LONDON (ShareCast) - (Sharecast News) - Premier African Minerals has agreed amended terms with KME Holdings for the proposed acquisition of KME's assets, it announced on Thursday.
The AIM-traded firm said it has also agreed terms for the acquisition of 50% of the equity in Zimbabwe-based near-term gold producer, Honey Badger Resources.

On the KME transaction, Premier African Minerals said it had agreed to acquire 50% of KME Plant Hire for consideration of $1.4m, to be settled in new ordinary shares.

The proposed acquisition and spin-out of the combination of KME's assets and Premier's Zimbabwe minerals projects, as announced in November last year, would no longer proceed as a result.

KME Plant Hire's assets included six exploration drill rigs, surface and underground dump trucks, light vehicles and support equipment, with a book value of around $4m, and was the same asset portfolio as detailed in the November KME transaction, the Premier board confirmed.

On the HBR transaction, Premier said it had entered into a binding conditional heads of terms to acquire 50% of the equity of HBR, which owns a Zimbabwe-based near-term gold producer with "substantial" exploration and development upside potential, for consideration of $3.7m to be settled in shares.

HBR had two projects available for immediate development and within close proximity of each other, the Premier board explained.

The first project was a JORC-compliant gold resource of 535,000 ounces, with copper credits at a grade of 2.10 grams per tonne of gold, and 0.33% copper, with a wide ore body, consistent in strike and depth, which would be suitable for open pit and underground mining methods.

Premier said the second project was an option over a nearby mining lease, which had historically supplied high-grade ore from existing underground shafts to the previous owners' nearby gold facility.

The previous owners had declared an internal, non-compliant resource target greater than 500,000 ounces at a grade of 4.1 grams per tonne.

Premier's board said it believed that there was the potential to target a total resource covering the two projects in excess of two million ounces of gold, through additional exploration work and drilling utilising the KME Plant Hire asset base.

It was targeting gold production within nine months of closing the transaction.

Premier said it now planned to begin additional drilling at the Zulu Lithium Project after the transactions, working towards completion of the feasibility study, and added that on closing of the two transactions, it would appoint new members to its executive and operational management team.

"Premier must protect against the possibility of a future adverse event disabling our company as has been the case with RHA Tungsten, and in fact against any further delays, for whatever reason," said chief executive officer George Roach.

"At the same time, management has decided to expand operations by taking advantage of some significant opportunities in Zimbabwe, bring Zulu back to development and generally reduce the impact and dependence on RHA Tungsten.

"Whilst the issue of the shares to acquire 50% of each of KME Plant Hire and HBR will require Premier shareholder approval and will add significantly to total shares in issue, the overall value created is expected to outweigh the dilutive effect."

Roach said existing Premier shareholders were likely to retain a "substantially greater interest" in the projects going forward than may have been the case with the previously-announced November KME transaction.

"It should be noted that whilst the price at which new shares will be issued is market dependent, downside movement is capped at our recent low, whilst the upside is uncapped.

"The potential of the acquisitions, retention of full ownership of Zulu, approaching settlement of RHA and advances in Circum Minerals should be carefully considered."

HBR already had a JORC-compliant Resource greater than 500,000 ounces, Roach highlighted, and a further internal non-compliant resource target in a semi-developed and previously-mined deposit at the option.

"We believe there is potential to develop a significant gold mine in this region of Zimbabwe that already hosts major gold production," he explained, adding that Premier's initial exploration target was two million ounces.

"The proposed terms of the New KME Transaction has reduced the overall acquisition cost to Premier while retaining the key benefit of being able to carry out the further drilling required for the definitive feasibility study for Zulu at significantly reduced cost, and while still allowing Premier to hold 100% of Zulu.

"We plan to commence drilling at Zulu as soon as possible, and we further look forward to expanding the scale of Zulu pending final approval of the recent Zimbabwean Gazette of Zulu's application for an exclusive prospecting order for approximately 20,200 hectares in the surrounding area.

"I am delighted at the opportunity of working together closely with the KME executive management team who will be joining us following completion and I look forward to working with them in restoring investor confidence and shareholder value."

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