Mahenge Graphite Project Update

·6-min read

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

13 October 2020

Armadale Capital Plc

(‘Armadale’ or ‘the Company’)

Mahenge Graphite Project Update

Armadale Capital plc (LON: ACP) the AIM quoted investment group focused on natural resource projects in Africa, is pleased to provide an update on its 100%-owned Mahenge Graphite Project (‘Mahenge’).

HIGHLIGHTS

  • Front End Engineering Design (‘FEED’) of processing plant by international engineering, procurement and construction company (‘EPCM’) due to commence shortly upon selection of preferred construction group

  • Selection process at an advanced stage, with suitable strategies for the development and construction of Mahenge already identified following a detailed consultation process with a range of potential mining contractors

  • Ready to initiate follow-up and final metallurgical test programme to enable the detailed selection of the processing plant equipment

  • National Environmental Management Council (‘NEMC’) site visit completed - one of the penultimate steps required for granting of the Environmental Permit (ESIA approval) to facilitate the granting of the mining licence

  • Continue to advance ongoing project financing negotiations for mine construction of Stage 1 of Mahenge’s 60,000 tpa capacity

Armadale Chairman, Nick Johansen, commented:

"We are delighted to announce another crucial step forward in the development of Mahenge. Appointing our chosen EPCM will mark the commencement of the next preparatory phase of mine construction and take us another step closer to production. In addition, the completion and submission of the Environmental and Social Impact Assessment (ESIA) is one of the final necessary components in the Mining Licence process and I would like to thank all those involved for their efforts in completing this important piece of work in such a short time frame. Receipt of a Mining Licence will be one of the final and most important de-risking milestones for the Project and we look forward to being able to update further on this as we work with NEMC to conclude the final licencing components.

"Alongside this, as previously indicated we continue to be positively engaged in development funding options. Testament to Mahenge’s highly compelling project economics we have received strong interest, and we are naturally committed to securing the best option for our stakeholders. We will update shareholders on further developments as soon as we are in a position to do so.

"With project financing, a mining licence and commencement of mine construction all imminent, Mahenge, and indeed Armadale, is on the cusp of transformation. Ultimately, Mahenge’s value potential is clear, and it is our responsibility and focus to convert this into meaningful returns for our stakeholders. To deliver on this, we have devised a staged development plan giving a fast-tracked, low-cost route to production. This is truly an exciting time of development."

Further Detail

Armadale has continued to focus on fast tracking Mahenge to production. The Company has been engaging with potential international manufacturing and construction companies as to their suitability and capability to complete the graphite processing plant in Tanzania.

A group of international companies have been short-listed with final selection imminent, following which work will commence on the FEED component. The first stage of the work will be for the selected EPCM to complete a metallurgical test programme to enable the detailed selection of the processing plant equipment. Metallurgical testing has confirmed that Mahenge can produce high quality, high purity graphite, with conventional technology achieving consistent purity of above 97% TGC, some of the highest grades in the sector, with identified target markets; a large proportion of concentrates in the medium size fractions are confirmed to be ideally suited to the battery market whilst coarser grind sizes can retain a larger proportion of larger flake sizes, suited to the expandable and graphite foil markets.

Throughout the Project’s development, Armadale has continued to engage with potential international mining contractors to develop strategies for the construction and mining requirements of the Project. This has assisted Armadale in developing a fit for purpose approach in the development of the Project from construction to production operations.

Positive progress also continues to be made on finalising the Company’s Mining licence application. The ESIA application for the Project was submitted by Tanzanian based, registered and certified environmental consultants to the NEMC in Tanzania in September 2020. A site visit has since been completed by NEMC, Armadale staff and the Company’s lead consultant as part of the ESIA application. The presentation of key findings and recommendations by NEMC and any satisfactory addressing of these findings in a final submission will lead to the environmental certification being completed. The completed certification is the final component required for the granting of the Mining licence.

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

+44 (0) 20 7236 1177

Nomad and broker: finnCap Ltd

Christopher Raggett / Teddy Whiley

+44 (0) 20 7220 0500

Joint Broker: SI Capital Ltd

Nick Emerson

+44 (0) 1483 413500

Press Relations: St Brides Partners Ltd

Charlotte Page / Beth Melluish

+44 (0) 20 7236 1177

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. The project has been established as a large, long life graphite deposit capable of producing high quality graphite concentrate for the rapidly emerging EV market. Metallurgical test work has confirmed that Mahenge can produce high quality, high purity graphite, with conventional technology achieving consistent purity of above 97% TGC, with 99.99% TGC achievable, making its product suitable for both the high growth EV/battery market and the expandable and graphite foil markets.

An optimised Definitive Feasibility Study (‘DFS’) established that US$985m pre-tax cashflow could be generated from an initial 15-year mine life, utilising just 25% of the resource, which remains open in multiple directions offering significant further upside. Based on average annual production of large flake high-purity graphite of 109ktpa, this led to an estimated pre-tax NPV of US$430m and IRR of 91%. Armadale intends to deliver low cost, fast-tracked production through a staged ramp-up plan, beginning with 60,000tpa graphite concentrate production for the first three years (Stage 1) before increasing to a life of mine average of 109,000tpa (Stage 2). Stage 1 has a low capital cost estimate of US$39.7m, including a contingency of U$S4.1m or 15% of total direct capital cost with 1.6 year (after tax) payback period from first production based on an average sales price of US$1,112/t. Stage 2 expansion is to be funded from cashflow.

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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Contacts

Armadale Capital Plc