MINING and natural resource development company, Premier African Minerals, has issued a force majeure notice to China’s Canmax Technologies citing unforeseen operational hurdles encountered at its Zulu Lithium plant in Fort Rixon.
Force majeure, a French term, which 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.
The 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.
Last year, Canmax provided US$35 million in pre-funding to enable the construction and commissioning of a large-scale pilot plant. Its chairman Mr Pei Zenzhue had his first visit to the site last year.
Chief executive officer, Mr George Roach, has expressed frustration emanating from unforeseen challenges faced by the main plant contractor responsible for the design and construction of the plant, Stark Resources.
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.
“Whilst 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.
“Whilst 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 has confirmed the defect and has undertaken 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.
According to the update, Premier had been advised that the milling and sizing component of the plant required certain limited modifications to allow for full optimisation to design capacity throughput.
In particular, Premier has been informed by Stark that the plant is unable to provide material correctly sized and in sufficient tonnage from the comminution section to the floatation plant to meet the concentrate production contemplated under the Agreement.
“Inter alia, the bearing seal assemblies in the EDS mill are unable to prevent dust and liquid ingress into the bearing assembly and consequentially must be redesigned. Accordingly, and for reasons set out more fully in the Force Majeure notice (“FM Notice”) that Premier served on 25 June 2023 under its agreement with Canmax dated 28 July 2022, a formal state of Force Majeure (“FM”) is now in effect,” said Premier in a statement.
The immediate effect of the FM is the suspension of all obligations under the Agreement including those associated with delivery of the product by Premier and any consequences associated with it.
“Specifically, this suspends for the duration of the FM event, any consequence, notice, interest, or the like associated with the delivery of product. The existing Agreement makes provision for such an event of FM and contemplates a maximum time of six months during which the cause or causes of the FM should be rectified.
“In Premier’s current opinion, in the light of recent developments, a de facto state of FM has therefore been in existence from 25 May 2023”.
Reads part of the Force Majeure, “Specifically, the following Force Majeure’s are being provided pursuant to this notice both of which fall within the terms of Section 12.1 of the Off-take: (viii) disruption or breakdown of storage plants, terminals, equipment, machinery, or other facilities, which are not in the ordinary course of business.
“(vii) Shortages, failure, unavailability, or inability to obtain machinery, materials, supplies, plant or equipment, water, fuel, transportation or power, which are not in the ordinary course of business.”
The document states that Premier African Minerals Limited is unable to deliver the product within the stipulated dates as set out in the Agreement.
“A latent defect in the bearing seal assembly has been discovered. The bearing seal assembly is unable to prevent dust and liquid ingress into the bearing assembly, and that the mill is unable to operate with a feed moisture content greater than 10 percent when return feed causes the moisture content of the feed to exceed this limit.
“For product to be produced at the contracted quantity, 37,5 tonne of ore at 150 microns needs to be transferred to the floatation section of the plant in a continuous supply stream. Given the foregoing, the disruption, breakdown and failure of the components of the plant constitute the Force Majeures.”
It adds that the Force Majeures could not have been reasonably foreseen by the Premier African Minerals Limited when the design and construction of the plant was taking place, and the inability of the plant to operate with the elevated moisture content and the latent defect discovered is not an ordinary course disruption, breakdown or failure.
The remedy to the Force Majeures requires either the supply and installation of new EDS mills, or the addition of an additional conventional ball mill that is not immediately available.
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