TIDMACP
Armadale Capital Plc / Index: AIM / Epic: ACP / Sector:
Investment Company
05 June 2020
Armadale Capital Plc ('Armadale' or 'the Company')
DFS update increases Mahenge NPV to $430 million
Armadale Capital plc (LON: ACP), the AIM quoted investment group
focused on natural resource projects in Africa, is pleased to
provide results for the updated Definitive Feasibility Study for
its Mahenge Liandu graphite project ('Mahenge' or 'the Project') in
south-east Tanzania, completed by experienced graphite specialists
BatteryLimits.
The update, which is based upon a revised Mine Schedule using a
higher-grade cut off of 9% Total Graphitic Carbon ('TGC'), a higher
strip ratio of 1.95:1, and a rescheduled Stage 2 expansion, results
in the production profile increasing average annual output from
80ktpa to 109ktpa of concentrate over life of mine, which is a
significant 30% increase on the recently completed Definitive
Feasibility Study ('DFS').
Highlights
-- Updated Mine Schedule reaffirms Mahenge as a long-life low-cost graphite
project
-- 30% increase in average annual production of large flake high-purity
graphite to 109ktpa compared to recently completed DFS annual production
of 80kpta
-- 20% increase in estimated pre-tax NPV to US$430m and IRR of 91%
-- US$985m pre-tax cashflow to be generated from initial 15 year mine life
utilising just 25% of the resource, which remains open in multiple
directionsoffering significant further upside
-- Staged ramp-up planned to facilitate near term production with 60,000tpa
graphite concentrate to be produced for the first three years (Stage 1)
before increasing to LOM average 109,000tpa (Stage 2)
-- A higher-grade cut off is expected to allow the Company to maximise
initial production and build lower grade stockpiles in subsequent years
-- Low capital cost estimate - Stage 1 is US$39.7m, including contingency of
U$S4.1m or 15% of total direct capital cost
-- 1.6 year (after tax) payback period from first production for Stage 1
based on an average sales price of US$1,112/t
-- Stage 2 expansion is expected to be funded from cashflow
-- Application for Mining Licence is planned to commence by the end of June,
with further updates due shortly
-- Projected timeline to first production is expected to be approximately
10-12 months from the start of construction
The delivery of the updated DFS delivery confirms the enormous
commercial potential of Mahenge and will support ongoing
discussions for binding offtake agreements, debt package finance
for construction and project level development funding. Following
these substantially improved economics to an already attractive
Feasibility Study, a number of initiatives are currently advancing
with respect to project financing and the Company hopes to be in a
position to update the market shortly with respect to one or more
of these workstreams.
Armadale Chairman, Nick Johansen, commented:
"The updated DFS 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, and
as reflected in the significantly improved NPV figures greatly
enhances its already attractive economics.
"The Mahenge project has a long mine life, 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
updated DFS reconfirms the enormous commercial potential of the
Mahenge graphite project and lends strong support to our ongoing
discussions for binding offtake agreements, debt package finance
for construction and project level development funding -- all
workstreams which are in flight and advancing well and which we
hope to provide further updates upon in the near future. In
addition, important work continues with progressing workstreams in
relation to Detailed Design Engineering, and the finalisation of
the Company's application for a full Mining Licence (and thus
furthering major permitting milestones).
"Armadale has continued to deliver a number of key value
accretive milestones in recent months and we look forward to
maintaining this momentum in the near term in order to continue to
build value for shareholders."
Project update summary
Mining
An updated Mine Schedule using a higher-grade cut off of 9% TGC
has resulted in a LOM average production increase of 30% to 109
ktpa.
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
Table 1: The updated mining inventory
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
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.
Table 2: Updated Production Schedule by Year.
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
Key financial metrics
The recently completed DFS 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.
The updated mining schedule and revision of the schedule stage 2
expansion from year 5 to year 4 has resulted in a 20% increase in
project NPV to US$430m. The IRR remains at 91% with a modest less
than 3% increase in capital to US$39.7m.
Further, the average LOM product sales price of $1,112/t
reflects a more conservative product pricing assumption adopted for
the update.
Table 3: Updated DFS key financial metrics
DFS results (Mar
Area Unit 2020) Update Results
Mining inventory (Mt) 14.4 13.4
Mine grade (TGC%) 9.9 12.5
Strip ratio 1.1 2.0
Project Life (years) 17 15
Total LOM Net Revenue (US$ M, real) 1,634 1,823
Total LOM EBITDA (US$ M, real) 981 1,085
Total LOM Net Cash
Flows Before Tax (US$ M, real) 883 985
Total LOM Net Cash
Flows After Tax (US$ M, real) 618 690
NPV @ 10.0% - before
tax (US$ M, real) 358 430
NPV @ 10.0% - after
tax (US$ M, real) 242 292
IRR - before tax (%, real) 91% 91%
IRR - after tax (%, real) 67% 68%
Project Capital
Expenditure (US$ M, real) 38.6 39.7
Payback Period -
after tax (years) 1.6 1.6
Average Sales Price
(LOM) Product (US$/t) 1,179 1,112
Cash Costs (FOB DES) (US$/t, real) 385 369
Sensitivity Analysis
Additional financial sensitivity analysis has been undertaken
and is outlined in tables 4 and 5.
Table 4 NPV sensitivity analysis (before tax)
Base
Key metric 30% Unfavourable 20% Unfavourable 10% Unfavourable Case 10% Favourable 20% Favourable
US$ US$M US$M US$M US$M US$M
Capital
Expenditure 407 415 422 430 437 445
Operating
Expenditure 324 360 395 430 465 500
Grade 224 293 361 430 498 567
Price 192 271 350 430 509 588
LOM Average
Sales Price
$/t 778 889 1000 1112 1223 1334
Table 5 IRR sensitivity analysis (before tax)
Base
Key metric 30% Unfavourable 20% Unfavourable 10% Unfavourable Case 10% Favourable 20% Favourable
Capital
Expenditure 71% 77% 83% 91% 100% 111%
Operating
Expenditure 71% 78% 84% 91% 97% 104%
Grade 55% 67% 79% 91% 103% 114%
Price 49% 63% 77% 91% 104% 118%
The DFS updated financial metrics show a significant improvement
in the already compelling economics of the Mahenge project. The
sensitivity analysis furthers shows robustness of the Project,
where a 30% reduce in product pricing still results a US$192m NPV
and IRR of 49%.
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$985m over an initial 15 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$39.7m, which includes a
contingency of U$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$1,112/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 +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, 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.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20200605005183/en/
CONTACT:
Armadale Capital Plc
SOURCE: Armadale Capital Plc
Copyright Business Wire 2020
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