company registered in Mauritius that holds prospective gold
mining and exploration licences in the Democratic Republic of
Congo and which is the 71.25% owner and operator of the Missi
Gold Project located in Sputh Kivu, which is approximately 350km
south of Bukavu and 180km north of Kalemie. To help support
the acquisition we raised £300,000 (before costs and expenses)
through the issue of new Ordinary Shares at an issue price of 0.32
pence per new Ordinary Share.
The acquisition of a stake in CASA, added a gold asset which
we consider a valuable addition and one that filled a gap within
our portfolio where previously we offered our shareholders no
exposure to the precious metals sector. We have now rectified
that omission.
The CASA licence holdings consist of three contiguous mining
licenses (133km2), issued in March 2015 and valid for 30 years. These
licenses, which encompass a 60km strike length of the Tanganyika
graben within the Rusizian belt (“Misisi Corridor”), include the
Akyanga deposit along with the Lubitchako, Tulongwe, Kilombwe and
Mutshobwe prospects (targets). Over the last six years approximately
US$30m was spent by CASA developing these licenses. In addition to
the regional geophysical surveys completed over these license areas
in 2011, CASA has carried out 19,522m of diamond drilling, 2,720m
of reverse circulation drilling and excavated 6,274 line metres of
trenches on their respective licenses.
At CASA’s most advanced project, the Akyanga deposit, SRK
reported a JORC compliant Mineral Resource with a US$1,200/oz
gold selling price and 0.5 g/t Au cut-off grade optimised pit shell,
which comprises a gross Inferred oxide gold Mineral Resource
of 5.5 Mt at a grade of 1.5 g/t Au for approximately 272 koz
of contained metal. SRK has further reported a gross Inferred
transition gold Mineral Resource of 16.2 Mt at a grade of 1.8 g/t
Au for approximately 927 koz of contained metal.
Following detailed structural geological reinterpretation of the
deposit, the above resource has now been revised by African Mining
Consultants (“AMC”) to a JORC-compliant Inferred Mineral Resource
of 1,046,000 oz Au at an average grade of 2.27 g/t Au, using a
US$1,250/oz gold price and a conservative 1.5 g/t Au cut-off grade.
12 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Principal Activities and Strategic Review of the Business
The principal activity of Premier African Minerals Limited (Premier or the Company) and its subsidiary companies
(the Group) during the year under review is the mining, exploration, evaluation development and investment in
natural resource properties on the African continent. During the year, the Group moved from primary explorer
and developer to producer with its flagship project, the RHA Tungsten Mine, located in Zimbabwe.
Premier was incorporated on 21 August 2007 in the British Virgin Islands (BVI) as a BVI business company with
number 1426861. The registered office is Craigmuir Chambers, PO Box 71, Road Town, Tortola, British Virgin Islands.
The Company was admitted to trading on the London Stock Exchange’s AIM Market on 10 December 2012.
Objectives
RHA
Circum
During the period under review, the primary focus of the company
was to ensure that teething issues encountered during the mine
commissioning phase that resulted in a suspension of mining
operations, could be rectified in order to enable RHA to move into
steady production output to attain cash flow revenues.
With a mining licence now secured on the flagship Danakil
Potash Project, our objective in connection with what is a small
shareholding in Circum, is to remain vigilant and supportive as
our investment exposure enters a new period and react to any
opportunity to expand our interest in this tier 1 project.
With those commissioning challenges now being managed,
the primary focus will be to ensure RHA attains steady
production flows in line with the capacity of the mining and
processing plant capabilities.
Further, we want to undertake further resource technical and
geological work to determine the possibility of adding further
resources to the asset base of RHA.
Zulu
Following the securing of a maiden resource estimate, the
objective is to undertake further metallurgical test-work and
with our advisers explore corporate actions that could serve to
release value for the company from what is emerging as a globally
significant technology metals asset.
CASA
As a supportive shareholder, we are working with CASA to provide
support during a period when an important drill programme is
under way that could result in a significant increase in the gold
resource at Misisi. Should such an outcome occur, we consider
CASA will become an attractive acquisition target for a major gold
mining company, or become suitable for a public market listing,
where our objective for CASA is to ensure our shareholding
secures maximum value for our shareholders as the Misisi project
moves up the value curve.
TCT
As a cash generating component within our portfolio, our objective
with TCT is to work with the company to provide as much financial
reporting transparency as possible so as to feed the financial
and operation performance of TCT back to our shareholders and
the market. We also intend to work to advance exploration and
development work on their limestone asset acreage.
WWW.PREMIERAFRICANMINERALS.COM 13
Principal Risks and Uncertainties
The Group is subject to a number of risks and uncertainties
which could have a material effect on its business, operations
or future performance, including but not limited to:
Operating Risks
The activities of the Group are subject to all of the hazards and
risks normally incidental to exploring and developing natural
resource projects. These risks and uncertainties include, but are
not limited to environmental hazards, industrial accidents, labour
disputes, geo-political risks, encountering unusual or unexpected
geologic formations or other geological or grade problems,
unanticipated changes in rock formation characteristics and
mineral recovery, encountering unanticipated ground or water
conditions, land slips, flooding, periodic interruptions due to
inclement or hazardous weather conditions and other acts of
God or un-favourable operating conditions and losses.
Should any of these risks and hazards affect the Group’s
exploration, development or mining activities, it may cause the
cost of production to increase to a point where it would no longer
be economic to extract minerals from the Group’s properties,
require the Group to write-down the carrying value of one or
more of its assets, cause delays or a stoppage of mining and
processing, result in the destruction of mineral properties or
processing facilities, cause death or personal injury and related
legal liability, any and all of which may have a material adverse
effect on the Group.
Early Stage Business Risk
The Group has recently recorded some revenue from operations
at RHA and is expected to generate ongoing revenue as mining
operations become more stable. The Group’s success will
depend on its ability to raise capital and generate cash flows
from production in the future. The Board manages this risk by
monitoring cash levels and reviewing cash flow forecasts on a
regular basis.
Early Stage Project Risk
The Group’s flagship project, RHA Tungsten, has moved into
production during 2017 but all other projects are at an early stage
of development. In advancing these projects to the stage where
they may be cash generative, many risks are faced, including
the inherent uncertainty of discovering commercially viable
reserves, the capital costs of exploration, competition from other
projects seeking financing and operating in remote and often
politically unstable environments. While discovery of a mineral
deposit may result in substantial rewards, few properties that
are explored are ultimately developed into economically viable
operating mines. Major expenditure may be required to establish
reserves and it is possible that even preliminary due diligence will
show adverse results, leading to the abandonment of projects.
Whether a mineral deposit will become commercially viable
depends on a number of factors, some of which are the particular
attributes of the deposit, proximity to infrastructure, financing
costs and governmental regulations. The effect of these factors
can only be estimated and cannot be accurately predicted.
Environmental Risks and Hazards
All phases of the Group’s operations are subject to environmental
regulation in the areas in which it operates. Environmental
legislation is evolving in a manner that may require stricter
standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments
of proposed projects and a heightened degree of responsibility
for companies and their officers, directors and employees.
There is no assurance that existing or future environmental
regulation will not materially adversely affect the Group’s
business, financial condition and results of operations.
Environmental hazards may exist on the properties on which
the Group holds interests that are unknown to the Group
at present. The Board manages this risk by working with
environmental consultants and by engaging with the relevant
governmental departments and other concerned stakeholders.
Political and Regulatory Risk
The Group’s operating activities in Africa, notably in Zimbabwe,
Togo and Mozambique, are subject to laws and regulations
governing expropriation of property, health and worker
safety, employment standards, waste disposal, protection
of the environment, mine development, land and water use,
prospecting, mineral production, exports, taxes, labour standards,
occupational health standards, toxic wastes, the protection
of endangered and protected species and other matters. The
Group is dependent on the political and economic situation
in these countries and may be adversely impacted by political
factors such as expropriation, war, terrorism, insurrection and
changes to laws governing mineral exploration and operations.
Internal Control and Financial Risk Management
The Board has overall responsibility for the Group’s systems of
internal control and for reviewing their effectiveness. The Group
maintains systems which are designed to provide reasonable
but not absolute assurance against material loss and to manage
rather than eliminate risk.
The key features of the Group’s systems of internal control are
as follows:
• Management structure with clearly identified responsibilities;
• Production of timely and comprehensive historical
management information presented to the Board;
• Detailed budgeting and forecasting;
• Day to day hands on involvement of the Executive Directors
and Senior Management; and
• Regular board and meetings and discussions with the Non-
executive directors.
The Group’s activities expose it to a number of financial risks
including cash flow risk, liquidity risk and foreign currency risk.
Disclosure of management’s objectives, exposure and policies
in relation to these risks can be found in note 31 to these
financial statements.
14 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Environmental Policy
The Group is aware of the potential impact that its subsidiary
companies may have on the environment. The Group ensures
that it complies with all local regulatory requirements and seeks
to implement a best practice approach to managing
environmental aspects.
The RHA Tungsten Project located in Zimbabwe was granted
approval of its Environmental Impact Assessment and is permitted
to undertake mining operations by the Environmental Management
Agency of Zimbabwe.
Health and Safety
The Group’s aim is to achieve and maintain a high standard of
workplace safety. In order to achieve this objective the Group
provides ongoing training and support to employees and sets
demanding standards for workplace safety.
Going Concern
These consolidated financial statements are prepared on the going
concern basis. The going concern basis assumes that the Group will
continue in operation for the foreseeable future and will be able to
realise its assets and discharge its liabilities and commitments in
the normal course of business. The Group has incurred significant
operating losses and negative cash flows from operations as the
Group continued to move from a development and exploration
company into operations during the year under review.
During the year, the Group raised US$5.528 million in net
funding through share and warrant subscriptions to fund further
investment in the RHA Tungsten Mine to improve production,
exploration at Zulu, to acquire a minor stake in the unlisted Casa
Mining and to fund working capital.
Immediately subsequent to the year-end, the Group raised
a further US$615,000 (£550,000) through the further issue
of Loan Notes. In January 2017, the Group raised a further
US$1.277 million (£1.020 million) through a direct subscription
for new shares, whilst in March 2017; the Group raised further
gross proceeds of US$2.512 million (£2.0 million) through an
underwritten offer through PrimaryBid.com. There remains an
active and very liquid market for the Group’s shares.
The Directors have prepared cash flow forecasts for the period
ended 31 December 2018, taking into account forecast operating
cash flow and capital expenditure requirements for its RHA
Tungsten mine, operating cash flows at TCT, available working
capital and forecast expenditure for the rest of the Group
including overheads and other development costs. The forecasts
include additional funding requirements which the directors
believe will be met.
In the event that RHA fails to meet revenue predictions from
the end of Q3, and any other relevant risk factor discussed in
regard to RHA arises, the Group will need to obtain additional
debt finance or equity to fund its operations and other project
development activities for the period to 31 December 2018. The
cash flow forecast is as much dependent on production targets
being met at RHA, as the price of APT remaining stable during the
period to 31 December 2018.
The Board believes it has a valuable asset in the Zulu Lithium
and Tantalum exploration project and is considering a number of
approaches that have been made that may result in a sale of all or
part of this asset and a resultant liquidity event.
The Board also believes that it has a valuable asset in the
Circum shares whose estimated fair value at 31 December 2016
remained at US$4 million.
After careful consideration of those matters set out above, the
Directors are of the opinion that the Group will be able to obtain
adequate resources to enable it to undertake its planned activities
for the period to 31 December 2018 from production and from
additional fund raising and have prepared the consolidated
financial statements on the going concern basis. Nevertheless due
to the uncertainties inherent in meeting its revenue predictions
and obtaining additional fund raising there can be no certainty
in these respects. The financial statements do not include
any adjustments that would result if the Group was unable to
continue as a going concern.
George Roach
Chief Executive Officer & Executive Chairman
7 July 2017
WWW.PREMIERAFRICANMINERALS.COM 15
Directors’ Report
Results
The audited financial statements for the year ended 31 December
2016 are set out on pages 20 to 60. The Group realised a loss
before and after tax of US$5,632,000 for the year ended
31 December 2016 (31 December 2015: US$7,862,000).
The operating loss includes:
- A gross loss of US$458,000 (2015: US$1,453,000);
- Depreciation and amortisation expense of US$1,456,000
(2015: US$714,000);
- No impairment charge on exploration and evaluation assets in
2016 (2015: US$844,000)
- Administration expenses totalled US$2,999,000 (31 December
2017 the Company raised further gross proceeds of £2.0 million
through an underwritten offer through PrimaryBid.com. There
remains an active and very liquid market for the Group’s shares.
Borrowings
During the prior year the Chairman had provided bridge loan
financing of US$550,000, of which US$247,000 was converted to
equity during 2016. Subsequent to the year end the balance was
converted through the issue of equity.
The US$250,000 unsecured loan from AgriMinco Corp was settled
subsequent to the year end.
Further information on these transactions is included in note 22.
2015: US$3,132,000)
Other Key Elements of Financial Position
- Finance costs totalled US$721,000 (2015: US$1,719,000)
Dividends
As the Group moved closer to production during the year and
incurred losses during financial year 2016, the Directors do not
recommend the payment of a dividend in respect of the year
under review.
Fund-Raising and Capital
During the 2016 financial year, net funds of US$5,528,000 (2015:
US$2,218,000) were raised through equity and direct subscriptions
from the issue of share capital.
Darwin
During the year the Company raised net proceeds of US$2,350,000
(2015: US$4,142,000) from the issue of loan notes to Darwin
Strategic Limited (“Darwin”) primarily to fund the construction of
the RHA Tungsten Project. As noted in the prior year, loan notes
outstanding at the year end with a gross value of £1,125,000 were
fully settled by the issue of equity during the 2016 year.
In August 2016, the Company entered into a new Loan Note
agreement with Darwin for up to US$4,609,000 (£3,500,000)
and issued Loan note 1 with a gross value of US$2,305,000
(£1,750,000) on that date. During November 2016 Darwin
converted US$310,000 (£250,000) into equity. A further issue
of loan notes was made on 19 December for a gross value of
US$681,000 (£550,000).
Subsequent to the yearend further loan notes with a gross value
of US$677,000 (£550,000) were issued and during January and
February 2017 all outstanding loan notes were redeemed through
the issue of equity.
Further information on the Darwin Loan Notes is provided in
notes 24 and 25.
Subscription for shares
In January 2017, the Company raised a further £1.0 million
through a direct subscription for new shares, whilst in March
The intangible assets increased during the period through
the provisional valuations of the TCT limestone assets of
US$1,968,000 and the forestry concession of US$1,022,000.
Goodwill amounting to US$1,034,000 (2015: US$ Nil) has been
recognised on the acquisition of TCT. Exploration and Evaluation
costs of US$276,000 were capitalised on the Zulu Lithium and
Tantalite Project in Zimbabwe.
Some US$1,078,000 was invested in the acquisition of property,
plant and equipment during the year (2015: US$5,937,000) whilst
an additional investments of US$250,000 was made in available-
for-sale assets (2015: US$ Nil).
Events After the Reporting Date
At the date these financial statements were approved, the Directors
were not aware of any significant events after the reporting date
other than those set out in note 34 to the financial statements.
Directors
The Directors of Premier who served during the period or
subsequently were:
• George Roach (appointed on incorporation April 2007);
• Pamela Hueston (resigned 27 July 2016);
• John (Ian) Stalker (appointed 4 December 2012, reappointed
22 April 2016);
• Michael Foster (appointed 26 February 2015);
• Russel Swarts (appointed 19 January 2017)
Share Capital
Premier’s shares are publicly traded on AIM with the stock ticker
of PREM.
As at the date of this report the Company’s issued share capital
consists of 4,391,022,019 Ordinary Shares of no par value.
The company does not hold any Ordinary Shares in treasury.
16 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Major Shareholders
As at the date of this report the Company is aware of the following
persons who hold, directly or indirectly, voting rights representing
3% or more of the issued share capital of the Company to which
voting rights are attached:
Name
Number of
Ordinary Shares
% Issued
Share Capital
George Roach*
461,787,134
10.5%
* George Roach and/or structures associated with G Roach.
The percentage of shares not held in public hands is 19.91%.
There are no restrictions on the transfer of the Company’s AIM securities.
Corporate Governance
The Directors observe the requirements of the UK Corporate
Governance Code as modified by the recommendations of
the Quoted Companies Alliance (“QCA”) to the extent they are
considered appropriate in light of the Company’s size, stage of
development and resources.
Board Structure
At the reporting year-end, the Board had four directors, three of
whom are non-executive.
One executive director resigned on the 27th July 2016.
A new director was appointed on the 19th January 2017.
The Board is responsible for the management of the business
of the Group, setting its strategic direction and establishing
appropriate policies. It is the Directors’ responsibility to oversee
the financial position of the Company and monitor its business
and affairs on behalf of the Shareholders, to whom they are
accountable. The primary duty of the Board is to act in the best
interests of the Company at all times. The Board also addresses
issues relating to internal control and risk management. The Non-
executive Directors bring a wide range of skills and experience to
the Company, as well as independent judgment on strategy, risk
and performance. The Non-executive Directors are considered by
the Board to be independent at the date of this report.
Board Committees
Audit Committee
financial management to review the annual and interim financial
statements of the Company, oversees the Company’s accounting
and financial reporting processes, the Company’s internal
accounting controls and the resolution of issues identified by the
Company’s auditors.
Remuneration Committee
The Remuneration Committee comprises of Mr Ian Stalker and Mr
Michael Foster and is chaired by Mr Stalker. The Remuneration
Committee assumes general responsibility for assisting the
Board in respect of remuneration policies for Premier. The
Committee reviews and recommends remuneration strategies
for the Company and proposals relating to compensation for
the Company’s officers, directors and consultants and assesses
the performance of the officers of the Company in fulfilling
their responsibilities and meeting corporate objectives. It has
the responsibility for, inter alia, administering share and cash
incentive plans and programmes for Directors and employees
and for approving (or making recommendations to the Board on)
share and cash awards for Directors and employees.
Disclosure Committee
The Disclosure Committee comprises of Mr Michael Foster
and Mr Ian Stalker and is chaired by Mr Foster. The Disclosure
Committee assumes general responsibility for approval and
monitoring compliance with the Company’s disclosure controls
and procedures. It has the responsibility, inter alia, determining
whether information is inside information, deciding whether the
inside information is to be announced as soon as possible and
reviewing the scope, content and accuracy of disclosure. The
Company has adopted a share dealing code governing the share
dealings of the Directors and applicable employees during close
periods and is in accordance with Rule 21 of the AIM Rules.
Nomination Committee
The Nomination Committee meets as required to consider the
composition of and succession planning for the Board, and to
lead the process of appointments to the Board. The Committee is
made up of Mr George Roach and Mr Ian Stalker, and is chaired
by Mr Roach.
AIM Compliance Committee
The AIM Compliance Committee comprises Mr Ian Stalker and Mr
Michael Foster and is chaired by Mr Stalker. The AIM Compliance
Committee is responsible for monitoring compliance with AIM
Rules and to liaise with the Company’s Nominated Advisor.
Statement of Disclosure of Information to Auditors
The Audit Committee, which comprises of Mr Michael Foster, Mr
Russel Swarts and Mr Ian Stalker, and is chaired by Mr Stalker, is
responsible for the appointment of auditors and the audit fee,
and for ensuring that the financial performance of the Company
is properly monitored and reported. The Audit Committee, inter
alia, meets with the Company’s external auditor and its senior
As at the date of this report, the Directors confirm that so far as each
Director is aware, there is no relevant audit information of which
the Company’s auditor is unaware; and each Director has taken all
the steps that he ought to have taken as a Director in order to make
himself aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
WWW.PREMIERAFRICANMINERALS.COM 17
Directors’ Report continued
Auditor
RSM UK Audit LLP has indicated its willingness to continue in
office as auditor.
Directors’ Responsibilities in Respect of the Preparation of
Financial Statements
The Directors are responsible for preparing the financial
statements in accordance with applicable laws and regulations.
The Directors prepare group financial statements for each
financial year. The Directors are required by the AIM Rules of the
London Stock Exchange (“AIM Rules”) to prepare group financial
statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”).
The group financial statements are required by IFRS as adopted
by the EU to present fairly the financial position and performance
of the Group. In preparing the group financial statements, the
Directors are required to:
• Select suitable accounting policies and then apply
them consistently;
• Make judgments and accounting estimates that are
reasonable and prudent.
• State whether they have been prepared in accordance with
IFRSs adopted by the EU; and
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Group. They are also responsible
for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring
that the Annual Report includes information required by the
AIM Rules.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Premier
African Minerals Limited website. The Company’s website is
maintained in accordance with AIM Rule 26. Legislation in the British
Virgin Islands governing the preparation and dissemination of the
financial statements may differ from legislation in other jurisdictions.
Signed on behalf of the Board of Directors
George Roach
Chief Executive Officer & Executive Chairman
7 July 2017
18 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
NON-STATUTORY INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF PREMIER AFRICAN MINERALS LIMITED
Opinion on Non-Statutory Financial Statements
We have audited the group non-statutory financial statements
for the year ended 31 December 2016 on pages 20 to 60. The
financial reporting framework that has been applied in their
preparation is International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
The fair values of the limestone exploration license and forestry
concession have been determined on a provisional basis because
management have not yet completed the fair value exercises.
Any subsequent change in identification of assets acquired or the
valuation of these assets will impact the fair value of intangible
assets and also goodwill, deferred tax and non-controlling
interests arising in respect of the business combination.
In our opinion the group non-statutory financial statements:
• Give a true and fair view of the state of the group’s affairs as at
31 December 2016 and of its loss for the year then ended; and
• Have been properly prepared in accordance with IFRSs as
adopted by the European Union.
Emphasis of Matter – Carrying Value of Property, Plant and
Equipment and Going Concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures
made in notes 4 and 5 of the financial statements concerning
the recoverability of mine assets included in property, plant and
equipment and the Group’s ability to continue as a going concern.
• Carrying value of property, plant and equipment (“PPE”) – note
4 describes the key assumptions that management have
made in the value in use calculation for the RHA mine cash
generating unit in concluding that the carrying amount of its
PPE of US$9.4 million is not impaired. The key assumptions
include production volumes, grade and wolframite prices, as
well as discount rate and mine life. As the mine is at an early
stage of production, there can be no certainty over these
assumptions, which indicates the existence of a material
uncertainty in respect of the carrying value of property, plant
and equipment.
• Going concern – note 5 describes the uncertainty over
production volumes and sales prices achievable at the RHA
mine on which the cash flow forecasts are based and the need
for additional fund-raising in the next 12 months, on which the
Group is dependent in order to continue operating as a going
concern. These factors indicate the existence of a material
uncertainty which may cast significant doubt about the group’s
ability to continue as a going concern.
The financial statements do not include the adjustments that
would result if the group was unable to continue as a going
concern or adjustments were required to the carrying value of
property, plant and equipment.
Emphasis of Matter – Identification and Valuation of
Intangible Assets Acquired in a Business Combination
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures
made in notes 4 and 14 of the financial statements concerning
the identification and valuation of intangible assets acquired in
the acquisition of TCT.
Scope of the Audit of the Non-Statutory
Financial Statements
A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at http://
www.frc.org.uk/auditscopeukprivate
Matters on which we are Engaged to Report by Exception
We have nothing to report in respect of the following matters
where we are engaged to report to you, if in our opinion:
• We have not received all the information and
explanations we require for our audit.
Respective Responsibilities of Directors and Auditor
As more fully explained in the Directors’ Responsibilities
Statement set out on page 21, the directors are responsible for
the preparation of the group non-statutory financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
group non-statutory financial statements in accordance with
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
This non-statutory report is made solely to the company’s
members, as a body, in accordance with the terms of our
engagement dated 11 March 2016. Our non-statutory audit work
has been undertaken so that we might state to the company’s
members those matters we are required to state to them in a
non-statutory auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company’s members as a body, for our non-statutory audit work,
for this non-statutory report, or for the opinions we have formed.
RSM UK AUDIT LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
7 July 2017
WWW.PREMIERAFRICANMINERALS.COM 19
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Revenue
Cost of sales
Gross loss
Administrative expenses
Depreciation and amortisation expense
Impairment of exploration and evaluation assets
Operating loss
Finance costs
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Gain arising on available-for-sale financial asset
Foreign exchange translation
Notes
7
8
16
13
10
11
15
2016
$ 000
192
(650)
(458)
(2,869)
(1,584)
-
(4,911)
(721)
(721)
(5,632)
-
2015
$ 000
103
(1,556)
(1,453)
(3,132)
(714)
(844)
(6,143)
(1,719)
(1,719)
(7,862)
-
(5,632)
(7,862)
-
(65)
(65)
1,500
50
1,550
Total comprehensive income for the year
(5,697)
(6,312)
Loss attributable to:
Owners of the parent
Non-controlling interests
Loss for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
(3,405)
(2,227)
(5,992)
(1,870)
(5,632)
(7,862)
(3,470)
(2,227)
(4,442)
(1,870)
Total comprehensive income for the year
(5,697)
(6,312)
Loss per share (expressed in US cents)
Basic and diluted loss per share
12
(0.2c)
(0.1c)
The notes on pages 24 to 60 are an integral part of these consolidated financial statements.
20 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2016
ASSETS
Non-current assets
Intangible exploration and evaluation assets
Other intangible assets
Goodwill
Investments
Property, plant and equipment
Other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Other financial liabilities
Borrowings
Deferred tax
Provisions
Current liabilities
Bank overdraft
Trade and other payables
Other financial liabilities
Borrowings
Loan notes
Derivative financial instruments
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Merger reserve
Foreign exchange reserve
Share based payment reserve
Loan note warrants
Retained earnings
Total equity attributable to the owners of the parent company
Non-controlling interests
TOTAL EQUITY
Notes
13
13
14
15
16
19
18
19
21
22
11
23
20
21
22
24
24
25
26
27
28
24
33
2016
$ 000
5,436
1,022
1,034
4,250
9,585
196
21,523
335
268
399
1,002
22,525
(937)
-
(983)
(809)
(2,729)
(155)
(2,615)
(1,370)
(566)
(1,874)
-
(6,580)
(9,309)
13,216
26,856
(176)
284
1,284
562
(12,878)
15,932
(2,716)
13,216
2015
$ 000
3,192
-
-
4,000
9,918
255
17,365
183
426
45
654
18,019
(180)
(259)
-
(735)
(1,174)
(62)
(3,049)
(10)
(549)
(1,230)
(194)
(5,094)
(6,268)
11,751
21,469
(176)
349
1,079
-
(9,473)
13,248
(1,497)
11,751
These financial statements were approved and authorised for issue by the Board on 7 July 2017 and are signed on its behalf.
George Roach
Chief Executive Officer
The notes on pages 24 to 60 are an integral part of these consolidated financial statements.
WWW.PREMIERAFRICANMINERALS.COM 21
CONSOLIDATED STATEMENT OF CASH FLOWS
As at 31 December 2016
Notes
2016
$ 000
2015
$ 000
Net cash outflow from operating activities
Investing activities
Property, plant and equipment expenditure
Exploration and evaluation expenditure
Purchase of available-for-sale financial assets
Cash acquired TCT
Proceeds from sale of investment in Joint Venture
Net cash used in investing activities
Financing activities
Proceeds from borrowings
Net proceeds from issue of loan notes
Net proceeds from issue of share capital
Finance charges
Repayment of finance lease
Net cash from financing activities
Net increase /(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate variation
Net cash and cash equivalents at end of year
30
16
13
22
24
25
(3,486)
(3,099)
(1,078)
(276)
(250)
25
-
(4,365)
(885)
-
-
1,000
(1,579)
(4,250)
-
2,350
3,178
(168)
(36)
5,324
259
(17)
2
244
800
4,142
2,218
-
-
7,160
(189)
174
(2)
(17)
The notes on pages 24 to 60 are an integral part of these consolidated financial statements.
22 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Share
capital
$ 000
Merger
reserve
$ 000
Foreign
exchange
reserve
$ 000
At 1 January 2015
14,792
(176)
Loss for the year
Foreign exchange
translation
Gain on available-for-
sale asset
Total comprehensive
income for the period
Transactions
with owners
-
-
-
-
Issue of equity shares
6,757
Share issue costs
Share based payment
(80)
-
-
-
-
-
-
-
-
At 1 January 2016
21,469
(176)
Loss for the year
Foreign exchange
translation
Total comprehensive
income for the period
Transactions
with owners
Acquisition of TCT
Issue of equity shares
Share issue costs
Share based payment
Loan note warrants
-
-
-
-
5,640
(253)
-
-
-
-
-
-
-
-
-
-
299
-
50
-
50
-
-
349
-
(65)
(65)
-
-
-
-
-
Share
based
payment
reserve
$ 000
1,118
-
-
-
-
-
-
(39)
1,079
-
-
-
-
-
-
205
-
At 31 December 2016
26,856
(176)
284
1,284
Loan
note
warrants
$000
Total
attributable
to owners
of parent
$ 000
Non-
controlling
interest
(“NCI”)
$ 000
Retained
earnings
$ 000
Total
equity
$ 000
-
-
-
-
-
-
-
-
-
-
-
-
-
562
562
(6,076)
9,957
373
10,330
(5,992)
(5,992)
(1,870)
(7,862)
-
50
1,500
1,500
-
-
50
1,500
(4,492)
(4,442)
(1,870)
(6,312)
-
-
6,757
(80)
1,095
1,056
-
-
-
6,757
(80)
1,056
(9,473)
13,248
(1,497)
11,751
(3,405)
(3,405)
(2,227)
(5,632)
-
(65)
-
(65)
(3,405)
(3,470)
(2,227)
(5,697)
-
-
-
-
-
-
1,008
5,640
(253)
205
562
-
-
-
-
1,008
5,640
(253)
205
562
(12,878)
15,932
(2,716)
13,216
The notes on pages 24 to 60 are an integral part of these consolidated financial statements.
WWW.PREMIERAFRICANMINERALS.COM 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Premier African Minerals Limited (‘Premier’ or ‘the Company’),
together with its subsidiaries (the ‘Group’), was incorporated in
the Territory of the British Virgin Islands under the BVI Business
Companies Act, 2004. The address of the registered office is
Craigmuir Chambers, PO Box 71, Road Town, Tortola,
British Virgin Islands.
The Group’s operations and principal activities are the mining and
development of mineral reserves on the African continent.
Premier’s shares were admitted to trading on the London Stock
Exchange’s AIM market on 10 December 2012.
2. Basis of preparation
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
in issue and as endorsed by the European Union. IFRS includes
interpretations issued by the IFRS interpretations Committee
(formerly IFRIC).
The consolidated financial statements have been prepared under
the historical cost convention with the exception of available-for-
sale financial assets and derivative financial instruments which
are included at fair value, and on a going concern basis. The
preparation of financial statements in conformity with EU adopted
IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the
process of applying the Group’s accounting policies.
The accounting policies set out below are consistent across the
Group and to all periods presented in these financial statements.
3. Significant accounting policies
Basis of consolidation
Subsidiaries are all entities (including special purpose entities)
over which the Group has control. The Group controls an entity
when it is exposed to, or has the rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. The existence and
effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group
controls another entity. The Group also assesses existence of
control where it does not have more than 50% of the voting
power but is able to govern the financial and operating policies
by virtue of de-facto control. This is evidenced with RHA Tungsten
(Private) Limited which the Group owns 49% of but is consolidated
into the Group (refer note 4).
De-facto control may arise in circumstances where the size of
the Group’s voting rights relative to the size and dispersion of
holdings of other shareholders give the Group the power to
govern the financial and operating policies.
Subsidiaries are consolidated, using the acquisition method, from
the date that control is gained and non-controlling interests are
apportioned on a proportional basis.
Inter-company transactions, balances and unrealised gains
on transactions between group companies are eliminated.
Unrealised losses are also eliminated. When necessary amounts
reported by subsidiaries have been adjusted to conform with the
Group’s accounting policies.
Business combinations and goodwill
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition
of a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and
the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at
the acquisition date. The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest’s
proportionate share of the recognised amounts of the acquiree’s
identifiable net assets.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the net
of the acquisition-date amounts of the identifiable assets acquired
and the liabilities assumed.
Goodwill is tested for impairment as at the reporting date.
Goodwill is allocated for the purpose of impairment testing to
cash generating units and then the recoverable amount of each
cash generating unit at the period end is assessed on the basis of
value in use, or if higher the fair value less costs of disposal. If the
recoverable amount exceeds the carrying values no impairment
loss is recognised.
Transactions with non-controlling interests that do not result in
loss of control are accounted for as equity transactions – that is,
as transactions with the owners in their capacity as owners. The
difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to
non-controlling interests are also recorded in equity.
Adoption of new and revised standards
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not been
applied in these financial statements, were in issue, but not
effective for the year ended 31 December 2016:
24 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
1 January 2018
Exploration and evaluation assets
Title
Subject
Effective date
All IFRS and
IFRS 12*
Annual Improvements to IFRSs
2014–2016 Cycle
1 January 2017 &
1 January 2018
Amendments
to IAS 12*:
Recognition of Deferred Tax
Assets for Unrealised Losses
1 January 2017
Disclosure Initiative
1 January 2017
Amendments
to IAS 7*
Amendments
to IFRS 2*
Classification and
Measurement of Share-based
Payment Transactions
IFRIC 22*
Foreign Currency Transactions
and Advance Consideration
1 January 2018
IFRS 9
Financial Instruments
1 January 2018
IFRS 15
Revenue from Contracts
with Customers (IFRS 15
clarifications not EU-endorsed)
1 January 2018
IFRS 16*
Leases
1 January 2019
*Not yet endorsed in the EU
The Directors anticipate that the adoption of these Standards
and Interpretations as appropriate in future periods will have no
material impact on the financial statements of the Group
Revenue
Revenue from the sale of wolframite concentrate is recognised in
profit or loss when the product is sold. A sale occurs when the
significant risks and rewards of ownership have been transferred
to the buyer. Ownership is transferred when the concentrate
is delivered to the buyer’s designated port and a certificate of
delivery is obtained.
Foreign currencies
The Group’s presentation currency and the functional currency of
each of the group’s entities is US Dollars.
Foreign currency transactions are recorded at the exchange rate
ruling on the date of transaction. Foreign exchange gains and
losses resulting from the settlement of such transactions, and
from the retranslation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies, are
recognised in profit or loss.
Taxation
The Group has no taxable profit during the year.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the consolidated financial statements and the corresponding
tax bases used in the tax computations, and is accounted for
using the balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in profit or loss,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
The Group applies the full cost method of accounting for
Exploration and Evaluation (‘E&E’) costs, having regard to the
requirements of IFRS 6 Exploration for and Evaluation of Mineral
Resources. Under the full cost method of accounting, costs of
exploring for and evaluating mineral resources are accumulated
by reference to appropriate cost centres being the appropriate
licence area and/or licence areas held under option agreements.
An option agreement grants the option holder the right to
explore and evaluate mineral resources, and to acquire the
licences at a later date at the discretion of the option holder.
Exploration and evaluation assets are tested for impairment as
described further below. Where appropriate, licences may be
grouped into a cost pool.
All costs of E&E are initially capitalised as E&E assets, such as
payments to acquire the legal right to explore, including option
payments, costs of technical services and studies, seismic
acquisition, exploratory drilling and testing. Intangible costs include
directly attributable overheads together with the cost of other
materials consumed during the exploration and evaluation phases.
Costs incurred prior to having obtained the legal rights to explore
an area are expensed directly to profit or loss as they are incurred.
E&E costs are not amortised prior to the conclusion of
appraisal activities.
E&E assets related to each exploration licence or pool of
licences are carried forward, until the existence (or otherwise)
of commercial reserves has been determined. Once the
technical feasibility and commercial viability of extracting a
mineral resource is demonstrable, the related E&E assets are
assessed for impairment on an individual licence or cost pool
basis, as appropriate, as set out below and any impairment
loss is recognised in profit or loss. The carrying value, after any
impairment loss, of the relevant E&E assets is then reclassified as
property, plant and equipment.
E&E assets are assessed for impairment when facts and
circumstances suggest that the carrying amount may exceed its
recoverable amount. Such indicators include, but are not limited
to, those situations outlined in paragraph 20 of IFRS 6 Exploration
for and Evaluation of Mineral Resources and include the point at
which a determination is made as to whether or not commercial
reserves exist.
The aggregate carrying value is compared against the expected
recoverable amount, generally by reference to the present
value of the future net cash flows expected to be derived from
production of commercial reserves.
WWW.PREMIERAFRICANMINERALS.COM 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
When a licence or pool of licences is abandoned or there is no
planned future work, the costs associated with the respective
licences are written off in full.
estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately.
Any impairment loss is recognised in profit or loss and
separately disclosed.
The Group considers each licence, or where appropriate, a pool
of licences, separately, for the purposes of determining whether
impairment of E&E assets has occurred.
Intangible asset – forestry concession
The forestry concession has been provisionally valued using a
discounted future cash flow earning approach. The recognition of
the intangible asset fulfils the conditions of being identifiable and
separable and is owned by the Mozambican company acquired
during the period.
Amortisation will be charged on a straight line basis of 10 years.
Inventory
Inventory is valued at the lower of cost and net realisable value.
The cost of inventories is based on the cost of consumables and
cost of production. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs
of completion and selling expenses.
Property, plant and equipment
Property, plant and equipment (‘PPE’) is stated at cost less
accumulated depreciation and any accumulated impairment
losses. Depreciation is provided on all PPE to write off the cost less
estimated residual value of each asset over its expected useful
economic life on a straight-line basis at the following annual rates:
• Land & buildings – 10 years
• Plant & equipment – 4/5 years
• Mine - depreciated over the life of the mine currently
assessed at eight years
• Assets under construction – not depreciated and will
be transferred to the appropriate category of PPE and
depreciated when fully ready to use.
At each reporting date, the Group reviews the carrying amounts of
its property, plant and equipment to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment
loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the
asset belongs. Recoverable amount is the higher of fair value
less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset (or cash-generating unit) for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised in profit or loss immediately.
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise cash and cash
equivalents, trade and other receivables, investments in shares,
borrowings, other financial liabilities and trade and other payables.
There is no material difference between the book value and fair
value of the Group’s financial instruments.
Financial assets
The Group classifies all its financial assets as loans and receivables
or as available-for-sale investments. Management determines the
classification of financial assets at initial recognition.
Loans and receivables are classified as current assets or
non-current assets based on their maturity date. Loans and
receivables comprise “Trade and other receivables” and “Cash and
cash equivalents” in the statement of financial position. Loans and
receivables are recognised initially at fair value and subsequently
carried at amortised cost less any impairment.
A provision for impairment of receivables is established when
there is objective evidence that the Group will not be able to
collect all amounts due. Indicators of impairment would include
financial difficulties of the debtor, likelihood of the debtor’s
insolvency, default in payment or a significant deterioration in
credit worthiness. Any impairment is recognised in profit or loss.
Subsequent recoveries of amounts previously written off are
credited in profit or loss.
Available-for-sale investments are non-derivative financial assets
that are either designated in this category or not classified in any
other category of financial asset. They are included in non-current
assets unless management intends to dispose of the investment
within 12 months of the reporting date. Available-for-sale
investments are initially recognised at fair value plus transaction
costs and subsequently carried at fair value. Changes in fair value
are recognised in equity. When available-for-sale investments
are sold or impaired, the accumulated fair value adjustments
recognised in equity are included in profit or loss as gains or
losses from available-for-sale investments.
Available-for-sale investments are assessed for indicators
of impairment at the end of each reporting period. They are
considered to be impaired when there is objective evidence that,
as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows
of the investment have been negatively affected.
26 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Financial liabilities
Borrowings and other financial liabilities are recognised initially at
fair value, net of transaction costs incurred and are subsequently
stated at amortised cost. Any difference between the amounts
originally received (net of transaction costs) and the redemption
value is recognised in profit or loss over the period to maturity
using the effective interest method.
Borrowings and other financial liabilities are classified as current
liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the
statement of financial position date.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Convertible loan notes and derivative financial instruments
The presentation and measurement of loan notes for accounting
purposes is governed by IAS 32 and IAS 39. These standards
require the loan notes to be separated into two components:
• A derivative liability, and
• A debt host liability.
This is because the loan notes are convertible into an unknown
number of shares, therefore failing the ‘fixed-for-fixed’ criterion
under IAS 32. This requires the ‘underlying option component’ of
the loan note to be valued first (as an embedded derivative), with
the residual of the face value being allocated to the debt host
liability (refer financial liabilities policy above).
Valuation method
The fair value of the derivative liability is determined in accordance
with IFRS 13 using an appropriate valuation methodology.
Valuation of the embedded derivative
The embedded derivative represents the additional value of
the conversion features on the note. The value depends on the
probability of the conversion triggers being triggered and the
expected payoff under that scenario.
The valuation of the embedded derivative requires the estimation
of the probability of default and the probability of the conversion
triggers being triggered at each date where the company is
contracted to redeem the notes. The value of the embedded
derivative is the discounted probability weighted payoff under the
different conversion trigger scenarios.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
An obligation to incur environmental restoration, rehabilitation
and decommissioning costs arises when disturbance is caused
by the development or on-going production of a mining property.
Such costs arising from the decommissioning of plant and other
site preparation work, discounted to their net present value,
are provided for and capitalised at the start of each project, as
soon as the obligation to incur such costs arises. These costs are
recognised in the income statement over the life of the operation,
through the depreciation of the asset and the unwinding of the
discount on the provision. Costs for restoration of subsequent site
damage which is created on an ongoing basis during production
are provided for at their net present values and recognised in the
income statement as extraction progresses.
Changes in the measurement of a liability relating to the
decommissioning of plant or other site preparation work (that
result from changes in the estimated timing or amount of the cash
flow, or a change in the discount rate) are added to or deducted
from the cost of the related asset in the current period. If a
decrease in the liability exceeds the carrying amount of the asset,
the excess is recognised immediately in the income statement.
If the asset value is increased and there is an indication that the
revised carrying value is not recoverable, an impairment test is
performed in accordance with the accounting policy above.
Equity
Equity comprises the following:
• Issued share capital - ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
• Merger reserve represents the difference between the
nominal value of shares issued by the Company to the
shareholders of ZimDiv Holdings Limited and the nominal
value of the ZimDiv shares taken in exchange.
• Foreign exchange reserve represents the differences arising
from translation of investments in overseas subsidiaries.
• Share-based payment reserve represents equity-settled
share-based payments until such share options are exercised
and the fair value of warrants issued.
• Retained earnings represent retained profits less
retained losses.
• Non-controlling interests represents the share of retained
profits less retained losses of the non-controlling interests.
Share based payment transactions
The Group operates an equity-settled share option plan and
issues warrants from time to time either with direct subscriptions
in equity or as finance related packages. The fair value of the
service received in exchange for the grant of options or issue
of warrants is recognised as an expense or recognised as
a deduction from equity or an addition to intangible assets
depending on the nature of the services received. The fair value of
warrants issued as part of a finance related package is charged as
finance costs in the profit or loss.
Share based payments are measured at fair value (excluding
the effect of non-market-based vesting conditions) at the date
of grant. The fair value determined at the grant date of equity-
settled share based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of shares
that will eventually vest and adjusted for the effect of non-market-
based vesting conditions.
WWW.PREMIERAFRICANMINERALS.COM 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair value is measured by use of the Black Scholes model. The
expected life used in the model has been adjusted, based on
management’s best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
The warrants issued as part of the loan note agreements are
also subject to certain reset provisions. The terms of the warrant
agreements allow for an adjustment to the exercise price or
the quantum of warrants issued depending on a number of
circumstances. The fair value of the warrants under any re-pricing
event is also valued by use of the Black Scholes model at their
current and new price. The difference in fair value is charged to
profit or loss as and when a re-pricing event occurs.
Operating leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to
profit or loss on a straight-line basis over the period of the lease.
Finance leases
Leases where the lessee acquires the economic benefits of the
use of the leased asset for the major part of its economic life
in return for entering into an obligation to pay for that right are
classified as finance leases. At commencement of the lease term,
finance leases are recognised as assets and liabilities in the
statement of financial position at amounts equal to the fair value
of the leased asset or, if lower the present value of the minimum
lease payments, determined at the inception of the lease. The
discount rate is the interest rate implicit in the lease. Initial direct
costs are added to the amount recognised as an asset.
Minimum lease payments are apportioned between the finance
charge and the reduction of the outstanding liability. The finance
charge shall be allocated to each period during the lease term
so as to produce a constant periodic rate of interest on the
remaining balance of the liability.
Operating segments
Segmental information is provided for the Group on the basis of
information reported internally to the chief operating decision-
maker for decision-making purposes. The Group considers that
the role of chief operating decision-maker is performed by the
Group’s board of directors.
4. Significant accounting judgements,
estimates and assumptions
In applying the Group’s accounting policies, the Directors are
required to make judgements, estimates and assumptions
about the carrying amounts of the assets and liabilities that are
not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results
may differ from these estimates.
The key estimates and assumptions that have a significant risk of
causing material adjustments to the carrying amounts of certain
assets and liabilities recognised in these consolidated financial
statements within the next financial year and key judgements are:
Recoverability of exploration and evaluation assets
Determining whether an exploration and evaluation asset is
impaired requires an assessment of whether there are any
indicators of impairment, including by reference to specific
impairment indicators prescribed in IFRS 6 Exploration for and
Evaluation of Mineral Resources. If there is any indication of
potential impairment, an impairment test is required based on
value in use of the asset. The carrying amount of exploration and
evaluation assets at 31 December 2016 was US$5,436,000 (2015:
US$3,192,000). No impairment charge was recognised in 2016
because the directors’ judgement is that there is no indication of
impairment (2015: US$844,000 impairment recognised in respect
of the Katete and Tinde licenses).
Recoverability of mine assets
Determining whether a mine asset is impaired requires an
assessment of whether there are any indicators of impairment,
including by reference to specific impairment indicators
prescribed in IAS36 Impairment of Assets. If there is any indication
of potential impairment, an impairment test is required based on
value in use of the asset. The value in use calculation requires the
entity to estimate the future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to
calculate present value.
During 2016 the operating losses at RHA were higher than
predicted due to operations in the open pit failing to deliver ore
at the anticipated grade, suspension of operations during April
and May 2016 and September to December 2016 to permit hoist
rehabilitation and reinstallation and upgrade of the underground
shaft. The operating losses were an indicator of potential
impairment and management completed an impairment review.
Key assumptions used in generating the discounted cash flow
analysis included: 11,500 mtu concentrate production per month;
8 year mine plan; APT price of US$220 per metric ton unit (‘mtu’);
26% discount rate; and a zero growth rate in operating cash flow
after the plant is fully operational, forecast to be for the full year
2018. Other key factors include attainment of forecast grade as
set out in our resource statement and plant operating parameters
being achieved. The XRT sorter installation is a significant element
in increasing confidence in RHA in that 70% of the anticipated run
of mine feed target of 40,000 ton per month is passed through
the sorter, which is able to recover approximately 95% of the
mineralisation in a mass pull of some 5%. This is expected to
significantly reduce operating costs per mtu of concentrate and
provide a much higher overall mining rate once grade, recoveries
and plant throughput meet expectations. There is no certainty
that these assumptions will be achieved.
Sensitivity analysis was conducted on the volume, grade, concentrate
production per month and APT price assumptions in the model.
A 10% reduction in the volumes mined from 40,000 tons per month
assumed in the model to approximately 36,000 tons per month would
not incur an impairment charge if all other assumptions were met.
A 10% decrease in the grade from those assumed in the model (5.5kg
per ton for underground and 2.2kg per ton for open pit) would not
incur an impairment charge if all other assumptions were met.
A decrease in concentrate production per month from the 11,500
mtu included in the model to 10,000 mtu would not incur an
28 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
impairment charge if all other assumptions were met.
A 10% reduction in the APT price from $220/mtu as included in
the model US$200/mtu would not incur an impairment charge if
all other assumptions were met. The model currently uses an APT
price of US$220/mtu and current prices are US$214-223/mtu.
The model assumes annual revenues of US$19.5m from 2018.
Revenue generation is dependent on a number of inter-linked
assumptions and a combination of changes in those assumptions
that reduced annual revenue to less than approximately US$14.0m
per annum from 2018 would result in an impairment charge.
The carrying amount of mine assets at 31 December 2016 was
US$9,412,000 (2015: US$9,918,000). The mine assets relate to the
RHA Tungsten Mine in Zimbabwe. The assessment indicates that
no impairment charge was needed for 2016.
Estimation of useful life for mine assets
Mine assets are depreciated/amortised on a straight-line basis
over the life of the mine concerned. Judgement is applied in
assessing the mine’s useful life and in the case of RHA Tungsten,
the Group’s only operating concern, is based on the initial
Preliminary Economic Assessment (‘PEA’) first published in August
2013 that initially modelled an 8 year life of mine.
Basis of consolidation
RHA Tungsten (Private) Limited
During 2013, Premier concluded a shareholders’ agreement
with the National Indigenisation and Economic Empowerment
Fund (‘NIEEF’) whereby NIEEF acquired 51% of the shares of RHA
Tungsten (Private) Limited (‘RHA’). The principal terms of the
agreement are as follows:
• ZimDiv Holdings Limited (‘ZimDiv’), a wholly owned subsidiary, is
appointed as the Manager of the project for an initial 5 year term.
• ZimDiv has marketing rights to the product.
• Each shareholder can appoint up to two directors each, with
a 5th director who is rotated between each shareholder. The
5th director will not have a vote.
• Although the local Zimbabwean company is responsible for
financing and repayment of such, Premier has secured the
funding to advance RHA to production.
• There has been no operational change since the agreements
were signed and Premier continues to fund RHA until it
becomes cash generative.
At the financial year-end, two directors of RHA were from the
Premier Group and two from NIEEF. A fifth board appointee
has not yet been made. There is no majority vote at board level
and Premier still retains operational and management control
through its shareholders’ agreement. Following the assessment,
the Directors concluded that Premier, through its wholly owned
subsidiary ZimDiv, retained control and should continue to
consolidate 100% of RHA and recognise non-controlling interests
in the consolidated financial statements.
TCT Industrias Florestais Limitada
During 2016, Premier concluded the public deeds for the
assignment of quotas to acquire a 26% interest in TCT IF from
Transport Commodity Trading Mozambique Limitada (“TCTM”) and
a further 26% interest from GAPI Sociedade de Investimentos S.A.
(“GAPI”), in aggregate amounting to 52% for a total consideration
of US$2.1 million. Despite not holding legal title to the quotas,
the directors have concluded that Premier has control of TCT
by virtue of irrevocable power of attorney to permit Premier to
participate and vote in all General Assembly meetings on behalf of
both parties.
At the financial year-end, one director of TCT was from the Premier
Group and two directors from TCT. There is no majority vote at board
level and Premier still retains operational and management control.
Premier has further been appointed as the manager of TCT.
Following the assessment, the Directors concluded that Premier
should consolidate 100% of TCT and recognise non-controlling
interests in the consolidated financial statements.
Valuations
• Valuation of inventory – judgement was applied in calculating
the initial carrying value of inventory and judgement continues
to be applied in assessing the net realisable value. See
accounting policy regarding inventories.
• Available-for-sale investment – Premier’s investment in Circum
Minerals Limited (‘Circum’) is classified as an available-for-
sale investment and as such is required to be measured at
fair value at the reporting date. As Circum is unlisted there
are no quoted market prices. In previous years the fair value
of the Circum shares was derived using the most recent
placing price. In the absence of placings during 2016, the
directors have sought to update the latest placing price
of US$2 per share in August 2015 with reference to share
price movements of comparable listed companies and have
concluded that there is no change in fair value as at 31
December 2016.
• Valuation of warrants, share options and ordinary shares
issued as consideration – judgement is applied in determining
appropriate assumptions to be used in calculating the fair
value of the warrants, shares and share options issued. Refer
accounting policy note and note 29.
• Valuation of the embedded derivative in the convertible loan
notes – judgement is applied in determining appropriate
assumptions to be used in calculating the fair value of
derivatives associated with the convertible loan notes. Refer
accounting policy note and note 31.
Identification and valuation of intangible assets acquired in a
business combination
Judgement has been applied in the identification and valuation
of the forestry, lodge and limestone assets acquired in the
acquisition of TCT – refer to note 13 for details of the assumptions
and estimates made. Fair values have been determined on a
provisional basis because management have not yet completed
the fair value exercise. Any subsequent change in identification
and valuation of these assets during the measurement period
will impact the fair value of intangible assets and also goodwill,
deferred tax and non-controlling interests arising in respect of the
business combination.
WWW.PREMIERAFRICANMINERALS.COM 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Going concern
Judgement is applied in assessing the likelihood and timing of future
cash flows associated with the Group’s activities. Judgement is also
applied in assessing the likelihood of receiving future funding.
5. Going concern
These consolidated financial statements are prepared on the going
concern basis. The going concern basis assumes that the Group will
continue in operation for the foreseeable future and will be able to
realise its assets and discharge its liabilities and commitments in
the normal course of business. The Group has incurred significant
operating losses and negative cash flows from operations as the
Group continued to move from a development and exploration
company into operations during the year under review.
financial statements on the going concern basis. Nevertheless due
to the uncertainties inherent in meeting its revenue predictions
and obtaining additional fund raising there can be no certainty
in these respects. The financial statements do not include
any adjustments that would result if the Group was unable to
continue as a going concern.
6. Segmental reporting
Segmental information is presented in respect of the information
reported to the Directors.
For the purposes of the current financial year, segmental
information has been changed to separately report the revenue
generating segments of RHA Tungsten (Private) Limited that
operates the RHA Tungsten Mine and TCT IF.
During the year, the Group raised US$5.528 million in net
funding through share and warrant subscriptions to fund further
investment in the RHA Tungsten Mine to improve production,
exploration at Zulu, to acquire a minor stake in the unlisted Casa
Mining and to fund working capital.
The RHA Tungsten Mine segment derives income primarily from
the production and sale of wolframite concentrate whilst the TCT
segment includes a forestry concession and an exploration asset.
All other segments are primarily focused on exploration and on
administrative and financing segments.
Segmental results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated
on a reasonable basis.
Immediately subsequent to the year-end, the Group raised
a further US$615,000 (£550,000) through the further issue
of Loan Notes. In January 2017, the Group raised a further
US$1.277 million (£1.020 million) through a direct subscription
for new shares, whilst in March 2017; the Group raised further
gross proceeds of US$2.512 million (£2.0 million) through an
underwritten offer through PrimaryBid.com. There remains an
active and very liquid market for the Group’s shares.
The Directors have prepared cash flow forecasts for the period
ended 31 December 2018, taking into account forecast operating
cash flow and capital expenditure requirements for its RHA
Tungsten mine, operating cash flows at TCT, available working
capital and forecast expenditure for the rest of the Group
including overheads and other development costs. The forecasts
include additional funding requirements which the directors
believe will be met.
In the event that RHA fails to meet revenue predictions from
the end of Q3, and any other relevant risk factor discussed in
regard to RHA arises, the Group will need to obtain additional
debt finance or equity to fund its operations and other project
development activities for the period to 31 December 2018. The
cash flow forecast is as much dependent on production targets
being met at RHA, as the price of APT remaining stable during the
period to 31 December 2018.
The Board believes it has a valuable asset in the Zulu Lithium
and Tantalum exploration project and is considering a number of
approaches that have been made that may result in a sale of all or
part of this asset and a resultant liquidity event.
The Board also believes that it has a valuable asset in the
Circum shares whose estimated fair value at 31 December 2016
remained at US$4 million.
After careful consideration of those matters set out above, the
Directors are of the opinion that the Group will be able to obtain
adequate resources to enable it to undertake its planned activities
for the period to 31 December 2018 from production and from
additional fund raising and have prepared the consolidated
30 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
By operating segment
2016
Result
Revenue (1)
Impairment of exploration and evaluation assets
Operating loss
Loss before taxation
Assets
Exploration and evaluation assets
Other intangible assets
Goodwill
Investments
Property, plant and equipment
Inventories
Trade and other receivables
Cash
Total assets
Liabilities
Other financial liabilities
Borrowings
Bank overdraft
Trade and other payables
Deferred tax
Loan notes
Total liabilities
Net assets
Other information
Depreciation
Exploration and evaluation additions
Other intangible asset additions
Property, plant and equipment additions
Property, plant and equipment additions - TCT
Unallocated
Corporate
$ 000
RHA Tungsten
Mine*
Zimbabwe
$ 000
Exploration
Zimbabwe
$000
TCT IF**
Mozambique
$000
-
-
(2,274)
(2,328)
-
-
4,250
-
-
216
352
4,818
2,127
566
-
1,037
-
1,874
5,604
(786)
-
-
-
-
-
135
-
(2,499)
(3,214)
-
-
-
9, 412
221
241
38
9,912
179
-
155
2,165
-
-
2,499
7,414
(1,566)
-
-
(1,070)
-
-
-
(149)
-
3,468
-
-
-
-
-
1
57
-
9
9
1,968
1,022
1,034
-
173
114
7
7
Total
$ 000
192
-
(4,912)
(5,632)
5,436
1,022
1,034
4,250
9,585
335
464
399
3,469
4,327
22,526
-
-
-
8
-
-
8
3,462
-
276
-
-
-
-
-
-
214
983
-
1,197
3,130
(18)
1,968
1,022
8
173
2,306
566
155
3,424
983
1,874
9,308
13,216
(1,584)
2,244
1,022
1,078
173
*
Represents 100% of the results and financial position of RHA Tungsten (Private) Limited (“RHA”) whereas the Group owns 49%. Non-controlling interests
are disclosed in note 33.
** Represents 100% of the results and financial position of TCT Industrias Florestais Limitada (“TCT IF”) whereas the Group controls 52%. Non-controlling
interests are disclosed in note 33.
(1) RHA Revenue is generated from sales to one customer, in line with RHA’s off-take agreement, whilst TCT Revenue is generated from the sale of forestry
products and the provision of hospitality services.
WWW.PREMIERAFRICANMINERALS.COM 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Segmental reporting continued
By operating segment
2015
Result
Revenue (1)
Impairment of exploration and evaluation assets
Operating loss
Loss before taxation
Assets
Exploration and evaluation assets
Investment
Property, plant and equipment
Inventories
Financial assets
Cash
Total assets
Liabilities
Bank overdraft
Segment liabilities
Other financial liabilities
Borrowings
Loan notes
Derivative financial liability
Total liabilities
Net assets
Other information
Depreciation
Exploration and evaluation additions
Property, plant and equipment additions
Unallocated
Corporate
$ 000
RHA Tungsten
Mine, Zimbabwe*
$ 000
Exploration
Zimbabwe
$000
-
-
(2,356)
(4,018)
-
4,000
-
-
328
44
4,372
-
584
505
1,230
194
2,513
1,859
-
-
-
103
-
(2,910)
(2,967)
-
-
9,918
183
353
-
10,454
62
3,164
190
303
-
-
3,719
6,735
(714)
885
5,937
Total
$ 000
103
(844)
(6,143)
(7,862)
3,192
4,000
9,918
183
681
45
-
(844)
(877)
(877)
3,192
-
-
-
-
1
3,193
18,019
-
36
-
-
-
-
36
3,157
-
-
-
62
3,784
190
808
1,230
194
6,268
11,751
(714)
885
5,937
*
Represents 100% of the results and financial position of RHA Tungsten (Private) Limited whereas the Group owns 49%. Non-controlling interests are
disclosed in note 33.
(1) Revenue is generated from sales to one customer, in line with RHA’s off-take agreement.
32 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
7. Cost of sales
Mining contractor
Staff costs
Consumables
Equipment hire and maintenance
Mining services
Plant services
Selling costs
E&E development costs
Inventory adjustment
2016
$ 000
378
239
87
100
8
9
37
11
(219)
650
2015
$ 000
868
319
203
130
60
46
51
-
(121)
1,556
Cost of sales comprises production costs in both RHA Tungsten (Pvt) Limited and TCT Industrias Florestais Limitada.
8. Administrative expenses
Staff costs
Consulting and advisory fees
Directors’ fees
Audit, accounting and legal fees
Marketing and public relations
Travel
Security costs
Vehicle operating costs
Insurance
Office and administration
Foreign exchange losses
Exploration costs expensed
Share based payment (notes 28 and 29)
2016
$ 000
2015
$ 000
462
726
59
550
99
273
58
26
61
290
61
-
204
2,869
655
804
145
433
107
265
40
31
40
264
16
24
308
3,132
WWW.PREMIERAFRICANMINERALS.COM 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Directors’ remuneration
Directors’ remuneration
300
2016
Executive Directors
George Roach
Pamela Hueston (*)
Non-Executive Directors
John (Ian) Stalker
Michael Foster
2015
Executive Directors
George Roach
Pamela Hueston
Non-Executive Directors
John (Ian) Stalker
Neil Herbert
Michael Foster (*)
Directors’
Fees
$000
Consultancy
Fees
$ 000
-
-
20
15
35
180
85
-
-
265
Directors’
Fees
$000
Consultancy
Fees
$ 000
-
5
75
21
26
127
180
180
-
-
-
360
487
Total
$ 000
180
85
20
15
300
Total
$ 000
180
185
75
21
26
487
(*) These directors were not employed during the full financial year.
The Directors’ fees disclosed in note 8 herein include US$23,750 (31 December 2015: US$15,000) being the fees paid to Directors of
RHA Tungsten (Pvt) Limited, who are not directors of the parent company.
The 2016 Directors fees noted above remain unpaid at the financial year-end.
No pension benefits are provided for any Directors.
34 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
10. Finance costs
Interest charged by suppliers
Interest on borrowings
Derivative financial liability transaction costs
Unwinding of discount on provisions
Interest on finance lease
11. Taxation
Taxation charge for the year
2016
$ 000
138
81
423
74
5
721
2015
$ 000
57
35
1,567
35
25
1,719
-
-
There is no taxation charge in the year ended 31 December 2016 (31 December 2015: Nil). As the Group is an international Business
Group, the British Virgin Islands imposes no corporate taxes or capital gains tax. However, the Group may be liable for taxes in the
jurisdictions of the underlying operations.
There are no recognised tax assets in respect of accumulated losses in West Africa or Zimbabwe. The Group has incurred tax losses;
however a deferred tax asset has not been recognised in the accounts due to the unpredictability of future profit streams.
Deferred tax
Deferred tax TCT
2016
$ 000
983
983
2015
$ 000
-
-
12. Earnings (Loss) per share
The calculation of earnings (loss) per share is based on the income (loss) after taxation divided by the weighted average number of
shares in issue during the year:
Net loss attributable to owners of the parent (US$000)
Weighted average number of Ordinary Shares in calculating basic earnings per share (‘000)
Basic income (loss) per share (US cents)
Diluted income (loss) per share (US cents)
2016
2015
(3,405)
1,798,808
(0.2c)
(0.2c)
(5,992)
655,650
(0.1c)
(0.1c)
As the Group incurred a loss for the year, there is no dilutive effect from share options and warrants in issue or the shares issued after
the reporting date.
WWW.PREMIERAFRICANMINERALS.COM 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Intangible assets excluding goodwill
Exploration and evaluations assets
Other intangible assets
Opening carrying value 2015
Expenditure on exploration and evaluation
Transferred to property, plant and equipment **
Impairment *
Opening carrying value 2016
Expenditure on exploration and evaluation
Acquisition - limestone license
Acquisition - forestry concession
Closing carrying value 2016
2016
$ 000
5,436
1,022
6,458
Exploration &
Evaluation assets
$000
Other intangible
assets
$000
6,806
885
(3,655)
(844)
3,192
276
1,968
-
5,436
-
-
-
-
-
-
1,022
1,022
2015
$ 000
3,192
-
3,192
Total
$ 000
6,806
855
(3,655)
(844)
3,192
276
1,968
1,021
6,458
Exploration costs not specifically related to a licence or project or on speculative properties are expensed directly to profit or loss in the
year incurred. During the year US$ Nil (31 December 2015: US$24,000) exploration costs were expensed.
Exploration and evaluation assets at 31 December 2016 relate to the Zulu Lithium and Tantalite Project located in Zimbabwe and the
provisional valuation of the limestone licence in Mozambique (2015: Zulu Lithium and Tantalite Project only).
During the year US$276,000 (2015: US$ Nil) was capitalised to the Zulu Lithium and Tantalite Project. In the prior year US$885,000
capitalised to Katete and Tinde was impaired. Exploration work conducted during the year indicated that both lithium and tantalum
recovery may be a viable option. The Group views this project as strategic and exploration work will be continued in the future, cash
flow permitting.
The group acquired a limestone licence as part of the TCT acquisition. The value of this asset has been estimated on a provisional basis
because management are assessing the geological potential of the license and determining an appropriate valuation method.
During the year within the TCT acquisition, a forestry concession was acquired, which has been provisionally valued at US$1,022,000
(2015: US$ Nil) and is further described in note 14 herein.
*
In the prior year capitalised costs relating to the Katete (US$717,000) and Tinde (US$127,000) assets located in Zimbabwe were impaired. The Tinde Project
holds 9 mineral block claims mainly prospective for fluorspar. The Company plans to retain the claims however there are no immediate or future plans for
development whilst the Group focuses its attention on other more prospective projects. The Katete Project holds 25 mineral block claims mainly prospective
for rare earth elements. The Group has maintained the four key blocks of claims in the expansive area. The Board of Directors may decide at some future date
to explore the properties however as at this time there is no formal exploration plan in place or funding allocated for future development.
** In the prior year, on the date of commercial viability and technical feasibility the carrying amount of exploration and evaluation assets related to the
RHA Tungsten Project was transferred to Property, Plant and Equipment.
36 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
14. Business combination and goodwill
Acquisition
In October 2016 the company completed the acquisition of a 52% interest in Mozambique based TCT Industrias Florestais Limitada. TCT
owns a substantial limestone deposit located on rail in the Sofala Province of Mozambique and is the holder of the exploration licence
together with significant forestry operations.
In accordance with our stated strategy, Premier’s business objective is to find, invest and acquire interests in low capex potentially near-
term production assets. The TCT limestone project provides this opportunity in a region that the company currently operates and TCT’s
limestone and timber interests complement the company’s current portfolio of natural resource interests.
In accordance with IFRS 3 Business Combinations, all acquired assets and liabilities were recognised at their fair values or provisional fair
values on the date of acquisition, with the residual excess of the fair value of the consideration over net assets being recognised as goodwill.
The following table summarises the consideration and fair and provisional fair values of assets acquired and liabilities assumed at the
date of acquisition:
Property, plant and equipment *
Intangible assets - limestone exploration license **
Intangible assets - forestry concession ***
Inventories *
Trade receivables and prepayments *
Cash and cash equivalents *
Trade and other payables *
Deferred tax liabilities ****
Fair value of net assets acquired
Non-controlling interest
Goodwill
Acquisition cost
$ 000
188
1,968
1,022
72
35
25
(225)
(983)
2,101
(1,008)
1,034
2,127
*
These assets and liabilities are carried at their fair value
**
The value of this asset has been estimated on a provisional basis because management are assessing the geological potential of the license and
determining an appropriate valuation method
***
The value of this asset has been estimated on a provisional basis because management have not yet completed the fair value exercise
****
The deferred tax liability has been calculated based on the applicable tax rate applied to the intangible assets valuation
The acquisition cost will be satisfied by either cash or shares, which will be determined by the seller’s request (see note 21.2).
WWW.PREMIERAFRICANMINERALS.COM 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. Business combination and goodwill continued
Net cash outflow arising on acquisition:
Cash consideration paid (less cash retention)
Acquisition related costs
Cash and cash equivalents within the TCT business on acquisition
Total net cash outflow on acquisition
$ 000
-
(25)
25
-
Other costs relating to the acquisition have not been included in the consideration cost. Directly attributable acquisition costs include
external legal and accounting costs incurred in compiling the acquisition legal contracts and the performance of due diligence activity
amounted to US$25,000. These costs were converted to equity as per note 25. TCT has a 31 December calendar year end. In the
period between acquisition and 31 December 2016, TCT contributed revenue of US$57,000 and net loss before taxation of US$13,000.
15. Investments
Opening carrying value
Fair value of shares on acquisition
Fair value adjustment
Closing carrying value
Reconciliation of movement in investments
Investment in Circum Minerals Limited *
Fair value adjustment **
Fair value adjustment ***
Investment in Casa Mining Limited ****
Closing carrying value
2016
$ 000
4,000
250
-
4,250
1,400
1,100
1,500
250
4,250
2015
$ 000
2,500
-
1,500
4,000
1,400
1,100
1,500
-
4,000
The shares are considered to be level 3 financial assets under the IFRS 13 categorisation of fair value measurements.
*
Represents 2 million shares in unlisted entity Circum Minerals Limited (‘Circum’).
**
As Circum is unlisted there are no quoted market prices. Fair value of the shares was therefore estimated using the price at which warrants
in Circum shares were exercised by a third party in February 2015 at US$1.25 per share.
***
Fair value of the shares was adjusted to the most recent placing price of US$2 per share during August 2015.
****
Represents a 4.5% interest in Casa Mining Limited acquired in October 2016. Due to the recent purchase date, no change in fair value has been recognised
The fair value of these available-for-sale investments at 31 December 2016 amounted to US$4,250,000 (31 December 2015:
US$4,000,000). The Directors consider that the carrying amount of investments approximates their fair value.
Subsequent to the yearend Circum Minerals Limited announced a 4.9 billion ton potash resource with seismic data suggesting further
potential total resources. Annual low cost, low risk solution mining, scalable production plan, mine gate cash costs projected to be amongst
the lowest in the world and the potential for the lowest capital intensity production indicate that potash recovery may be a viable option.
38 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
16. Property, plant and equipment
Cost
At 1 January 2015
Additions
Transfers
At 31 December 2015
Additions
Acquisition of TCT
At 31 December 2016
Depreciation
At 1 January 2015
Charge for the year
At 31 December 2015
Charge for the year
At 31 December 2016
Net Book Value
At 31 December 2016
At 31 December 2015
Mine
$000
284
3,001
3,615
6,900
842
-
7,742
-
431
431
1,161
1,592
6,150
6,469
Assets under
construction
$000
Plant &
equipment
$000
Land &
buildings
$000
688
-
(688)
-
-
-
-
-
-
-
-
-
-
-
165
2,165
728
3,058
228
169
3,455
119
242
361
343
704
2,751
2,697
30
771
-
801
8
4
813
8
41
49
80
129
685
752
Total
$000
1,167
5,937
3,655
10,759
1,078
173
12,010
127
714
841
1,584
2,425
9,585
9,918
WWW.PREMIERAFRICANMINERALS.COM 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Subsidiaries
Premier had investments in the following subsidiary undertakings as at 31 December 2016, which principally affected the losses and net
assets of the Group:
Name
ZimDiv Holdings Limited
RRCC Ltd
Regent Resources Capital Corporation SAU
G and B African Resources Benin SARL
Zulu Lithium Mauritius Holdings Limited
R.H.A. Tungsten Mauritius Limited
Kavira Minerals Holdings Limited
Tinde Fluorspar Holdings Limited
Lubimbi Minerals Holdings Limited
Gwaaii River Minerals Holdings Limited
Zulu Lithium (Private) Limited
RHA Tungsten (Private) Limited
Katete Mining (Private) Limited
Tinde Fluorspar (Private) Limited
LM Minerals (Private) Limited
BM Mining & Exploration (Private) Limited
Country of incorporation
and operation
Proportion of
voting interest %
Activity
Mauritius
BVI
Togo
Benin
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Mauritius
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
100
100
100
100
100
100
100
100
100
100
100
Holding Company
Holding Company
Exploration
Exploration
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Exploration
49*
Development
100
100
100
100
Exploration
Exploration
Exploration
Exploration
TCT Industrias Florestais Limitada
Mozambique
52**
Forestry and Exploration
*
Accounted as a controlled subsidiary, refer note 4 significant accounting judgements, estimates and assumptions – Basis of consolidation.
**
Accounted for as a subsidiary, refer note 3 Basis of consolidation and note 21.2 explaining power of attorney and right to appoint director.
18. Inventories
Wolframite concentrate and ore work-in-process
Mine consumables
Forestry raw material
Forestry work-in-progress
Forestry finished goods
2016
$ 000
119
102
20
74
20
335
2015
$ 000
120
63
-
-
-
183
40 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
19. Trade and other receivables
VAT input tax receivable
Other receivables
Prepayments
Current
Non-current
2016
$ 000
2015
$ 000
199
213
52
464
268
196
464
303
284
94
681
426
255
681
Other receivables at 31 December 2016 include US$196,000 (31 December 2015: US$255,000) receivable from AgriMinco Corp
(‘AgriMinco’). The AgriMinco receivable is due on settlement of the Agriminco loan (refer note 22). The Directors consider that the carrying
amount of other receivables and prepayments approximates their fair value.
In note 34.5 Events after the balance sheet date a settlement agreement has been reached with regard to this receivable and the loan payable.
20. Trade and other payables
Trade payables *
Accruals **
Payroll liabilities
2016
$ 000
937
1,443
235
2,615
2015
$ 000
1,270
1,618
161
3,049
All trade and other payables at 31 December 2016 are due within one year, non-interest bearing, and comprise amounts outstanding for mine
purchases and on-going costs, except as described further below. The Directors consider that the carrying amount of trade and other payables
approximates their fair value.
*
Trade payables include an amount owing to Senet (Pty) Ltd. (“Senet”), for EPCM services relating to the construction of the infrastructure supporting the RHA
Tungsten processing plant. The Company signed an Acknowledgment of Debt and Agreement to Pay on 16 April 2015 on behalf of RHA Tungsten (Private)
Limited (“RHA”) for all amounts due. All invoices are due within 30 days, after which interest will accrue at an annual interest rate of 25%, compounded daily,
with all amounts due by 31 August 2015. On 26 October 2015, the Company agreed an extension of the payment terms with monthly repayments beginning
1 October 2015 and ending 30 April 2016. Senet agreed a reduction in the interest rate charged from the period 1 October 2015 until final settlement at the
South African prime lending rate. As at 31 December 2015, the amount owing to Senet is US$160,586, including accrued interest.
The full debt to Senet plus interest was settled during the current year.
** In the prior year, amounts owing to JR Goddard Contracting (Pvt) Ltd (“JRG”), the open pit mining contractor for RHA, were co-guaranteed by the
Company and attracted interest at a rate of 12% per annum, compounded monthly. The Company entered into an agreement with JRG in September
2015 that JRG would receive no less than US$50,000 per month in settlement of outstanding liabilities. At 31 December 2015, the amount owing to
JRG was US$533,032 including accrued interest.
On 10 March 2016, the contact with JRG was terminated and the Company entered into a Memorandum of Agreement to settle all outstanding amounts
under the contract which was entered into on 9 March 2015. The parties agreed to terminate the open pit contract from 10 March 2016. Amounts owing
to JRG as at 11 March 2016 amount to US$851,312 including a US$247,000 termination benefit and interest but excluding VAT of 15% with first payment
deferred to 1 May 2016. Interest is charged at 12% per annum, compounded monthly. Repayments are agreed at US$54,626 per month for a period of
20 months. At the year-end US$655,512 (31 December 2015: US$533,032) was outstanding in terms of this Memorandum of Agreement.
WWW.PREMIERAFRICANMINERALS.COM 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. Other financial liabilities
21.1 Finance lease
During 2015, the Company entered into a finance lease with Board Market Trading 258 (Pty) Ltd for the purchase of two generators with
net book value of US$148,779 (31 December 2015: US$181,336) to be used at the RHA Tungsten Mine. The finance lease is for a term of
48 months with interest charged at 19.5% per annum with monthly repayment of US$5,960 beginning from 1 August 2016. Depreciation
charged on the assets financed by leases during the year was US$19,457 (31 December 2015: US$19,457).
The agreement is classified as a finance lease as the rental period amounts to the estimated useful economic life of the assets concerned
and the Group has the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount.
Future lease payments are due as follows:
2016
Not later than one year
Between one year and five years
Later than five years
2015
Not later than one year
Between one year and five years
Later than five years
Minimum lease
payments
$000
Interest
$000
Present value
$000
50
130
-
180
11
29
-
40
61
159
-
219
Minimum lease
payments
$000
Interest
$000
Present value
$000
10
180
-
190
25
40
-
65
35
220
-
255
42 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
21.2 Acquisition of TCT Industrias Florestais Limitada
Purchase price of 52% interest (see note 14)
Current
Non-current
2016
$ 000
2,127
1,320
807
2,127
2015
$ 000
-
-
-
-
On 31 October 2016 the Company announced it had concluded the public deeds for the assignment of quotas to acquire a 26% interest
in TCT IF from Transport Commodity Trading Mozambique Limitada (“TCTM”) and a further 26% interest from GAPI Sociedade de
Investimentos S.A. (“GAPI”), in aggregate amounting to 52% for a total consideration of US$2.1 million.
Pursuant to the agreement with TCTM as announced on 27 April 2016, and announced as completed in October 2016, the Group
obtained control over TCTM’s 26% interest in TCT IF (the “TCT Agreement”) for a consideration of US$1.1 million, payable in four tranches
in either new Premier Ordinary Shares or cash at the election of TCTM.
• The amended payment tranches are as follows: the first tranche now amounts to US$220,000 and is payable within five working days
to TCTM following pending approval by the Mozambican authorities;
• The second tranche amounts to US$440,000 and is payable within 60 days following the first tranche;
• The third tranche amounts to US$220,000 and is payable within 90 days following the first tranche;
• The final tranche amounts to US$220,000 and is payable within 120 days following the first tranche.
Pursuant to the agreement with GAPI, the Group obtained GAPI’s 26% interest (the “GAPI Agreement”) for a consideration of US$1.0
million, payable in five tranches in either new Premier Ordinary Shares or cash at the election of GAPI.
• The first tranche amounts to US$220,000 and is payable within five working days to GAPI following pending approval by the
Mozambican authorities;
• The second tranche amounts to US$195,000 and is payable within 13 months following the first tranche;
• The third tranche amounts to US$195,000 and is payable within 21 months following the first tranche;
• The fourth tranche amounting to US$195,000 is payable within 29 months following the first tranche;
• The final tranche amounting to US$195,000 is payable within 36 months following the first tranche.
The Original Public Deed Certificates (“Certificates”) for both the TCTM Agreement and the GAPI Agreement shall remain in the care of
Premier’s elected solicitors, until written confirmation is received from either GAPI or TCTM confirming that the final instalment of the
purchase price has been received, thereafter, the Certificates will be released to Premier whereby final procedural registration of the
assignment of quotas as well as the publication of the amendment of the articles of association of the TCT IF shall be enacted.
Furthermore, the Parties have acknowledged and agreed that during the period, Premier shall have an irrevocable power of attorney
to permit Premier to participate and vote in all General Assembly meetings on behalf of both parties. Premier shall also be allowed
to appoint a representative to the TCT IF’s Board of Directors. The company has elected George Roach to TCT IF’s Board of Directors.
Premier has further been appointed as the manager of TCT IF.
WWW.PREMIERAFRICANMINERALS.COM 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. Borrowings
As at 1 January
Loans received (1) (2) (3)
Loans repaid through conversion to equity (1)
Loans capitalised as equity (4)
Accrued interest
As at 31 December
Current
Non-current
2016
$ 000
808
-
(247)
-
5
566
566
-
566
2015
$ 000
767
800
-
(794)
35
808
549
259
808
Borrowings comprise loans from a related party and a non-related party. Loans from a related party are further disclosed in Note 32,
Related Party Transactions.
(1) On 9 April 2015, the CEO and Chairman George Roach provided a US$250,000 bridge loan facility and agreed the repayment and
conversion terms of the loan outstanding at 31 December 2014. Together the loans with any accrued interest will become repayable
by the Company as soon as all other third party indebtedness has been repaid in full or with the prior consent of all third party
lenders. The loans are unsecured and interest will accrue at the rate of LIBOR plus 3%. George Roach may elect to convert all or part
of the loans into new ordinary shares in the Company at a conversion price that is the lesser of the volume-weighted average price of
the ordinary shares for the five trading days immediately prior to the date of conversion or the closing price of the ordinary shares on
the date of the loans.
On 29 January 2016, the Company issued 47,479,109 shares at an issue price of 0.364p per share for a total value of £172,824
(US$247,000) to George Roach for conversion of this loan refer note 25 (27).
(2) On 27 April 2015, AgriMinco Corp (“AgriMinco”) provided a US$250,000 loan facility. The loan with any accrued interest will become
repayable by the Company in 24 months or earlier with the prior consent of all third party lenders. The loans are unsecured and
interest will accrue at the rate of 5% per annum. AgriMinco may elect to convert all or part of the loan into new units when the loan
facility becomes payable. One unit comprises one new ordinary share and one new warrant. The conversion price will be the lesser
of the fifteen day volume-weighted average price of the ordinary shares for the two business days immediately prior to the maturity
date and the date of a repayment notice, if any. Each new warrant would entitle the unit holder to subscribe for one new ordinary
share at an exercise price equivalent to a 20% premium to the conversion price for a period of two years.
(3) On 15 September 2015, the CEO and Chairman George Roach provided a US$300,000 loan direct to RHA Tungsten (Pty) Limited
(‘RHA’). The loan with any accrued interest will become repayable by RHA as soon as all other third party indebtedness has been
repaid in full or with the prior consent of all third party lenders. The loans are unsecured and interest will accrue at the rate of
LIBOR plus 3%.
(4) On 4 December 2015 George Roach converted US$650,000 of his loans to Premier into new ordinary shares and on 11 December
2015 Mr Roach converted a further US$144,119 of his loans into new ordinary shares (refer note 25).
44 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
23. Provisions
Rehabilitation provision As at 1 January
Unwinding of discount
As at 31 December
2016
$ 000
735
74
809
2015
$ 000
700
35
735
A provision is recognised for site restoration and decommissioning of current mining activities based on current environmental
and regulatory requirements. The net present value of the provision at a discount rate of 10% over an 8 year life of mine amounts
to US$809,000 (31 December 2015: US$735,000) and has been capitalised as an addition to mine costs and depreciated in PPE as
explained in the accounting policy note.
24. Loan notes and derivative financial liabilities
Convertible loan notes
As at 1 January
Loans notes issued
Loan notes converted (note 25)
Premium on notes converted
Foreign exchange
Deferred finance costs
As at 31 December
Derivative financial instruments
Derivative financial liability on issue of loan notes
Loan notes issued
Loan notes converted (note 25)
Premium on notes converted
Foreign exchange
As at 31 December
2016
$ 000
1,230
2,920
(1,523)
-
(39)
(714)
1,874
2016
$ 000
194
-
(199)
-
(5)
-
2015
$ 000
-
4,005
(2,495)
35
10
(324)
1,230
2015
$ 000
1,151
-
(968)
5
6
194
WWW.PREMIERAFRICANMINERALS.COM 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Loan notes and derivative financial liabilities continued
Loan notes
On 23 August 2016, the Company entered into an agreement with Darwin whereby Darwin could subscribe for a total of £3.5 million in
convertible loan notes in which the Company would receive 90% of the par value of the notes. The loan notes were to be issued in three
tranches on fulfilment of certain milestones. The notes will redeem 12 months from the subscription date unless repaid or converted.
As at the reporting date, only tranches 1 and 2 were drawn down and during the year US$220,000 of these were converted into equity
(refer note 25). The gross amount of the loans issued can be converted between 105% and 100% of principal into ordinary shares at
90% of the traded share price when certain conditions are met. This conversion option represents a derivative liability of the company
that is separately presented on the statement of financial position and fair valued through profit or loss. The directors have concluded
that the value of the conversion option is not material and accordingly there is no value presented above.
During the year under review Darwin converted, in total, US$1,523,000 (31 December 2015: US$2,495,000) into equity.
The loan notes are secured by a put option held by the loan note holder that would require George Roach to purchase the shares held
in Circum Minerals Limited at US$2 per share, representing the carrying value of the investment in note 15. This represents a guarantee
given by the director and the put option has been valued by a third party at approximately US$1.6m.
For details of the fair value hierarchy, valuation techniques, and significant observable inputs related to determining the fair value
derivative financial instruments, which are classified in level 2 hierarchy, refer to note 31.
Warrant liabilities
The Darwin instruments were issued with warrants equal to 30% of the aggregate par value of the loan notes issued on each of the relevant
issue dates with the right to purchase one newly issued ordinary share for each warrant. The warrants have an exercise price of 125% of
the initial market price and can be issued within three years and 7 days of the issue date. During the year ended 31 December 2016 Darwin
were issued with 77,777,778 warrants in respect of issue date one and 44 million in respect of warrants issued on issue date 2.
For details of the fair value hierarchy, valuation techniques, and significant observable inputs related to determining the fair value
derivative financial instruments, which are classified in level 2 hierarchy, refer to notes 29 and 31.
25. Share capital
Authorised share capital
4 billion (31 December 2015: 2 billion) ordinary shares of no par value.
46 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Issued share capital
As at 1 January 2015
Shares issued on exercise of share options (1)
Shares issued on conversion of loan notes (2)
Shares issued for employee share award (3)
Shares issued on conversion of loan notes (4)
Shares issued on conversion of loan notes (5)
Shares issued on exercising of warrants (6)
Shares issued on exercising of warrants (7)
Shares issued under subscription agreement (8)
Shares issued on exercise of share options (9)
Shares issued on exercise of share options (10)
Shares issued under subscription agreement (11)
Shares issued under indigenisation agreement (12)
Shares issued on conversion of loan notes (13)
Shares issued on conversion of loan notes (14)
Shares issued under indigenisation agreement (15)
Shares issued on conversion of loan (16)
Shares issued under subscription agreement (17)
Shares issued on conversion of loan (18)
Shares issued on conversion of loan notes (19)
As at 31 December 2015
Shares issued on conversion of loan notes (20)
Shares issued on conversion of loan notes (21)
Shares issued under subscription agreement (22)
Shares issued under subscription agreement (23)
Shares issued under subscription agreement (24)
Shares issued under subscription agreement (25)
Shares issued under subscription agreement (26)
Shares issued on conversion of loan (27)
Shares issued on conversion of loan notes (28)
Shares issued on conversion of loan notes (29)
Shares issued on conversion of loan notes (30)
Shares issued on conversion of loan notes (31)
Shares issued on conversion of loan notes (32)
Shares issued on conversion of loan notes (33)
Shares issued under subscription agreement (34)
Shares issued under subscription agreement (35)
Shares issued under subscription agreement (36)
Shares issued on conversion of loan notes (37)
Shares issued on conversion for fees (38)
Shares issued on conversion for fees (39)
Shares issued on conversion for fees (40)
As at 31 December 2016
Number of Shares
‘000
503,117
$ 000
16,283
12,206
20,086
4,000
18,519
44,444
9,000
35,000
22,500
5,537
7,500
21,000
6,596
81,572
118,536
7,017
79,945
30,000
21,088
57,586
-
229
50
384
914
172
688
700
-
135
434
100
768
854
50
650
171
144
314
1,105,249
23,040
40,000
30,303
4,615
7,692
3,000
50,000
54,000
47,479
77,954
53,976
25,703
42,818
59,898
36,860
100,000
146,667
93,750
79,397
25,763
19,214
7,273
189
144
17
29
11
190
205
247
267
204
97
240
462
285
696
1,584
366
221
88
75
24
2,111,611
28,680
WWW.PREMIERAFRICANMINERALS.COM 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Share capital continued
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
On 10 February 2015, the Company issued 12,206,271 shares on exercise of share options under the Group’s share option plan. The share options
had an exercise price of US$ Nil. The fair value of the share options has been credited to retained earnings.
On 4 March 2015, the Company issued 20,085,699 shares to Darwin Strategic Limited on conversion of £150,000 of loan notes (refer note 23) at an
issue price of 0.7468p per share.
On 13 March 2015, the Company issued 4,000,000 shares at nil cost to the Company’s Chief Operating Officer in conjunction with an employee
share award. The average price of the Company’s shares on issue date was 0.85p per share valuing the award at £34,000 (US$50,170).
On 30 April 2015, the Company issued 18,518,518 shares to Darwin Strategic Limited on conversion of £250,000 of loan notes (refer note 23) at an
issue price of 1.35p per share.
On 5 June 2015, the Company issued 44,444,444 shares to Darwin Strategic Limited on conversion of £600,000 of loan notes (refer note 23) at an
issue price of 1.35p per share.
On 5 June 2015, the Company issued 9,000,000 shares to YAGM on the exercising of warrants at an exercise price of 1.25p per share.
On 24 June 2015, the Company issued 35,000,000 shares to Darwin Strategic Limited on the exercising of warrants at an exercise price of 1.25p per share.
On 9 July 2015, the Company issued 22,500,000 shares under a subscription agreement at a price of 2p per share.
On 10 July 2015, the Company issued 5,536,864 shares on exercise of share options under the Group’s share option plan. The share options had an
exercise price of US$ Nil. The fair value of the share options has been credited to retained earnings.
(10)
On 29 July 2015, the Company issued 7,500,000 shares on exercise of share options under the Group’s share option plan. The share options had an
exercise price of 1.15p per share.
(11) On 22 September 2015, the Company issued 21,000,000 shares under a subscription agreement at a price of 1.35p per share.
(12)
(13)
(14)
(15)
(16)
On 2 October 2015, the Company issued 6,596,300 shares to the National Indigenisation Economic and Empowerment Fund (‘NIEEF’) in settlement of the
first tranche payment of US$100,000 on the RHA Tungsten Project reaching commercial production. The shares were issued at a price of 1p per share.
On 23 October 2015, the Company issued 81,572,190 shares to Darwin Strategic Limited on conversion of £500,000 of loan notes (refer note 23) at
an issue price of 0.613p per share.
On 30 November 2015, the Company issued 118,535,383 shares to Darwin Strategic Limited on conversion of £567,500 of loan notes (refer note
23) at an issue price of 0.47876p per share.
On 2 December 2015, the Company issued 7,017,447 shares to NIEEF in settlement of the second payment of US$50,000 in respect of the RHA
Tungsten Project. The shares were issued at a price of 0.47p per share.
On 4 December 2015, the Company issued 79,945,167 shares at an issue price of 0.538p per share for a total value of £430,105 (US$650,000) to
George Roach for conversion of a portion of his loans (refer note 21).
(17) On 10 December 2015, the Company issued 30,000,000 shares under a subscription agreement at a price of 0.375p per share.
(18)
(19)
(20)
(21)
On 11 December 2015, the Company issued 21,087,680 shares at an issue price of 0.4505p per share for a total value of £95,000 (US$144,119) to
George Roach for conversion of a portion of his loans (refer note 21).
On 16 December 2015, the Company issued 57,586,206 shares to Darwin Strategic Limited on conversion of £208,750 of loan notes (refer note 23)
at an issue price of 0.3625p per share.
On 13 January 2016, the Company issued 40,000,000 shares to Darwin Strategic Limited on conversion of £132,000 of loan notes (refer note 23) at
an issue price of 0.33p per share.
On 13 January 2016, the Company issued 30,303,030 shares to Darwin Strategic Limited on conversion of £100,000 of loan notes (refer note 23) at
an issue price of 0.33p per share.
(22) On 29 January 2016, the Company issued 4,615,386 shares under a subscription agreement at a price of 0.26p per share.
(23) On 29 January 2016, the Company issued 7,692,308 shares under a subscription agreement at a price of 0.26p per share.
(24) On 29 January 2016, the Company issued 3,000,000 shares under a subscription agreement at a price of 0.26p per share.
(25) On 29 January 2016, the Company issued 50,000,000 shares under a subscription agreement at a price of 0.26p per share.
(26) On 29 January 2016, the Company issued 54,000,000 shares under a subscription agreement at a price of 0.26p per share.
48 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
(27)
(28)
(29)
(30)
(31)
(32)
(33)
On 29 January 2016, the Company issued 47,479,109 shares at an issue price of 0.364p per share for a total value of £172,824 (US$247,000) to
George Roach for conversion of a portion of his loans (refer note 21).
On 12 February, the Company issued 77,954,475 shares to Darwin Strategic Limited on conversion of £210,000 of loan notes (refer note 23) at an
issue price of 0.269388p per share.
On 17 February, the Company issued 53,975,695 shares to Darwin Strategic Limited on conversion of £157,500 of loan notes (refer note 23) at an
issue price of 0.291798p per share.
On 17 February, the Company issued 25,702,712 shares to Darwin Strategic Limited on conversion of £75,000 of loan notes (refer note 23) at an
issue price of 0.291798p per share.
On 19 February, the Company issued 42,817,855 shares to Darwin Strategic Limited on conversion of £175,000 of loan notes (refer note 23) at an
issue price of 0.408708p per share.
On 22 February, the Company issued 59,897,676 shares to Darwin Strategic Limited on conversion of £325,000 of loan notes (refer note 23) at an
issue price of 0.542592p per share.
On 24 February, the Company issued 36,860,109 shares to Darwin Strategic Limited on conversion of £200,000 of loan notes (refer note 23) at an
issue price of 0.542592p per share.
(34) On 29 February 2016, the Company issued 100,000,000 shares under a subscription agreement at a price of 0.5p per share.
(35) On 26 April 2016, the Company issued 146,666,667 shares under a subscription agreement at a price of 0.75p per share.
(36) On 18 October 2016, the Company issued 93,750,000 shares under a subscription agreement at a price of 0.32p per share.
(37)
(38)
(39)
(40)
On 23 November, the Company issued 79,396,838 shares to Darwin Strategic Limited on conversion of £250,000 of loan notes (refer note 23) at an
issue price of 0.314874p per share.
On 21 December 2016, the Company issued 25,763,185 shares at an issue price of 0.275p per share for a total value of £70,849 (US$87,684) for
conversion of Directors fees.
On 21 December 2016, the Company issued 19,213,580 shares at an issue price of 0.3162p per share for a total value of £60,753 (US$75,190) to
Afmine for conversion of fees.
On 22 December 2016, the Company issued 7,272,727 shares at an issue price of 0.275p per share for a total value of £20,000 (US$24,513) to
Sam Levy for conversion of fees.
Reconciliation to balance as stated in the consolidated statement of financial position
As at 1 January
Issued share capital
Share issue costs
As at 31 December
2016
$ 000
21,469
5,640
(253)
26,856
2015
$ 000
14,792
6,757
(80)
21,469
WWW.PREMIERAFRICANMINERALS.COM 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. Merger reserve
Merger reserve *
2016
$ 000
(176)
* Relates to the agreement to issue shares to acquire 100% of the shares in ZimDiv Holdings entered into on 4 December 2012.
27. Foreign exchange reserve
As at 1 January 2015
Change in reserves during the year
As at 31 December 2016
28. Share based payment reserve and warrant options
Share options and warrants outstanding beginning of year
Share options granted
Share options exercised
Warrant options granted
Warrant options exercised
Share options and warrants outstanding end of year
No share options or warrants expired during the year.
2016
$ 000
349
(65)
284
2016
$’000s
1,079
78
-
127
-
1,284
2015
$ 000
(176)
2015
$ 000
299
50
349
2015
$’000s
1,118
258
(662)
797
(432)
1,079
50 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
29. Share based payments
Under IFRS 2 “Share Based Payments”, the Group determines the fair value of shares, options and warrants issued to Directors and
Employees as remuneration and Consultants and Advisors as consideration for their services, and recognises an expense in profit or
loss, a deduction from equity or an addition to intangible assets depending on the nature of the services received. A corresponding
increase is recognised in equity in the share based payment reserve.
Details of share issues are provided in note 25 and details of share options and warrants are set out below.
Share Options
The Company adopted a new incentive share option plan (the ‘Plan’) during 2012. The essential elements of the Plan provide that the
aggregate number of common shares of the Company’s capital stock issuable pursuant to options granted under the Plan may not
exceed 15% of the issued and outstanding Ordinary Shares at the time of any grant of options. Options granted under the Plan will have
a maximum term of 10 years. All options granted to Directors and management are subject to vesting provisions of one to two years.
The Company has granted the following share options during the years to 31 December 2016:
Issued to
Date Granted
Vesting Term
Employees and consultants
10/02/2011
1 year
Directors
Directors
04/12/2012
See 1 below
04/12/2012
See 2 below
Employees and associates
04/12/2012
See 3 below
Directors
Directors
Management
Management
Directors
Directors
Management
Management
Totals
29/07/2014
See 4 below
29/07/2014
See 5 below
29/07/2014
See 4 below
29/07/2014
See 5 below
13/03/2015
See 4 below
13/03/2015
See 5 below
13/03/2015
See 4 below
13/03/2015
See 5 below
Number of
Options Granted
‘000
2,250
20,386
20,386
5,536
6,000
6,000
6,500
6,500
2,000
2,000
3,250
3,250
84,058
Exercise Price
Expiry Date
1.135c
09/02/2014
Nil
2p
Nil
1.15p
1.50p
1.15p
1.50p
0.9p
1.17p
0.9p
1.17p
03/12/2022
03/12/2022
03/12/2022
28/07/2024
28/07/2024
28/07/2024
28/07/2024
12/03/2025
12/03/2025
12/03/2025
12/03/2025
Estimated
Fair Value
0.87c
1.11p
1.85p
1.85p
1.15p
1.15p
1.15p
1.15p
0.67p
0.64p
0.67p
0.64p
1.
2.
3.
4.
5.
These share options vest on the two-year anniversary of the grant date. The options are exercisable at any time after vesting during the grantee’s
period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.
These share options vest in equal instalments annually on the anniversary of the grant date over a two year period. The options are exercisable at any
time after vesting during the grantee’s period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after
which the options will lapse.
These share options vested on the grant date. The options are exercisable at any time after vesting during the grantee’s period as an eligible option
holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.
These share options vest on the one-year anniversary of the grant date. The options are exercisable at any time after vesting during the grantee’s
period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.
These share options vest on the two-year anniversary of the grant date. The options are exercisable at any time after vesting during the grantee’s
period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.
WWW.PREMIERAFRICANMINERALS.COM 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. Share based payments continued
No options were granted during the year ended 31 December 2016 (31 December 2015: 10,500,000), however due to the two year
vesting period a US$78,000 charge (31 December 2015: US$258,000) was recognised in respect of the above option schemes.
The fair value of the options granted during the year ended 31 December 2016 was US$ Nil (31 December 2015: US$102,000). The
assessed fair value of options granted to directors and management was determined using the Black-Scholes Model that takes into
account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share,
the expected dividend yield and the risk-free rate interest rate for the term of the option.
The Group has the following share options outstanding:
Grant Date
04/12/2012
04/12/2012
29/07/2014
29/07/2014
13/03/2015
13/03/2015
Expiry Date
03/12/2022
03/12/2022
28/07/2024
28/07/2024
12/03/2025
12/03/2025
Exercise Price
Number of
options outstanding
‘000
Number of options
vested and exercisable
‘000
Nil
2p
1.15p
1.50p
0.9p
1.17p
2,013
12,458
3,000
10,500
5,250
5,250
38,471
2,013
12,458
3,000
10,500
5,250
-
33,221
A summary of the status of the Group’s share options as of 31 December 2016 and changes during the year are as follows:
Options outstanding, beginning of year
Granted
Exercised
Options outstanding, end of year
2016
2015
Shares
‘000
38,471
-
-
38,471
Weighted Average
Exercise Price
1.15p
-
-
1.15p
Shares
‘000
53,215
10,500
(25,244)
38,471
Weighted Average
Exercise Price
1.05p
0.41p
0.34p
1.15p
No share options were cancelled and expired during the year.
52 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Warrants
During the year the Company granted 144,777,778 warrants (31 December 2015: 83,684,382) over Ordinary Shares.
Issued to
Advisors
Funders
Funders
Funders
Subscribers
Funders
Funders
Funders
Advisors
Funders
Totals
Date Granted
04/12/2012
28/01/2014
02/02/2015
28/04/2015
09/07/2015
15/09/2015
09/10/2015
23/08/2016
20/09/2016
19/12/2016
Number of
Warrants Issued
‘000
Exercise Price
7,017
9,000
40,000
16,674
1,500
3,559
21,951
77,778
23,000
44,000
200,479
4p
1.25p
1.25p
2.96875p
3p
1.4047p
1.025p
0.8437p
0.8p
0.375p
Expiry Date
03/12/2017
27/01/2017
09/02/2018
04/05/2018
08/07/2018
22/09/2017
16/10/2018
29/08/2019
19/09/2019
26/12/2019
* Warrants issued to funders have been accounted for as warrant liabilities in the consolidated statement of financial position.
The fair value of the warrants granted to advisors during the year ended 31 December 2016 was US$127,000 (31 December 2015:
US$715,000). The fair value of the warrants issued to funders for the year ended 31 December 2016 was US$562,000 and is shown
separately on the statement of financial position (31 December 2015: Nil).
The following table lists the inputs into the valuation model for the year to 31 December 2016:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Share price at grant date
Exercise price
Re-set provisions
23 August 2016 issue
20 September 2016 issue
19 December 2016 issue
-
203.0
0.56
0.475p
0.8437p
-
206.0
1.05
0.475p
0.375p
-
214.0
1.40
0.250p
0.800p
The warrants attached to the Darwin loan notes issued in 2016 contain certain re-set provisions as to exercise price and/or number of
warrants issued depending on certain conditions. Any share subscriptions priced at a price lesser than the warrant exercise price will
trigger a re-set of the exercise price to the lower share subscription price. This occurred on 19 December 2016. Therefore, the warrants
exercise price was re-set for all remaining Darwin warrants issued under the loan notes to a new exercise price of 0.375p being the
lowest subscription price on 16 December 2016.
A summary of the status of the Company’s share warrants as of 31 December 2016 and changes during the year are as follows:
Warrants outstanding, beginning of year
Granted
Expired
Exercised
Warrants outstanding, end of year
2016
‘000
55,701
144,778
-
-
200,479
2015
‘000
16,017
83,684
-
(44,000)
55,701
WWW.PREMIERAFRICANMINERALS.COM 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. Notes to the statement of cash flows
Loss before tax
Adjustments for:
Depreciation and amortization
Impairment of exploration and evaluation assets
Share of Joint Venture results
Foreign exchange
Finance costs
Fees settled in shares
Share based payments
Operating cash flows before movements in working capital
Increase in inventories
Decrease/(increase) in receivables
(Decrease) / increase in payables
Net cash (outflow) from operating activities
2016
$ 000
(5,632)
1,584
-
-
-
721
187
204
(2,936)
(152)
217
(615)
(3,486)
2015
$ 000
(7,862)
714
844
-
16
1,719
-
308
(4,261)
(183)
(409)
1,754
(3,099)
Cash and cash equivalents comprise cash at bank, bank overdrafts and short term bank deposits with an original maturity of three
months or less. The carrying value of these assets is approximately equal to their fair value.
54 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
31. Financial instruments
The Group uses financial instruments comprising cash, receivables, available-for-sale assets (investments in Circum and Casa shares), bank
overdraft, payables, borrowings, loan notes, and other financial liabilities. Cash balances are held in Sterling, US Dollars and the Euro.
The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk. However, rates are
monitored closely by management.
Financial assets and liabilities
2016
Trade and other receivables
Available-for-sale assets
Cash and cash equivalents
Bank overdraft
Trade payables
Accrued liabilities
Payroll liabilities
Borrowings
Loan notes
Other financial liabilities
2015
Trade and other receivables
Investment
Cash and cash equivalents
Bank overdraft
Trade payables
Accrued liabilities
Payroll liabilities
Borrowings
Loan notes
Derivative financial liability
Other financial liabilities
Available-for-sale
financial assets
$ 000
Loans and
receivables
$ 000
Financial liabilities
at amortised cost
$ 000
Financial liabilities
at fair value through
profit or loss
$ 000
-
4,250
-
4,250
-
-
-
-
-
-
-
-
464
-
399
863
-
-
-
-
-
-
-
-
-
-
-
-
155
937
1,443
235
566
1,874
2,307
7,517
-
-
-
-
-
-
-
-
-
-
-
-
Available-for-sale
financial assets
$ 000
Loans and
receivables
$ 000
Financial liabilities
at amortised cost
$ 000
Financial liabilities
at fair value through
profit or loss
$ 000
-
4,000
-
4,000
-
-
-
-
-
-
-
-
-
284
-
45
329
-
-
-
-
-
-
-
-
-
-
-
-
-
62
1,270
1,618
161
808
1,230
-
190
5,339
-
-
-
-
-
-
-
-
-
-
194
-
194
Total
$ 000
464
4,250
399
5,113
155
937
1,443
235
566
1,874
2,307
7,517
Total
$ 000
284
4,000
45
4,329
62
1,270
1,618
161
808
1,230
194
190
5,533
WWW.PREMIERAFRICANMINERALS.COM 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. Financial instruments continued
Valuation techniques and assumptions applied for the purposes of measuring fair value
The fair value of cash and receivables and liabilities approximates the carrying values disclosed in the financial statements.
The fair value of available-for-sale financial assets is estimated by using other readily available information. As the Circum and Casa
shares are in privately held exploration companies, the fair values were estimated using observable placing prices where available or
movements in the share price of comparable listed companies.
The fair value of the derivative instruments is calculated using the value of the convertible loan note in the absence of the conversion
features and the likelihood of default. This bond component of the convertible loan note has a value equal to the sum of the discounted
interest payments and capital redemptions on the note. These cash flows are typically discounted using a risk free discount rate.
The embedded derivative represents the additional value of the conversion features on the note. The value depends on the probability
of the conversion triggers being triggered and the expected payoff under that scenario. The valuation of the embedded derivative
requires the estimation of the probability of default and the probability of the conversion triggers being triggered at each date where the
company is contracted to redeem the notes. The value of the embedded derivative is the discounted probability weighted payoff under
the different conversion trigger scenarios.
Capital management
The Group manages its capital resources to ensure that entities in the Group will be able to continue as a going concern, while
maximising shareholder return.
The capital structure of the Group consists of equity attributable to shareholders, comprising issued share capital and reserves. The
availability of new capital will depend on many factors including a positive mineral exploration environment, positive stock market
conditions, the Group’s track record, and the experience of management. There are no externally imposed capital requirements. The
Directors are confident that adequate cash resources exist or will be made available to finance operations but controls over expenditure
are carefully managed.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are
as follows:
Sterling
Euro (€)
Canadian dollar (CDN$)
South African Rand (ZAR)
Mozambique metical (MZM)
Liabilities
Assets
2016
$ 000
189
163
-
32
234
618
2015
$ 000
275
168
21
51
-
515
2016
$ 000
350
1
-
-
3
354
2015
$ 000
21
1
-
-
22
The presentation currency of the Group is US dollars.
The Group is exposed primarily to movements in USD, the currency in which the Group receives most of its funding, against other
currencies in which the Group incurs liabilities and expenditure.
56 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Sensitivity analysis
Financial instruments affected by foreign currency risk include cash and cash equivalents, other receivables, trade and other payables
and convertible loan notes. The following analysis, required by IFRS 7 Financial Instruments: Disclosures, is intended to illustrate the
sensitivity of the Group’s financial instruments (at year end) to changes in market variables, being exchange rates.
The following assumptions were made in calculating the sensitivity analysis:
• All income statement sensitivities also impact equity
• Translation of foreign subsidiaries and operations into the Group’s presentation currency have been excluded from this sensitivity as
they have no monetary effect on the results
Income Statement / Equity
Exchange rates
+10% US$ Sterling (GBP)
-10% US$ Sterling (GBP)
+10% US$ Euro (€)
-10% US$ Euro (€)
+10% US$ South African Rand (ZAR)
-10% US$ South African Rand (ZAR)
+10% US$ Canadian dollar (CDN$)
-10% US$ Canadian dollar (CDN$)
+10% Mozambique metical (MZM)
-10% Mozambique metical (MZM)
2016
$’000s
2015
$’000s
23
(23)
17
(17)
0.2
(0.2)
0
(0)
23
(23)
38
(38)
18
(18)
0.3
(0.3)
2.1
(2.1)
-
-
The above sensitivities are calculated with reference to a single moment in time and will change due to a number of factors including:
• Fluctuating other receivable and trade payable balances
• Fluctuating cash balances
• Changes in currency mix
Credit risk
Financial instruments that potentially subject the Group to a significant concentration of credit risk consist primarily of trade debtors and cash
and cash equivalents. The Group limits its exposure to credit loss by placing its cash with major financial institutions. As at 31 December 2016,
the Group held US$399, 000 in cash and cash equivalents (2015: US$45,000) and had a US$155,000 bank overdraft (2015: US$62,000).
Liquidity risk
Some of the Group’s financial liabilities are classified as current and some are non-current. The Group intends to settle these liabilities
from revenue generated from sales production, sale of assets and working capital.
Market risk
The Group’s investments in available-for-sale financial assets comprise small shareholdings in unlisted companies. The shares are not
readily tradable and any monetisation of the shares is dependent on finding a willing buyer.
WWW.PREMIERAFRICANMINERALS.COM 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. Related party transactions
Borrowings
1.
On 9 April 2015, the CEO and Chairman George Roach provided a US$250,000 bridge loan facility and agreed the repayment and
conversion terms of the loan outstanding at 31 December 2014. Together the loans with any accrued interest are repayable by the
Company as soon as all other third party indebtedness has been repaid in full or with the prior consent of all third party lenders. The
loans are unsecured and interest will accrue at the rate of LIBOR plus 3%. George Roach may elect to convert all or part of the loans
into new ordinary shares in the Company at a conversion price that is the lesser of the volume-weighted average price of the ordinary
shares for the five trading days immediately prior to the date of conversion or the closing price of the ordinary shares on the date of
the loans.
On 29 January 2016, the Company issued 47,479,109 shares at an issue price of 0.364p per share for a total value of £172,824
(US$247,000) to George Roach for conversion of this loan refer note 25 (27).
2.
On 15 September 2015, through the Company the CEO and Chairman George Roach provided a US$300,000 loan direct to RHA
Tungsten (Pty) Limited (‘RHA’). The loan with any accrued interest will become repayable by RHA as soon as all other third party
indebtedness has been repaid in full or with the prior consent of all third party lenders. The loans are unsecured and interest will
accrue at the rate of LIBOR plus 3%.
The balance of the loans to Premier at 31 December 2016 was US$566,000 (refer note 22).
Subsequent to the reporting date, Mr. Roach converted the balance of his loans plus accrued interest to Premier into equity (refer note
34). During the 2016 financial year, Mr. Roach earned a total of US$7,000 (31 December US$27,000) in interest on his loans.
Supplies and Services
During 2016 administration fees of US$36,500 (2015: US$35,500) were paid by Premier to a trading business in which Mr G Roach,
Director is the beneficial owner. Administration fees comprised allocated rental costs and administrative support services. At the
financial year-end nothing remains outstanding of this amount (31 December 2015: US$8,500).
During 2016 capital goods, consumables and small equipment for RHA totalling US$38,380 (31 December 2015: US$36,624) was
purchased on behalf of RHA by a business in which Mr G Roach, Director is a beneficial owner. At the financial year end US$20,016
remains in creditors.
Put option
Premier entered into a put option agreement in respect of its holding of shares in Circum Minerals Limited (Circum) with George Roach.
Under the Circum Agreement, in the event that:
• Premier fails to meet its obligations under the JRG Memorandum;
• JRG exercises its rights under the surety against George Roach and;
• Premier fails to find an alternative buyer for its Circum shares,
Then the company may require George Roach to purchase such number of Circum shares at a price of US$2 per Circum Share (being
the fair market value of the Circum shares in the audited results for the year ended 31 December 2015) equal to the total amount then
owed to JRG.
58 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
Remuneration of key management personnel
The remuneration of the Directors and other key management personnel of the Group are set out below for each of the categories
specified in IAS 24 Related Party Disclosures.
Consulting fees
Staff costs
Directors’ fees
Share based payments
33. Non-controlling interests
At 1 January
Non-controlling interest at acquisition
Non-controlling interest in share of losses for the year - RHA
Non-controlling interest in share of losses for two months ended December 2016 - TCT
At 31 December
2016
$ 000
265
80
35
-
380
2016
$ 000
(1,497)
1,008
(2,209)
(18)
(2, 716)
2015
$ 000
360
206
127
50
743
2015
$ 000
373
-
(1,870)
-
(1,497)
The share of losses in the year represents the losses attributable to non-controlling interests in RHA Tungsten for the year and for the
two months ended 31 December 2016 for TCT IF.
34. Events after the reporting date
34.1 Conversion of loan note and issue of equity
• On 3 January 2017 the company received a notice of exercise by Darwin Capital Limited (“Darwin”) to convert 19 loan notes with an
aggregate value of £475,000 into equity (“Conversion Notice”). As a result, the Company issued 204,121,975 new ordinary shares to
Darwin at an issue price of 0.232704p per Share.
• On 19 January 2017 the Company issued 20 Loan Notes of the available 48 Loan notes as part of the Issue Date Two and Three of
the Loan Note agreement with Darwin, full terms of which were set out in the announcement dated 22 August 2016. Darwin was
issued with 42,857,143 warrants at 0.35 pence per warrant as part of the subscription.
• On 31 January 2017 the Company converted 16 loan notes with an aggregate par value of £400,000 into equity in relation to the
convertible loan notes announced on 23 August 2016. The Conversion Notice was received in aggregate for £400,000 of the loan
notes. The Company therefore issued 196,430,851 new ordinary shares to Darwin at an issue price of 0.203634p per Share.
• On 1 February 2017 the Company announced that it had received a notice of exercise by Darwin to convert a further 16 loan notes
with an aggregate par value of £400,000 into equity in relation to the convertible loan notes announced on 22 August 2016. The
Conversion Notice was received in aggregate for £400,000 of the loan notes. The Company therefore issued 196,430,851 new
ordinary shares to Darwin at an issue price of 0.203634p per Share.
WWW.PREMIERAFRICANMINERALS.COM 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34. Events after the reporting date continued
34.1 Conversion of loan note and issue of equity continued
• On 3 February 2017 the Company announced that it had received a notice of exercise by Darwin to convert a further 24 loan notes
with an aggregate par value of £600,000 into equity in relation to the convertible loan notes announced on 22 August 2016. The
Conversion Notice was received in aggregate for £600,000 of the loan notes. The Company therefore issued 294,646,277 new
ordinary shares to Darwin at an issue price of 0.203634p per Share.
• On 7 February 2017 the company, announced that it had received a notice of exercise by Darwin to convert the remaining 27 loan
notes with an aggregate par value of £675,000.00 into equity in relation to the convertible loan notes announced on 22 August 2016.
The Conversion Notice was received in aggregate for £675,000.00 of the loan notes the Company therefore issued 317,844,496 new
ordinary shares to Darwin at an issue price of 0.212368p per Share.
34.2 Settlement of Loan Facility with AgriMinco
As announced on 27 April 2015 the Company had entered into a two year US$250,000 loan facility with AgriMinco Corp. (“Loan
Facility”). On 19 January 2017, Premier and AgriMinco agreed to settle the Loan Facility, subject to TSX Exchange approval, whereby
the outstanding amount owed by Premier under the Loan Facility (amounting to US$260,922.39 including accrued interest) would
be offset by the historic amounts owed by AgriMinco (amounting to US$195,578.88). The net balance owed by Premier amounted to
US$65,343.51 and Premier agreed to repay AgriMinco in four equal instalments of US$12,335.88 from 15 March 2017, with an initial
amount of US$16,000 on execution of the settlement agreement.
34.3 Placings
On 30 January 2017 the company issued new ordinary shares to raise £1,020,000 before costs (the “Placing”) through a subscription.
On 24 March 2017 the company announced that it had raised gross proceeds of £2,011,396.27 via an offer on PrimaryBid.com through
the issue of 402,279,254 ordinary shares at an issue price 0.5p each
34.4 Loan Agreement with George Roach and Loan Agreement Conversion Rights
On 15 September 2015, George Roach provided a US$300,000 loan direct to Premier for the use at RHA Tungsten (Pty) Limited (“RHA”).
The loan is unsecured and accrues interest at a rate of 3% per annum. As at 28 March 2017, the loan and accrued interest totalled US$
309,457. On 28 March 2017 the Company announced that it had amended the terms of the existing loan agreement (“Loan”) with George
Roach through the grant of conversion rights. The Board granted conversion rights in respect of the Loan, which can now be converted
into new ordinary shares at a price of 0.5p per new ordinary share.
34.5 Conversion of Directors fees into equity
On 31 March 2017 the company announced that certain of its Directors (the “Relevant Directors”) have accepted new ordinary shares in
the Company (“Ordinary Shares”) as payment for their services (“Director Fees”) from year ending December 2016 (the “Relevant Period”).
The Company approved the conversion of £30,000, representing Director Fees owed to the Relevant Directors covering the Relevant
Period into 6,000,000 new Ordinary Shares which were issued at 0.5p per Ordinary Share.
35. Ultimate controlling party
There is no single ultimate controlling party.
60 PREMIER AFRICAN MINERALS | ANNUAL REPORT & ACCOUNTS | YEAR ENDED 31 DECEMBER 2016
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Company Information
Directors
George Roach
CEO and Executive Chairman
Ian Stalker
Non-Executive Director
Michael Foster
Non-Executive Director
Russel Swarts
Finance Officer and Non-Executive Director
Registered Office
Craigmuir Chambers
PO Box 71
Road Town
Tortola VG 1110
British Virgin Islands
Nominated Adviser
Beaumont Cornish Limited
2nd Floor, Bowman House
29 Wilson Street
London EC2M 2SJ
United Kingdom
Stockbroker
Shore Capital Stockbrokers Limited
Bond Street House
14 Clifford Street
London W1S 4JU
United Kingdom
Stockbroker
Beaufort Securities Ltd
63 St Mary Axe
London
EC3A 8AA
Independent Auditors
RSM UK Audit LLP
The Pinnacle
170 Midsummer Boulevard
Milton Keynes
Buckinghamshire MK9 1BP
United Kingdom
Reporting Accountant
RSM UK Audit LLP
The Pinnacle
170 Midsummer Boulevard
Milton Keynes
Buckinghamshire MK9 1BP
United Kingdom
Legal Advisors
Winckworth Sherwood LLP
Minerva House
5 Montague Close
London, SE1 9BB
United Kingdom
Legal counsel to the Company in the BVI
Harneys
Craigmuir Chambers
PO Box 71
Road Town
Tortola VG 1110
British Virgin Islands
Principal Bankers
Barclays Bank Plc
1 Churchill Place
London E14 5HP
United Kingdom
Registrars
Computershare Investor Services (BVI) Limited
Woodbourne Hall
PO Box 3162
Road Town
British Virgin Islands
Depository
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
United Kingdom
Public Relations
Yellow Jersey PR Limited
1st floor, 30 Stamford Street
London SE1 9LQ
United Kingdom
Craigmuir Chambers
P.O. Box 71
Road Town
Tortola VG 1110
British Virgin Islands
www.premierafricanminerals.com
AIM : PREM