Armadale Capital (LSE:ACP) rose 2.13pc to 1.2p on Friday morning after announcing progress towards the completion of a definitive feasibility study (DFS) for its flagship Mahenge Liandu graphite project in Tanzania.
The firm said a final environmental and social impact assessment report for the project found that the potential impact of graphite mining and processing can be reduced, limited, and eliminated using ‘appropriate mitigation measures’. The report was informed by consultations with various local authorities and includes baseline environmental data that looked at ways to reduce the impact of mining at the site.
Armadale said it has also completed a decommission implementation plan that considers ways to use the Mahenge Liandu side after mining completes. As part of this, the firm has examined ways to reduce the long-term impact of mining.
Elsewhere, the firm said it has also received a relocation action plan (RAP) covering the proposed 9km2 mining licence at Mahenge Liandu. According to Armadale, the area affected by the project has limited areas of development and a low population density. As a result, the company anticipates a low compensation cost relative to the overall capital requirement of the project.
Finally, Armadale added that it is finalising its comments to both the ESIA report and the RAP and expects to submit both to the National Environment Management Council of Tanzania by the end of April.
The company’s director Nick Johansen said: ‘We are very pleased with the speed at which the DFS is advancing as we look to advance the world-class Mahenge Liandu Graphite Project in south-east Tanzania and establish a significant high-grade graphite mine. Both the ESIA Report and RAP are integral to this process, enabling us to apply for a mining licence, so we are delighted with the findings that appear favourable. We are now completing our in-house work on these documents and look forward to submitting both to the NEMC shortly. Other multiple workstreams are ongoing regarding the DFS and commercial discussions related to the Project; we anticipate updating the market with further progress in the near term.’
Mahenge Liandu is a high-grade coarse flake asset that Armadale expects to become a strategically-valuable ‘world-class’ supplier to the lithium-ion battery sector once it enters production. The 29.9km2 site is based in the Neoproterozoic system of high-grade metamorphic rocks with easy access to strong infrastructure and Tanzania’s most populous city, Dar es Salaam.
According to Armadale, Mahenge Liandu is one of the highest-grade, large flake deposits in the world, with a JORC-compliant, inferred mineral resource estimate of 51.1Mt at 9.3pc total graphite. A scoping study completed in March last year gave the site a pre-tax NPV of $349m (£261.7m) and an internal rate of return (IRR) of 122pc; in comparison, Armadale’s market cap currently sits at just £4.61m. What’s more, these calculations are based on a conservative basket graphite price of $1,272/t.
The project has a payback period of just 1.2 years, based on low capex requirements of only $35m after tax and a mine life of 32 years at 400,000tpa (c.49,000tps of graphite concentrate). Armadale believes this life of mine could be increased significantly, with current figures representing just a quarter of Mahenge’s total resource.
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Author: Daniel Flynn
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