Armadale Capital (LSE:ACP) advanced 3.9pc to 1p on Friday after finalising the sale of its non-core project in the Democratic Republic of Congo (DRC). The Africa-focused natural resources business has entered a final formal sale agreement for the Mpokoto Project with African Royalty, a subsidiary of Arrow Mining.
The deal will see Arrow take over operations at Mpokoto and pay Armadale a 1.5pc royalty on gold sales once production begins. A feasibility study calculates that Mpokoto can house a 720,000tpa operation producing an average of 24,900oz of gold for four-and-a-half years.
Armadale said the transaction, first announced in October, crystallises Mpokoto’s value with a company capable of taking the mine into production. It also allows it to retain exposure to the project’s development upside.
The company said it can now focus entirely on advancing its flagship asset, the high-grade Mahenge Liandu Graphite project in Tanzania. Mahenge Liandu contains a JORC compliant inferred mineral resource estimate of 51.1Mt at 9.3pc total graphite content. This includes 38.8Mt classified as indicated. A scoping study gave the project an NPV of $349m with an internal rate of return of 122pc, a 1.2 year payback period, and low development costs.
Funds generated from the Mpokoto royalty will support Mahenge Liandu’s development. As of September last year, Armadale said it had been working on beginning a feasibility study at the graphite asset. It hopes this work can confirm the project’s commercial viability.
Company director Nick Johansen said: ‘The board of Armadale is confident that African Royalty and its related parties, who have significant experience of operating in the DRC, represents the best opportunity for Armadale to crystallise the value of the Mpokoto Project and begin receiving returns through the agreed royalty payments on gold sales. We look forward to reporting further news in due course relating to the development of Mpokoto and of our primary value driver, the Mahenge Liandu Project.’
Author: Daniel Flynn
Disclosure: The author does not own shares in the company mentioned in this article