Agreement to fund and develop the Mpokoto Gold ...

Agreement to fund and develop the Mpokoto Gold Project

Armadale Capital Plc

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

Agreement to fund and develop the Mpokoto Gold Project

Armadale, the AIM quoted investment company focused on natural resources projects in Africa, is delighted to announce that via a subsidiary, it has signed a Heads of Terms Agreement (the ‘Agreement’) with the Africa Mining Contracting Services group (‘A-MCS’) with a view to funding, developing, constructing and operating the Mpokoto Gold Project (‘Mpokoto’ or the ‘Project’) in the Katanga Province of the Democratic Republic of Congo (‘DRC’). The Agreement, which is subject to the execution of a final, definitive agreement between the parties, envisages that A-MCS will introduce investors to provide at least US$20 million of loan financing with a view to funding Mpokoto into production, which is targeted for H1 2016.

Highlights:

• The Agreement envisages that A-MCS will:
  • Work with Armadale and its principle consultant Bara Consulting to complete the Definitive Feasibility Study (‘DFS’), the results of which will form the basis of the definitive agreements
  • As a pre-condition to being appointed mining contractor over the Project, introduce at least US$20m of debt funding
  • Be appointed as Mining Contractor and provide open cast mining services, assistance with the construction of the infrastructure as well as agreed management services in relation to the operation of the Project
• Definitive agreements expected to be signed in the next quarter, in conjunction with the delivery of the DFS, the publication of which has been delayed until the finalisation of agreements
• Agreement is part of defined development strategy to rapidly advance the Project through to low capex, low opex gold production in H1 2016 - targeted cash cost per ounce of US$650
• Established resource of 678,000 oz gold (‘Au’) from 14.58 million tonnes ore at 1.45 g/t Au to produce approximately 25,000 oz Au per annum over a nine year life of mine
• Significant additional upside - exploration target of 2.4-3.0 million tonnes grading 1.25-1.5 g/t Au has potential to yield a further 120,000-150,000 oz Au
• Initial ground works to commence on site imminently
• Armadale will remain major stakeholder and lead operator of the Project

Justin Lewis, Director of Armadale, said, “This is a landmark agreement for our strategy of bringing Mpokoto into production within the next 12 months. The provision of at least US$20 million project finance is a crucial step in the Project’s development and with extensive local experience, we are delighted to have signed with A-MCS. We will now work closely with our new partners to finalise the DFS and the definitive agreements to deliver a low cost, low capex mine capable of generating excellent returns for shareholders. With this funding and development agreement, an initial NPV of US$55.3m (£36.3m) based on a forecast gold price of US$1,250/oz, and a further potential resource upgrade, Mpokoto continues to show its commercial value.”

Terms of the Agreement:

The Heads of Agreement has been entered into between Kisenge Limited, a wholly owned subsidiary of Armadale, and a wholly owned subsidiary of A-MCS. Pursuant to this, it is intended that a member of the A-MCS group will be appointed as mining contractor to the Mpokoto Project and work with the Armadale group to develop, construct and operate the Mpokoto Project. Importantly, conditional upon its appointment, A-MCS has agreed, subject to the execution of final, definitive agreements to introduce investors to provide at least US$20 million in debt to fund the construction of the Project. A-MCS will work with the Armadale team and its consultants to complete the DFS, which will form the core of their due diligence on the Project.

Project Finance:

A-MCS has agreed to introduce investors to provide at least US$20 million of loan finance to cover the capital costs of constructing the Mpokoto Project. The key components of the capital cost identified in the scoping study were US$8.25 million for the processing plant, US$3.75 million for associated infrastructure and US$8.5 million for infrastructure. The final agreed amount of funding will be subject to the agreed results of the DFS.

The Agreement sets out the indicative terms of the financing, which it is proposed will be provided by a way of loan notes secured over the Project at an interest rate of 12.5 per cent. and repayable anytime up to 36 months after the provision of the loan. It is also envisaged that the providers of such loan will be granted a warrant over 5 per cent. of the issued share capital if Kisenge, Armadale’s wholly owned subsidiary that owns its interest in the Mpokoto Project. Conditions precedent of the funding include the finalisation of definitive agreements with the investor(s), completion of the DFS with agreed capital costs, and the entering into a mining contract.

Mining Contractor:

Pursuant to the Agreement, conditional upon the completion of the DFS and the introduction of funding, Kisenge proposes to enter into a Mining Services Contract with the A-MSC group, pursuant to which it will provide open cast mining services, assistance with the construction of the infrastructure of the Project as well as agreed management services in relation to the operation of the Project.

Definitive Feasibility Study:

A-MCS has agreed to work with Armadale and its principal consultant, Bara Consulting, to complete the DFS on the Mpokoto Project. This will ensure that the Group benefit from A-MCS’s in-country expertise and that the costs, both capital and operational, are agreed between all parties and reflect the final terms agreed between the parties to construct and operate the mine through the Mining Services Contract. This process will also form a crucial part of the due diligence being undertaken by A-MCS and the investors that it intends to introduce.

As a consequence of the above process, the board has decided to delay the publication of the final results from the DFS until such time as the results have been reviewed and agreed by A-MCS, with publication anticipated during the next quarter in conjunction with the finalisation of definitive agreements with A-MCS. However, the overall results of the DFS are anticipated to be in line with the published expanded Scoping Study and, as a result of this partnership, the overall timeline to commencement for production in HI 2016 is now more secure.

Mpokoto Gold Project:

Mpokoto has a current Total Mineral Resource of 678,000oz Au from 14.58 million tonnes (‘Mt’) @ 1.45g/t Au at a cut-off grade of 0.5g/t to produce approximately 25,000 oz per annum over a nine year life of mine. The results of an Expanded Scoping Study demonstrated a post-tax net present value of US$55.3 million based upon a discount rate of 8% and a gold price of US$1,250/oz. The Project comprises four Mining Licences which are valid for an initial term of 30 years from 30 September 2014. Significant further upside is anticipated with an exploration target of 2.4-3.0 million tonnes grading 1.25-1.5 g/t Au which the Board estimate should yield an additional 120,000-150,000 oz Au to the Project. A proposed drilling programme is already planned targeting primary mineralisation and down dip mineralisation beyond the present pit limits. Importantly, recent work has highlighted the possibility of extensions of high grade mineralisation in sheared altered mafic rocks intersected in drill hole MPDD0064 which intercepted 27.9 metres@ 7.8 Au g/t Au. In addition, the geological work points toward laterally continuous zones of mineralisation. Further drilling will target near-surface "along strike mineralisation" which has the potential to substantially increase current pits to the north-west. Furthermore, the Project is part of a substantial 800,000 hectares of exploration licences yet to be explored.

As stated, the Company is currently finalising a definitive feasibility study on the Project which advances the work already undertaken as part of the Expanded Scoping Study.

**ENDS**

For further information please visit www.armadalecapitalplc.com or contact:

Armadale Capital	Â	Â	Â	Justin Lewis, Director	Â	Â	Â	[phone]	Â	Â
	Â	Â	Â	Charles Zorab	Â	Â	Â	[phone]
Nomad and broker: finnCap Limited				Christopher Raggett	Â	Â	Â	[phone]
	Â	Â	Â	Simon Hicks	Â	Â	Â
Joint Broker: VSA Capital Limited				Bhavesh Patel				[phone]
	Â	Â	Â	Richard Buckle	Â	Â	Â
Press relations: St Brides Partners Limited				Charlotte Heap				[phone]
	Â	Â	Â	Hugo de Salis	Â	Â	Â

Notes

Armadale Capital Plc is focused on investing in and developing a portfolio of investments, targeting the natural resources sector 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.

Armadale’s primary project is the development of the Mpokoto Gold project in the Democratic Republic of the Congo, in which it owns an 80% interest. Mpokoto has a current Total Mineral Resource of 678,000 oz Au from 14.58 Mt @ 1.45g/t Au at a cut-off grade of 0.5g/t. An Expanded Scoping Study for Mpokoto which demonstrated a post-tax net present value of US$55.3m based upon a discount rate of 8% and a gold price of US$1,250/oz. The Project is subject to four Mining Licences which are valid for an initial term of 30 years from 30 September 2014.

Armadale also currently holds approximately a 30% interest in Mine Restoration Investments Ltd, a South African listed company, focused on the briquetting and sale of coal fines in KwaZulu Natal, as well as a number of other quoted investments.

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

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