Shares in Armadale Capital (LSE:ACP) advanced 1.5pc on Wednesday morning after the business announced that it is fast-tracking plans to commercialise its flagship Mahenge Liandu graphite project. With a definitive feasibility study (DFS) for the Tanzania-based project due to complete in Q4 2019, the £4.4m firm said it is now focused on accelerating the various additional workstreams needed to reach production.
Mahenge 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 organisation, Mahenge 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.
As part of its acceleration efforts, Armadale’s management team will hold meetings with current and prospective Chinese parties in early June to finalise binding off-take and project funding agreements. According to Armadale, securing these agreements will validate Mahenge Liandu and mark the start of the company’s transition from graphite explorer to emerging mining.
As part of this work, test-work on fresh samples at Bureau Veritas’s facility in Perth is focusing on maximising the quality of Mahenge Liandu’s graphite product. Specifically, the work is aimed at enhancing purity levels for a certain volume of output, something that Armadale’s director Nick Johansen believes will highlight the project’s ‘true value’ to potential Chinese partners.
‘Our most important task is to ensure that a high-purity graphite product, which attracts a material price premium, can be consistently produced,’ he added in Wednesday’s release.
Previous results from the region where Mahenge Liandu is based have confirmed the potential to produce high-value produce from graphite deposite. As such, results from Bureau Veritas’s test-work programme are being used in Mahenge Liandu’s plant design, which is being progressed by a leading Chinese group. This group has used the data to provide an update on engineering, procurement, and constructing pricing that will be factored into the Mahenge Liandu DFS.
Armadale will also be fast-tracking its work on a graphite resource update as part of its acceleration efforts. This new figure – expected by the end of June - will incorporate the latest topographics survey data and the most recent round of reverse circulation and diamond drilling. The results of the update will then be used in the mine planning phase of Mahenge Liandu’s DFS.
Elsewhere, Armadale has collected water samples from bore-holes around Mahenge Liandu’s proposed mining site for testing to ensure suitability during mine construction and within the process plant. Armadale said the ability to use this groundwater rather than securing liquid from a third-party source will be an ‘important cost-saving development’ when mining operations begin.
Finally, Armadale said it has increased its engagement work with local community groups as part of its efforts to fast-track Mahenge Liandu’s commercialisation. This has so far involved donating food and necessary supplies to schools and well-being services.
‘Looking beyond the completion of the DFS, which is targeted for year-end, the Board is now focused on fast-tracking the various work streams critical to bringing the Mahenge Liandu Graphite Project into commercial production,’ added Johansen. ‘Our most important task is to ensure that a high-purity graphite product, which attracts a material price premium, can be consistently produced. In tandem, the team are finessing details for the processing plant, which has an initial capacity of 400ktpa, and at the same time are ensuring ground-water suitability at site.
‘Most importantly, we are ensuring our traction with the local community at Mahenge Liandu remains strong, as their ongoing support is critical to commissioning the Project. We look forward to providing shareholders with further regular updates as the Board moves to fast-track efforts towards transitioning from explorer towards emerging miner.’
The 29.9km2 Mahenge Liandu project 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. A scoping study completed in March last year gave the project 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 £4.4m. 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.
To read MiningMaven’s in-depth interview with Armadale’s management team on the company’s prospects and predictions for the graphite market, please click here.
Author: Daniel Flynn
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.