Updated Mine Plan Materially Increases Production

Updated Mine Plan Materially Increases Production

Armadale Capital Plc

Armadale Capital Plc / Index: AIM / Epic: ACP / Sector: Investment Company

12 May 2020

Armadale Capital Plc (‘Armadale’ or ‘the Company’)

Updated Mine Plan Materially Increases Production

Armadale Capital plc (LON: ACP), the AIM quoted investment group focused on natural resource projects in Africa, is pleased to provide details of further improvements to the Mine Schedule for the Mahenge Liandu Graphite Project (‘Mahenge’ or ‘the Project’) in south-east Tanzania, which was completed by experienced graphite specialists BatteryLimits. Following completion of an updated Mine Schedule using a higher-grade cut off of 9% TGC and a higher strip ratio of 1.95:1, and a revised expansion schedule, the Company is pleased to announce an increased production profile, increasing the average annual output to 109ktpa of concentrate over life of mine, which is a 30% increase on the recently completed Definitive Feasibility Study (‘DFS’).

Highlights

• Completion of an updated Mine Schedule using a higher-grade cut off of 9% Total Graphitic Carbon (‘TGC’), a higher strip ratio of 1.95:1, revised expansion schedule and includes a proportion of high-grade Inferred material
• 30% increase in average annual production of large flake high-purity graphite to 109ktpa compared to recently completed DFS
• Higher overall production from increased cut off of 9% TGC will materially increase annual production and has potential to significantly increase the US$358 million project NPV with minimal impact on the capex
• A higher-grade cut off is expected to allow the Company to maximise initial production and build lower grade stockpiles in subsequent years
• Updated Feasibility Study based on updated Mine Schedule anticipated by the end of May
• Production profile planned to take advantage of increasing demand for graphite as the Electric Vehicle market rapidly expands

Armadale Chairman, Nick Johansen, commented: “The updated mine schedule demonstrates the exceptional potential of the Mahenge Liandu Graphite Project. The use of a higher-grade cut off and mining of a higher-grade material at an increased pace leaves significant scope for the Project to produce higher volumes of graphite over the 15 year mine life at a higher EBITDA margin, thus enhancing its overall near-term upside.

“The Project has a relatively long life of mine, low cost of production and has now been significantly de-risked at a time of rapidly increasing demand for large-flake graphite. As such it represents an attractive opportunity for investors who wish to gain exposure at a crucial inflection point in its development.

“The detail from the recently completed Mine Schedule desktop studies is in the process of being worked into an upgraded Definitive Feasibility Study, which will be based upon a throughput of higher-grade material over a 15 year mine life, and we are expecting that it will have a significant impact on the results.

“In addition to this work, multiple workstreams are currently in progress including continued Detailed Design Engineering, the progressing of existing off-take agreements from MoUs to binding agreements, finalising of the Company’s application for a full Mining licence (and thus furthering major permitting milestones), and crucially, advancing discussions with potential debt finance partners and project level development funding for construction.

“Having delivered a number of key value accretive milestones in recent months, we look forward to maintaining this momentum in the near term in order to continue to build value for shareholders.”

Details

The Mahenge Project, graphite which recently delivered a Definitive Feasibility Study (‘DFS’) confirming Mahenge it as a long-life low-cost graphite project with a US$358 million NPV and an IRR of 91%. With the completion of an updated Mine Schedule using a higher-grade cut off of 9% TGC the average production increases 30% to 109 ktpa. This material increase in production is expected to have significant potential to further improve the already compelling economics at Mahenge, significantly uplifting average annual output with only incremental changes to the initial capex. New financial metrics for this will be included within Armadale’s updated Feasibility Study anticipated by the end of May.

The implication of the updated Mine Schedule is that more high-grade graphite will be processed over the life of mine, ultimately bolstering potential cashflow and enhancing the Project’s overall valuation, while allowing for the stockpiling of lower grade material for potential future processing.

The updated mine schedule is based on the following key changes;

• Increase in cut off grade to 9% TGC
• Revision of phased production expansion profile with stage 2 expansion moved forward from year 5 to year 4 resulting in average stage 1 production of 61 ktpa increasing to 121 ktpa in year 4.
• Inclusion of a proportion of high-grade inferred material

Area	Unit	DFS results	Update
Mining inventory	(Mt)	14.40	13.42
Measured and indicated	(Mt)	14.40	10.84
Inferred	(Mt)		2.58
Mine grade	(TGC%)	9.90	12.50
Strip ratio		1.10	1.95

Table 1: The updated mining inventory

The revised production profile is shown in table 2 which now starts at 53.3ktpa ramping up to an average rate of 121ktpa after year 4.

Year	Mill Feed Mt	Head Grade TGC %	Concentrate Kt
Y1	0.4	14.5%	53.3
Y2	0.5	12.1%	71.0
Y3	0.5	12.4%	59.1
Y4	1.0	13.4%	121.5
Y5	1.0	12.1%	131.3
Y6	1.0	11.9%	118.6
Y7	1.0	13.1%	116.3
Y8	1.0	11.7%	128.5
Y9	1.0	12.4%	115.1
Y10	1.0	12.5%	122.0
Y11	1.0	12.6%	122.1
Y12	1.0	12.2%	123.6
Y13	1.0	12.3%	119.1
Y14	1.0	12.5%	120.2
Y15	1.0	13.1%	121.9

Table 2: Updated Production Schedule by Year.

Mahenge Liandu Graphite Project, Tanzania

Armadale’s wholly-owned Mahenge Liandu Graphite Project is located in a highly prospective region, with a high-grade JORC compliant indicated and inferred mineral resource estimate announced February 2018 – 59.5Mt at 9.8% TGC. This includes 11.5Mt @ 10.5% Measured 32.Mt Indicted at 9.6% and 15.9Mt at 9.8% TGC, making it one of the largest high-grade resources in Tanzania.

The work to date has demonstrated the Project’s potential as a commercially viable deposit, with significant tonnage, high-grade coarse flake and near surface mineralisation (implying a low strip ratio) contained within one contiguous ore body.

A recently completed Definitive Feasibility Study confirmed Mahenge as a long-life low-cost graphite project with a US$358m NPV and IRR of 91% based on a two-stage expansion strategy comprising:

• Stage One – processing plant and infrastructure at a nominal design basis rate of 0.4-0.5 Mt/pa to produce a nominal 60,000t/pa graphite concentrate in the first four years of production
• Stage Two – a second 0.5 Mt/y plant and associated additional infrastructure doubling throughput to 1 Mt/y from Year 5 of operation

The DFS shows that Armadale can be a significant low-cost supplier to the graphite industry with the potential to generate pre-tax cashflows of US$882m over an initial 17 year mine-life and scope for further improvement as this utilises just 25% of the current resource, which remains open in multiple directions.

Projected timeline to first production is expected to be approximately 10-12 months from the start of construction and the capital cost estimate for Stage 1 is US$38.6m, which includes a contingency of U$S4.1m or 15% of total direct capital cost, with a 1.6 year payback for Stage 1 (after tax) based on an average sales price of US$1,179/t. Stage 2 expansion is expected to be funded from cashflow.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

**ENDS**

Enquiries:
Armadale Capital Plc Nick Johansen, Non-Executive Director Tim Jones, Company Secretary	[phone]
Nomad and broker: FinnCap Ltd Christopher Raggett / Edward Whiley	[phone]
Joint Broker: SI Capital Ltd Nick Emerson	[phone]
Press Relations: St Brides Partners Ltd Charlotte Page / Beth Melluish	[phone]

Notes

Armadale Capital Plc is focused on investing in and developing a portfolio of investments, targeting the natural resources and/or infrastructure sectors in Africa. The Company, led by a team with operational experience and a strong track record in Africa, has a strategy of identifying high growth businesses where it can take an active role in their advancement.

The Company owns the Mahenge Liandu graphite project in south-east Tanzania, which is now its main focus. The Project is located in a highly prospective region with a high-grade JORC compliant Indicated and inferred mineral resource estimate of 59.48Mt @ 9.8% TGC, making it one of the largest high-grade resources in Tanzania, and work to date has demonstrated Mahenge Liandu’s potential as a commercially viable deposit with significant tonnage, high-grade coarse flake and near surface mineralisation (implying a low strip ratio) contained within one contiguous ore body.

Other assets Armadale has an interest in, include the Mpokoto Gold project in the Democratic Republic of Congo and a portfolio of quoted investments.

More information can be found on the website www.armadalecapitalplc.com.

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