Final Results and Notice of AGM

Final Results and Notice of AGM

Armadale Capital Plc

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

20 May 2016

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

Final Results and Notice of AGM

Armadale, the AIM quoted investment company focused on natural resource projects in Africa, is pleased to announce its final results for the year ended 31 December 2015. In addition, the Company announces that its Annual General Meeting will be held at 11.00am on Friday 24 June 2016 at 55 Gower Street, London, WC1E 6HQ. A notice of AGM, together with printed copies of the Company’s Annual Report for the year ended 31 December 2015 will be posted to shareholders on 23 May 2016. Copies will also be available to view on the Company’s website: www.armadalecapitalplc.com.

Highlights

• Targeting low capex, low opex commercial gold production at the Mpokoto Gold Project in the Katanga province of the south of the Democratic Republic of the Congo (‘Mpokoto’ or the ‘Project’)
  • Two Phase project: Phase 1 for easy mining, low cost weathered ore. Processing to be simple crushing, milling, gravity concentration with cyanide leaching
  • Negotiations with potential partner A-MCS to construct, operate and provide funding of at least US$20 million finance Mpokoto with a view to enable construction to commence in second half of the year
• Established resource of 678,000 oz Au from 14.58 million tonnes ore at 1.45 g/t gold (Au’) to produce approximately 25,000 oz per annum over a nine year life of mine
• Definitive Feasibility Study of Phase 1 of the Project:
  • Open pit mining for Phase 1 presently scheduled over four years (annual mine production of 720,000 tonnes per annum) to produce an average 24,900 oz of gold per annum
  • Total revenues from Phase 1 of US$138.6 million, with average annual revenues of US$30.80 million at a gold price of US$1,250/oz and average annual pre-tax net operating profit of US$11.14 million
  • Capital cost of US$25.15 million, with operating costs of US$792/oz
• Significant further upside - exploration target of 2.4-3.0 million tonnes grading 1.25-1.5 g/t Au should yield an additional 120,000-150,000 oz Au
• Ongoing exploration programme at Mpokoto, with planned 2,000m of auger drilling followed by 2500m reverse circulation drilling, especially adjacent to the high grade zone of hole MPD064
• Initial sales of Mine Restoration Investments Ltd (‘MRI’) shares with holding revalued at market value to £320,000
• Focus on maintaining low cost base
• Loss for the year of £991,512 (2014, £1,077,697) relates to expenses incurred developing the Project and provisions against investments, as is typical of an exploration company

Chairman’s statement

Mining Development

Significant progress, albeit at a slower pace than we initially anticipated, continues to be made in advancing the Mpokoto Gold Project (‘Mpokoto’ or the ‘Project’) located in the South West of the Democratic Republic of the Congo. We now have completed all the key elements of the Definitive Feasibility Study (‘DFS’), which forms the basis of our mining plan and is an essential step in obtaining finance to fund the construction of the Project. As shareholders are aware we have been in a long term dialogue with our potential partners African Mining Contracting Services Group (‘A-MCS’) to finalise project finance and I am pleased to report that A-MCS continue to show keen interest in the Project.

Mpokoto

During the year much work has been done. We have selected the final processing route for both Phase One – the shallower, weathered oxide portion of the deposit, and Phase Two – the deeper, unweathered sulphide portion. The former will entail scrubbing, milling and concentrating the ore, with cyanidation of the resulting flotation concentrates. The DFS, the results of which were announced in February 2016 this year, set out various parameters for the Project. Phase One concentrates on the shallower oxide portion of the resource which will be prioritised for exploitation in advance of the deeper unweathered sulphide ore designated for Phase Two. The technical financial model shows solid economic fundamentals coming from annual mine throughput of 720,000 tonnes of ore over a four and half year mine life from which an average 24,900 oz gold per annum could be produced. At a gold price of US$1,250 per oz, the revenue is US$138.6 million from Phase One alone. Capital costs are estimated to be of the order of US$25 million, with cash operating costs of US$792 per oz. We feel this is a strong result for the Project. It is also worth pointing out that we acquired Mpokoto relatively recently at the end of 2013 so much has been achieved over the last two years in a difficult operating environment.

Discussions with our potential financing, construction and operating partner, A-MCS are ongoing. They are continuing with their review of the DFS and our short term aim remains to finalise project finance for at least US$20 million. Initial production is dependent on the receipt of this financing and accordingly this is no longer expected in H1 2016. We will provide further updates when appropriate. Meanwhile, the exploration programme at Mpokoto will continue over the course of the year. This next stage consists of 2,000 metres of auger drilling and then 2,500 metres of diamond drilling in approximately 150 holes. The purpose of this programme is to delineate further mineral resources and increase the overall mine life.

Other quoted investments

The Company owns a small portfolio of quoted investments in line with its investing policy. The largest is JSE listed Mine Restoration Investments Limited (MRI), which in June 2015 announced that it had entered into an agreement to acquire a significant interest in Iron Mineral Beneficiation Services Pty Limited (‘IMBS’) along with a fundraising of up to R200 million at R0.07 per share. In April 2016 the Board of MRI concluded that this acquisition was unlikely to proceed. This was a very unfortunate outcome as we were optimistic that the restructuring would provide a good opportunity for Armadale to dispose of its stake.

Your Board is now continuing with their efforts to sell the stake and since the year end has disposed of some of its interest on the market. In line with our accounting polices the stake in MRI has been revalued at is market price, which at the year end was approximately £320,000.

The Company continues to hold interests in other quoted investments which it keeps under active review.

Results

The Group does not have any revenue and has reported a loss, of which a significant proportion relates to the impairment of the value of our investment in to MRI, which accounting policies require us to value at its market value at the end of the financial year. We continue to pay particular attention to our own overhead costs to ensure our cash resources are used primarily in the development of Mpokoto and limit all costs associated with being a listed company. During the year under review our principal focus has been the development of Mpokoto and a substantial proportion of our costs relate to expenses incurred developing the Project. We see this as continuing for the foreseeable future.

In addition, as an Investing Company with a charter of investing in African-based mining projects, we continue to be in receipt of other opportunities and remain interested in looking to diversify the portfolio, where this makes sense and has the potential to deliver increased value for all shareholders. Where any projects progress we will advise the market and shareholders accordingly.

We look forward to reporting to shareholders on the continuing progress of Mpokoto as we seek to unlock its inherent value potential and, in the meantime, thank all shareholders for their on-going support and interest in the Company. Your board will continue to work tirelessly in our efforts to build shareholder value.

Peter Marks

Chairman

Financial Results

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

Â	Â	2015	Â	2014
Â		£		£
Other administrative expenses		(616,062)		(693,664)
Share based payment charge		-		(84,000)
Impairment of investments		(316,213)		(67,500)
Provision against loan		-		(225,326)
Â		Â		Â
Operating loss		(932,275)		(1,070,490)
Â		Â		Â
Finance income		49		7,455
Finance costs		(59,286)		(14,662)
Loss before taxation		(991,512)		(1,077,697)
Taxation		-		-
Loss for the year from continuing operations attributable to the equity holders of the parent company		(991,512)		(1,077,697)
Â		Â		Â
Loss per share attributable to the equity holders of the parent company		Pence		Pence
Basic and fully diluted		(1.91)		(4.43)
Â
Loss after taxation		(991,512)		(1,077,697)
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign entities		93,278		-
Total comprehensive loss attributable to the equity holders of the parent company		(898,234)		(1,077,697)

Consolidated Statement of Financial Position

At 31 December 2015

Â	Â	2015	Â	2014
Â		£		£
Assets Non-current assets		Â		Â
Exploration and evaluation assets		4,923,190		3,515,769
Property, plant and equipment		23,694		34,327
Investments		56,605		30,119
Â		5,003,489		3,580,215
Current assets		Â		Â
Investment		322,708		689,616
Trade and other receivables		317,230		182,645
Cash and cash equivalents		160,938		237,849
Â		800,876		1,110,110
Â		Â		Â
Total assets		5,804,365		4,690,325
Â		Â		Â
Equity and liabilities		Â		Â
Equity		Â		Â
Share capital		2,823,582		2,562,914
Share premium		16,585,413		14,807,570
Shares to be issued		286,000		286,000
Share option reserve		182,000		1,610,361
Foreign exchange reserve		93,278		-
Retained earnings		(14,550,731)		(14,987,580)
Total equity		5,419,542		4,279,265
Â		Â		Â
Current liabilities		Â		Â
Trade and other payables		339,486		153,074
Loan notes		45,337		-
Â		384,823		153,074
Non-current liabilities
Convertible loan notes		-		216,570
Derivative liability		-		41,416
Total non-current liabilities		-		257,986
Â		Â		Â
Total equity and liabilities		5,804,365		4,690,325

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015

Â	Â	Share Capital	Â	Share Premium	Â	Shares to be issued	Â	Share Option Reserve	Â	Foreign Exchange Reserve	Â	Retained Earnings	Â	Total
Â		£		£		£		£		£		£		£
Balance at 1 January 2014		2,472,076		13,240,323		1,352,000		1,526,361		-		(13,909,883)		4,680,879
Loss for the year		-		-		-		-		-		(1,077,697)		(1,077,697)
Total comprehensive loss for the year		-		-		-		-		-		(1,077,697)		(1,077,697)
Share based payments		-		-		-		84,000		-		-		84,000
Issue of shares		90,838		1,614,788		(1,066,000)		-		-		-		639,626
Expenses of issue		-		(47,541)		-		-		-		-		(47,541)
Total other movements		90,838		1,567,247		(1,066,000)		84,000		-		-		676,085
Balance at 31 December 2014		2,562,914		14,807,570		286,000		1,610,361		-		(14,987,580)		4,279,265
Loss for the year		-		-		-		-		-		(991,512)		(991,512)
Other comprehensive income		Â		Â		Â		Â		93,278		Â		93,278
Total comprehensive loss for the year		-		-		-		-		93,278		(991,512)		(991,512)
Issue of shares		260,668		1,911,395		-		-		-		-		2,172,063
Expenses of issue		-		(133,552)		-		-		-		-		(133,552)
Release on expiry of options		-		-		-		(1,428,361)		-		1,428,361		-
Total other movements		260,668		1,777,843		-		(1,428,361)		93,278		1,428,361		2,131,789
Balance at 31 December 2015		2,823,582		16,585,413		286,000		182,000		93,278		(14,550,731)		5,419,542

The following describes the nature and purpose of each reserve within owners’ equity:

Reserve	Â	Description and purpose
Share capital		amount subscribed for share capital at nominal value
Share premium		amount subscribed for share capital in excess of nominal value, net of allowable expenses
Shares to be issued		value of share capital to be issued in connection with the acquisition of Netcom
Share option reserve		reserve for share options granted but not exercised
Foreign exchange reserve		gains/losses arising on re-translating the net assets of overseas operations into sterling
Retained earnings		cumulative net gains and losses recognised in the statement of comprehensive income

Consolidated Statement of Cash Flows

For the year ended 31 December 2015

Â	Â	Â	Â	2015	Â	2014
Â	Â	Â		£		£
Â	Â	Â		Â		Â
Cash flows from operating activities	Â	Â		Â		Â
Loss before taxation	Â	Â		(991,512)		(1,077,697)
Adjustment for:	Â	Â		Â		Â
Depreciation	Â	Â		12,545		2,858
Unrealised foreign exchange differences	Â	Â		48,549		(4,818)
Loan note accretion	Â	Â		34,490		9,492
Impairment of investment	Â	Â		316,213		67,500
Loss on sale of investment	Â	Â		24,335		-
Provision against loan	Â	Â		-		225,326
Interest income	Â	Â		(49)		(7,455)
Share based payments	Â	Â		-		84,000
Shares issued in settlement of liabilities	Â	Â		165,250		114,626
Shares received for services	Â	Â		-		(2,784)
Accrued interest payable	Â	Â		1,714		-
Â	Â	Â		(364,130)		(588,952)
Changes in working capital Receivables	Â	Â		415		103,137
Payables	Â	Â		60,412		(99,573)
Net cash used in operating activities	Â	Â		(303,303)		(585,388)
Â	Â	Â		Â		Â
Cash flows from investing activities	Â	Â		Â		Â
Expenditure on exploration and evaluation assets	Â	Â		(1,158,019)		(651,156)
Loan to associated company	Â	Â		-		(110,913)
Purchase of listed investments	Â	Â		(7,986)		(31,947)
Sale of listed investments	Â	Â		7,860		-
Interest received	Â	Â		49		2,726
Net cash used in investing activities	Â	Â		(1,158,096)		(791,290)
Â	Â	Â		Â		Â
Cash flows from financing activities	Â	Â		Â		Â
Proceeds from share placement	Â	Â		1,502,994		525,000
Issue costs	Â	Â		(133,552)		(47,541)
Proceeds from issue of loan notes	Â	Â		120,000		248,494
Repayment of loan notes	Â	Â		(80,619)		-
Net cash from financing activities	Â	Â		1,408,823		725,953
Â	Â	Â		Â		Â
Net decrease in cash and cash equivalents	Â	Â		(76,911)		(650,725)
Cash and cash equivalents at 1 January 2015	Â	Â		237,849		888,574
Cash and cash equivalents at 31 December 2015	Â	Â		160,938		237,849

Notes to the financial statements

For the year ended 31 December 2015

1. Accounting policies

1. Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The principal accounting policies are set out below.

1.2. Going Concern

The financial statements have been prepared on the going concern basis as, in the opinion of the directors, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

At 13 May 2016, the Group had cash of £128,000 and held listed shares with a balance sheet value of £379,313. The cash in hand is sufficient to meet committed expenditure, including overheads, for approximately three months. In order to continue its operations and to develop further its exploration project, the Group will need to raise further funds. Discussions aimed at procuring the development finance needed to develop the project are at an advanced stage.

The directors believe that the project finance negotiations will be successfully concluded. Furthermore, they consider that it will be possible to raise further short-term working capital if required. However, there can be no certainty that either of these initiatives will succeed.

These factors indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

1.3. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation.

2. Loss per share

The calculation of loss per share is based on a loss of £991,512 (2014, £1,077,697), and on 51,875,616 ordinary shares (2014, 24,327,238), being the weighted average number of shares in issue during the year. On 22 June 2015, the ordinary shares of the Company were consolidated by the issue of one new ordinary share in exchange for 150 existing ordinary shares. Earnings per share has been calculated on the basis that the revised structure applied throughout the year and the comparative figure has been restated on the same basis.

There is no difference between basic loss per share and diluted loss per share as the Group reported a loss for the year.

The company has issued options over ordinary shares which could potentially dilute basic earnings per share in the future.

**ENDS**

For further information, please visit www.armadalecapitalplc.com, follow us on Twitter @ArmadaleCapital, or contact:

Enquiries:	Â
Armadale Capital Plc Charles Zorab, Company Secretary		[phone]
Nomad and broker: finnCap Limited Christopher Raggett / Simon Hicks		[phone]
Joint Broker: Beaufort Securities Limited Jon Belliss		[phone]
Press Relations: St Brides Partners Ltd. Charlotte Heap / Susie Geliher		[phone]

Notes

Armadale Capital Plc is focussed 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.

Armadale is focused on 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 gold (‘Au’) from 14.58 million tonnes (‘Mt’) @ 1.45g/t Au at a cut-off grade of 0.5g/t. The Company has recently announced the results of a Feasibility Study for Mpokoto which demonstrated a pre-tax net present value of US$43m based upon a discount rate of 5% 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, as well as a number of other quoted investments.

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

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