It doesn’t occur typically, however sometimes a penny inventory explodes larger over a brief interval and makes traders fabulous returns.

Premier African Minerals (LSE: PREM) is a small lithium inventory that some traders discover thrilling. The agency has a various portfolio of initiatives, together with lithium and tantalum in Zimbabwe, and gold in Mozambique.

May this be the following millionaire-maker? Let’s dig in.

What’s been happening?

This has been an extremely unstable inventory. It’s down 81% in just below a yr but continues to be up 85% over a five-year interval.

Why has the inventory crashed not too long ago? Repeated operational setbacks and money-burn points, in a nutshell.

Premier had hoped to get its wholly-owned Zulu Lithium pilot plant up and operating within the first half of 2023. Nevertheless, that didn’t occur.

Because the agency mentioned in its annual report printed final June: “In September 2022 we broke floor. In February 2023 we ran parts of the plant. In late March/early April 2023 we noticed first concentrates produced. Maybe this was all simply too good to be with out some setbacks.”

Yep, it was. One difficulty was not having the ability to safe the availability of a chemical substance to make the focus. Consequently, the agency mentioned it had “develop into clear that environment friendly operating of the general plant is not possible.”

Nevertheless it was nonetheless on observe to start out operations later in 2023 and had raised $14.8m throughout 2022.

All the time tomorrow

In September, CEO George Roach mentioned: “I consider this would be the final time that I doubtlessly report Interim Outcomes that don’t embrace particulars of money generative operations.“

It was concentrating on November shipments from its Zulu mission. Working losses within the six months to June had been $7.1m, it reported.  

In early December, the agency got here again and mentioned it hoped to lastly begin manufacturing in February 2024.

We’re now in April and there may be nonetheless no lithium or income. Nevertheless it has managed to lift one other $3m.

Are we there but?

On 10 April, George Roach commented: “Premier believes we at the moment are within the dwelling stretch with commissioning the Zulu plant operation… Premier appears ahead to lastly getting this plant over the road.”

He went on to explain it as a “tortuous journey” to date. A good remark, I’d say.

Anyway, whereas the plant has demonstrated it may well produce the specified grade of supplies, there at the moment are operational challenges affecting consistency and restoration charges.

However it will apparently “be rectified within the coming weeks“. So income might lastly, presumably, be close to.

The place subsequent?

As for changing into a millionaire, I’d want the shares to go up 50 occasions following a £20k funding. Or 20 occasions after £50k. Whereas theoretically doable, I feel that’s unlikely.

Then once more, my horse guess (Mr Unimaginable) simply ended the Grand Nationwide and not using a rider, so I’m not superb at calling some of these issues.

Would I make investments on this pre-revenue penny inventory? No, I wouldn’t, as issues stand. I do not know whether or not Premier will succeed and the way far more money it might want to increase to take action.

But the shares will certainly head larger if these newest operational challenges are resolved. Received’t they? And lithium demand needs to be sturdy long run as a result of inexperienced transition.