CHINA’S Canmax Technologies Co, which advanced US$35 million offtake funds to mining and natural resource development company Premier African Minerals has reportedly terminated the agreement, a development that would have a negative impact on the Zulu Lithium project.
This week, Premier Africa Minerals issued a force majeure notice to Canmax Technologies citing unforeseen operational hurdles encountered at its Zulu Lithium plant in Fort Rixon, Matabeleland South.
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance is beyond the control of the parties.
This was after the mining firm said the massive plant, which recently commenced production of spodumene concentrate is not able to produce sufficient spodumene to meet the conditions of its off-take agreement with Canmax.
This meant that it could not supply spodumene concentrate to Canmax as per the set timelines stipulated by the offtake agreement. In an update, Premier Africa Minerals confirmed that on Wednesday it received what it termed “a purported notice of termination of the Agreement from Canmax” following its force majeure notice to Canmax.
“Shareholders are reminded that the immediate effect of the Force Majeure (“FM”) is the suspension of Premier’s obligations under the Agreement and Canmax’s right to terminate.
“At this stage, whilst Canmax may dispute the grounds for declaration of the FM and are yet to provide formal communication to that effect, as such, Premier has been advised that the Notice of Termination, which requires inter alia the repayment by Premier of the Prepayment Amount of approximately US$34.6m (plus interest as applicable) within 90 days of today’s date, cannot be served at this time,” reads part of the update to shareholders.
Chief executive officer, Mr George Roach, has said the move by Canmax to terminate the agreement is of no force or effect.
“The company has been advised that this notice of termination has no force or effect. Premier has repeatedly extended an invitation to Canmax to attempt to resolve this situation as set out in the agreement, and does so again, now, and publicly”.
In an off-take and Prepayment Agreement update on Monday, Mr Roach said challenges faced are “beyond the control of Premier”, and could not have been foreseen by the investor.
“The issues at Zulu have been acknowledged by the plant contractor to be beyond the control of Premier, and could not have been foreseen by Premier.
“While I am deeply upset and committed to finding an equitable way forward with Canmax, that solution should strive to be fair and reasonable and in the best interests of all Premier shareholders as whole,” said Mr Roach.
“While my focus is squarely on resolution of the plant issues during this period of FM (Force Majeure) and production at Zulu, I will diligently strive to resolve the issues with Canmax and will actively pursue alternative strategies.”
Defects on some plant components were noticed, and Stark Resources has confirmed the defect and undertook to remedy it. Under the proposed remedy, it is anticipated that up to 50 percent of the required product may become available from late July 2023.
With the termination of the agreement, Premier is now free to engage with unnamed European-based entities who have shown interest.
“Premier has received approaches from competing hydroxide producers based out of China and from European-based entities intending to complete their own hydroxide and other downstream lithium operations.
“To date, Premier has resisted serious review of any of these approaches in the light of the Agreement with Canmax. However, in the context of the current stage of discussions with Canmax in respect of the Amended Agreement, Premier will now engage with these other interested parties,” it said in an earlier update this week.
The firm stressed to shareholders that based on current spodumene prices and costs estimates there has been no change to the board’s expectation that Zulu, when fully operational will operate profitably adding that “Zulu is and remains debt free and currently unencumbered by the Agreement.”
During a recent tour of the mine, officials said the firm has so far invested about US$80 million in the mining project and the plant is undergoing a trial run. Management has said their target is to generate up to US$30 million in revenue a month once they start operating at full throttle.
The Zulu lithium claim is generally regarded as potentially the largest undeveloped lithium-bearing pegmatite in the country.
The mine has 14 mclaims covering a surface area of 3,5km2 that are prospective for lithium and tantalum mineralisation. Lithium has increasingly become a key mineral worldwide with its demand surging for use in the ceramic industry, mobile phone manufacturing, and automotive battery industry. – The Chronicle
