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Armadale Capital Plc / Index: AIM / Epic: ACP / Sector: Investment Company
11 July 2016
Armadale Capital Plc ('Armadale' or 'the Company')
Completes Acquisition of High Grade Graphite Project in Tanzania
Armadale, the AIM quoted investment company focused on natural resource projects in Africa, is pleased to announce that further to the announcement on 2 June 2016 it has completed the acquisition of the Mahenge Liandu Graphite Project in south-east Tanzania ('Liandu Project').
Highlights
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Successfully completes acquisition of Liandu Project in Tanzania, furthering Armadale's strategy to build a portfolio of highly valuable African resource projects with near term revenue generation potential - complements wider portfolio including Mpokoto Gold Project, which has near term production potential
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Liandu project Neighbours Kibaran Resources Limited (ASX: KNL), with a market cap of approximately A$100 million, and with ThyssenKrupp as their offtake partner
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Graphite identified by Armadale as a high-demand strategic commodity - capitalising on the strong outlook for graphite from the burgeoning battery market
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Liandu Project has high grade coarse flake graphite - demonstrated with up to 33.8% Total Graphite Content ('TGC') from rock chip sampling and previous drilling confirmed 60m @ 10.7% TGC, including 24m @ 12.9% TGC and 5m @ 21.5% TGC
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Exploration programme underway and drilling campaign anticipated to commence in Q3 2016
Peter Marks, Chairman of Armadale said,
"Graphite has been identified and prioritised by the Armadale team as a high demand commodity with significant strategic value as an essential component of the modern lithium- ion battery. The Liandu Project provides Armadale with ground-floor access to this rapidly growing market whilst limiting exploration risk, due to the project's location in a premier graphite bearing region, which includes being contiguous to well established high grade graphite projects. We are now preparing to launch our initial exploration programme at Liandu, with drilling to commence in the coming weeks, and we look forward to newsflow stemming from this work over the course of 2016, including a maiden resource.
"I believe that this diversification of our commodity focus provides Armadale shareholders with an interesting and complementary investment profile; with exposure to a commodity with exciting growth prospects in graphite, coupled with the traditional safe-haven and store of value in gold, Armadale is strategically positioned for growth. I believe this offers existing and
potential new shareholders with a unique development opportunity and I look forward to reporting further on both sides of our exploration and development portfolio over the coming months."
Further Information on the Liandu Project
The Liandu Project is located in the Ulanga District in south-east Tanzania approximately 300km south west of Morogoro, and 10km from the town Mahenge. The area is highly prospective for graphite with the Mahenge properties located immediately to the east of Kibaran Resources (ASX:KNL) ('Kibaran') Epanko Project where Kibaran completed a bankable feasibility study ('BFS') in July 2015, with the following key findings:
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Proven and Probable Ore Reserves of 10.9Mt at 8.6% TGC
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Annual EBITDA of US$33.6m for 15 years
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Revenue Price US$1,466/t of concentrate, opex FOB Dar es Salaam $570/t
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Metallurgical Results: 85.7% of distribution > than 106 micron, carbon conc. of 96.3% TGC
Black Rock Mining (ASX:BKT) ('Black Rock') Mahenge Project is situated only 1km north-west of the Liandu Project and has a global resource of 131Mt at 7.9% TGC (including 38Mt at 10.2% TGC or 16.6 Mt at 11.1% TGC). Black Rock has delineated approximately 80% of their resources in eight months demonstrating the opportunity to add significant value to the Liandu Project in a short time frame. On 22 March 2016 Black Rock announced the results of an Independent Scoping Study with:
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52,000 tpa graphite concentrate mining operation (25 year mine life);
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at cash costs of US$458/t; and
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a sales price of US$1,236/t (FOB Dar es Salaam).
As reported on 20 June 2016, high grade graphite mineralisation of up to 33.8% TGC has been demonstrated through analysis of rock chip samples taken from the Liandu Project. These results were collected by Armadale and are in addition to the initial high-grade discovery. Previous drilling confirmed high-grade mineralisation from surface 60m @ 10.7% TGC, including 24m @ 12.9% TGC and 5m @ 21.5% TGC. The samples were taken from graphite schist outcrops over a 1.5km of strike that was mapped by the previous owner surrounding the initial discovery holes.
Exploration Programme
An exploration programme has been finalised for the Liandu Project. The first phase of work has commenced and will consist of a ground electromagnetic ('EM') survey in conjunction with on-going geological mapping. The objective of both the EM survey and geological mapping is to generate targets for Reverse Circulation ('RC') drilling. The amount of drilling required will be determined at the conclusion of the first phase of the exploration campaign but will include some diamond drilling to obtain samples for metallurgical test work and
enough RC drilling to achieve a JORC compliant resource, which is anticipated to be published by the end of 2016.
Global demand for spherical graphite
The recently published Benchmark Mineral Intelligence (5 June 2016) believes that there is a major paradigm shift occurring at a micro level in the spherical graphite market. Currently nearly all natural spherical graphite is produced in China, where production has expanded over the last year. Increasing demand has seen prices of uncoated spherical graphite increase over recent months. Whilst Chinese production of spherical graphite is increasing, it is anticipated that new sources of production will be needed to service emerging customers such as Tesla and other lithium-ion battery producers. Armadale, through the acquisition of the Liandu Project, is seeking benefit from this macro dynamic, and the anticipated growth in demand for natural spherical graphite, by becoming a supplier of spherical graphite to the lithium-ion battery sector.
Terms of the Acquisition
The Company has today entered into a share purchase agreement to acquire 100% of the issued share capital of Graphite Advancement Pty Limited ('GAP'), which owns the Liandu Project (the 'Acquisition'). The aggregate consideration payable is the issue of:
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57.5 million ordinary shares of 0.1 pence each in the Company ('Consideration Shares'); and
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£450,000 of unsecured convertible loan notes ('Loan Notes').
The Consideration Shares will be issued to the vendors of GAP on Admission to trading on AIM. Following completion of the Acquisition the Vendors will hold 28.9% of the issued share capital of the Company.
The Loan Notes are to be issued to the vendors of GAP in proportion to their shareholding in GAP. The Loan Notes are unsecured, pay interest equivalent to 10% per annum of the face value and are convertible into Ordinary Shares at 2p per Ordinary Share, together with any interest owing. The Loan Notes convert 12 months from issue and may be converted earlier at the option of the Company, so long as such conversion does not result in the holders owning more that 29.9% of the Company.
Kabunga Holdings Pty Ltd ('Kabunga'), An experienced investor in African focused mineral exploration, has been issued with 25,243,749 Ordinary Shares equating to approximately
12.73 percent of the Company's issued share capital. A net smelter royalty ('NSR') is payable by GAP Tanzania to Kabunga. The NSR is a 3% royalty on the net proceeds of sale of product from the Liandu Project pursuant to a royalty agreement between GAP and Kabunga. Kabunga had granted the Company the right to acquire 50% of the NSR at a price to be agreed. Kabunga , which will hold approximately 12.73% of the Company following the
completion of the Acquisition, has the right to nominate a director to the board of the Company.
If at any time within a period of 12 months following the completion of the Acquisition, either of Kabunga or BBD Custodians Pty Ltd, whom in aggregate hold 50.5% of GAP (the Principal Vendors) wishes to sell, transfer, or otherwise dispose of any of the Consideration Shares it holds and which represent 3% or more of the total issued capital in the Company, the Principal Vendor will first notify the Company in writing, providing reasonable details of the intended sale, transfer or disposal (including the minimum proposed sale price for the shares in question) and allowing the Company a period of 7 Business Days within which to secure a prospective purchaser for those Consideration Shares. If no such purchaser can be secured within that 7 Business Day period, the relevant vendor will be free to sell, transfer or otherwise dispose of those Consideration Shares.
Admission
The Company has today agreed to issue the Consideration Shares. The issue of the Consideration Shares is subject, inter alia, to admission of the Consideration Shares to trading on AIM ('Admission'), which is expected to occur at 8am on 14 July 2016. Application has been made to the London Stock Exchange for the Consideration Shares to be admitted to trading on AIM. The Consideration Shares will, when issued, rank pari passu in all respects with the Company's existing Ordinary Shares.
Following Admission, the Company will have 198,301,967 Ordinary Shares in issue. The Company has no shares in treasury, therefore the figure of 198,301,967 should be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change of their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.
Competent Person statement
The information in this announcement that relates to Exploration Results is based on information compiled by Mr Peter Sheehan (Principal Consultant for Newport Mining Services), a Competent Person, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Sheehan has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Sheehan consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
**ENDS**