Graphite-focused firm Armadale Capital (LSE:ACP) sat at 1.36p a share on Wednesday after announcing steady progress at its flagship Mahenge Liandu project and favourable commodity market conditions. The business – which currently has a £5.1m market cap – has appointed leading international laboratory Bureau Veritas to conduct metallurgical test work at the Tanzania-based project.
Armadale said the work will support previous tests at Mahenge Liandu that have shown ‘excellent flake size distribution and exceptional purity’. Specifically, these efforts confirmed that concentrates from the project can be upgraded readily to over the 99.95pc required to suit the rapidly expanding lithium-ion and expandable graphite markets.
The company has now delivered a shipment of 1.6ts of diamond core to Perth, Australia, where it will undergo metallurgical testing to produce a concentrate that will enable completion of final plant design. The concentrate samples will also be used to assist commercial discussions and downstream product test work.
Armadale added that its metallurgical work is on schedule for completion in June, while downstream test work results confirming product quality are scheduled for July.
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. According to the firm, the project 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 based on a conservative $1,272/t basket graphite price.
The metallurgical work detailed on Wednesday marks a crucial step towards the completion of Armadale’s ongoing definitive feasibility study (DFS) at Mahenge Liandu, on track for the final quarter of this year. These DFS results will contribute to the company’s ultimate decision on whether to mine the project.
Elsewhere in Wednesday’s update, Armadale said it believes that an increasing amount of value is being placed on higher purity, higher quality graphite concentrates. To demonstrate its point the business pointed to Black Rock, which owns a graphite project neighbouring Mahenge Liandu. The company recently announced binding sales agreements at materially higher than benchmark prices for higher purity concentrates, and significantly higher than the $1272/t used in Armadale's scoping study.
On this, Armadale’s director Nick Johansen added: ‘Should Mahenge Liandu secure higher average price binding sales agreements, based on enhanced product quality, this will positively impact the product fundamentals including NPV and IRR calculations. These were already robust: NPV of US$349m and IRR of 122%.’
With this in mind, Johansen said Mahenge Liandu is gathering ‘considerable interest’ from third parties, with discussions to date demonstrating a ‘clear interest’ in providing project-level financing. ‘We anticipate [that these] will fall into place in a timely manner, given the completion of our DFS schedule for this year,’ he added.
To read MiningMaven’s recent in-depth interview with Armadale’s management team covering the company’s portfolio and macro outlook for its associated commodity markets, please click here.
Author: Daniel Flynn
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