Prospect Resources to cut costs by 57%

AFRICAN lithium developer, Prospect Resources (Prospect) has undertaken a material cost reduction strategy, with operating costs set to be cut by 57%, so that funds raised meet its requirement for an extended lockdown period induced by COVID-19.

BY MTHANDAZO NYONI

In its first quarter report, Prospect said it had undertaken a material cost reduction strategy so that funds raised meet its requirement for an extended lockdown period, considering the current global conditions developing related to COVID-19.

Countries around the world are currently under lockdowns as part of measures to combat the spread of COVID-19, which has so far killed more than 247 000.

“The strategy targets a reduction of operating costs of 57% and includes reduction in staff count; reduction in salaries of directors and the remaining staff of approximately 50%; reduction of costs that are not directly related to the current corporate activities,” the company said.

The report notes that Prospect has scaled back all non-essential activities and has restructured its team to be focused on its three strategic objectives.

“The June quarter will see a material decrease in its recurring operating expenses in line with the company’s cost reduction strategy as stated above. The June quarter cash outflows will include associated restructuring costs and settlement of creditors,” it reads.

Prospect finished the quarter with a cash balance of A$564 000; a non-renounceable rights issue to raise up to A$3,1m with a closing date of May 11, 2020; and US$10m funding commitment from offtake partner Sinomine on placement of ball mill.

It also revealed that it has agreed to a request by Uranium One Group JSC to extend their exclusivity under the terms of the memorandum of understanding to August 10, 2020 due to logistical challenges facing all companies during the COVID-19 lockdown.

Prospect last month announced a non-renounceable rights issue to shareholders on a one-for-four basis at A$0.05 per fully paid ordinary share to raise up to approximately A$3,1m, with a minimum raising of A$1,2m.

However, due to COVID-19 lockdown, the closing date has been extended to May 11.

The rights issue is being priced at a 50% discount to the last traded price and a 64% discount to the 30-day volume weighted average price.

Board members have reportedly committed to participate in the offer and partially underwrite it to A$504 000 and management has committed to invest $68 000. Prospect has operations and exploration activities in Zimbabwe, with its flagship project being the Arcadia lithium project located on the outskirts of Harare.