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Some lithium shares spiked in 2023, however they’ve fallen again a good bit. And it makes me surprise if Premier African Minerals (LSE: PREM) is likely to be one to purchase now.
The corporate has its finger within the lithium enterprise, in excessive demand for batteries nowadays. And it additionally has pursuits in tungsten, tantalum, and different uncommon earth components in Africa.
It’s not only a lithium-only punt, so there’s a little bit of security from that.
Share value
Now, the share value is nicely below a penny, at simply 0.23p on the time of writing. And that often sounds a word of warning.
However I do suppose we’re seeing some curiosity once more in 2024, even after final 12 months’s climb got here to nothing. The shares reached 1.04p a 12 months in the past, so we’re a 12-month fall of 17%.
Nonetheless, even with final 12 months’s mini growth and bust, the value remains to be up 135% previously 5 years. Development share traders typically must buckle up for a bumpy journey.
The place’s the money?
The primary drawback up to now has been an absence of revenue. Actually, essentially the most notable factor within the agency’s accounts for the previous few years has been an absence of money circulate.
In its interim report in September 2023, Premier recorded a internet fall in money of $9.4m. It was nonetheless very a lot within the cash-burn section. And that may typically go on quite a bit longer than early traders hope.
However I see a superb probability that 2024 might mark a turning level.
With that first-half replace, CEO George Roach mentioned: “I imagine this would be the final time that I doubtlessly report Interim Outcomes that don’t embrace particulars of money generative operations.“
Lithium operations
So, I don’t suppose we must always hope for an excessive amount of once we see FY23 outcomes. However what’s 2024 trying like up to now?
Effectively, the agency’s March replace on its Zulu Lithium Plant operations outlined a lot of issues, with additional delays. Premier is taking on direct operation of the plant now. And it additionally kicked out the agency behind the design.
The CEO, whereas admitting these have been disappointing developments, mentioned: “Premier does imagine it is a main turning level and we glance ahead offering additional updates from Zulu.“
What subsequent?
The share value has declined since that downbeat replace. However the demand for lithium is there. And the agency assures us that the suppliers behind its plant growth are nonetheless on board.
However how for much longer will the money burn go on? How way more money will Premier want earlier than income arrive, and what dilution might shareholders undergo? I can’t reply these questions.
It is a penny inventory that I believe might begin to see a turnaround this 12 months. Then once more, I’ve thought that about related shares earlier than and been proved incorrect.
So, I’m satisfied there’s lithium promise right here, and we might see a better share value by the top of the 12 months. However the threat is simply too excessive for me to purchase.
