Premier African Minerals Limited’s future is hanging by a thread after auditors raised the red flag over its ability to continue as a going concern.
Chief executive and outgoing chairman George Roach last week said the miner ― having pinned its hopes on a debt/equity financing strategy after recording an operating loss from operations of $8,2 million in 2017 ― was hoping to get additional financing for its Zimbabwe’s RHA Tungsten Mine, failure of which would jeopardise operations.
RHA has been placed under care and maintenance pending positive resolution on the negotiations.
The group has appointed an independent engineering practice to review the RHA operating model, with Roach saying resumption of operations depended on a positive outcome of the funding negotiations and raising additional equity funds.
“The group’s ability to continue as a going concern is dependent on additional funding being secured. In the event that the negotiations are not successful, the alternatives proposed by the independent engineering practice are considered impractical and the group is unable to obtain additional debt or equity finance for RHA and the group working capital, a material uncertainty exists which may cast significant doubt on the ability of the group to continue as a going concern and therefore be unable to realise its assets and settle its liabilities in the normal course of business,” Roach said in the group’s annual report released last week.
For and on behalf of KPMG Inc, auditor Per Nick van Niekerk said the RHA financing negotiations ― which started in January ― have continued but their failure was likely going to see Premier being placed under judicial management.
“In the event of non-resolution by the end of Q3 2018, Premier would consider acting on a number of options, amongst others calling up its security and placing the business into judicial management.
“While anticipating a positive resolution to negotiations, any further RHA capital expenditure will be deferred indefinitely or until an alternative solution is found,” van Niekerk said.
The group’s cash flow forecast is dependent on raising additional debt or equity finance to fund group working capital requirements, according to KPMG.
As at December 31, 2017, Premier’s current liabilities exceeded current assets by $1,843 million.
The group raised $11,624 million in net funding through share and warrant subscriptions for further investment in the RHA, exploration at its Zulu mine, to increase the minor stakes in the unlisted Circum and Casa and for working capital.