Shares in Armadale Capital (LSE:ACP) sat at 1.1p on Tuesday morning after the graphite-focused firm revealed several areas of substantial progress at its flagship Mahenge Liandu project in Tanzania.

Armadale said initial metallurgical test-work results for the project, which it is currently advancing towards commercialisation, demonstrated graphite recovery of up to 95pc total graphite content (TGC). Although this is consistent with expectations, the organisation is now completing incremental test-work to enhance the quality of its final graphite concentrate product.

It added that this new stage of metallurgical work is ‘progressing well’, with targeted premium purity levels currently sitting in the 95-97pc range. Such an enhancement would place Mahenge Liandu towards the high-end of graphite project globally, potentially facilitating premium pricing being factored into future offtake agreements.

Elsewhere, Armadale said that a review of local rainfall data has indicated that the project will have enough surface water for both mining and processing. The use of surface and recycled water will minimise run-off from the site and into surrounding communities.

Meanwhile, the business said further test-work has confirmed that water bores can be used in Mahenge Liandu’s process plant, mine construction, and operation phases and that groundwater can be used in drought conditions. These reduce the need for a bore field to be constructed to supply water, cutting overall project costs.

Finally, Armadale said it recently held a meeting with a director of the council committee of the nearby Liandu village. This saw both parties agree that their existing relationship has delivered ‘considerable value’ to the community over the past two years and should continue.

Mahenge Liandu boasts a high-grade JORC-compliant indicated and inferred mineral resource estimate of 51.1Mt at 9.3% TGC. This includes 38.7Mt at 9.3pc TGC and 12.4Mt at 9.1pc TGC, making the project one of the most considerable high-grade resources in Tanzania.

Armadale is currently in the processing of completing a definitive feasibility study (DFS) for the project based on the results of a scoping study that was completed in March last year. This DFS is scheduled to end in Q4 this year.

The firm’s scoping study suggested that Mahenge Liandua could produce an average of 49,000tpa worth of high-quality graphite products for a 32-year mine life – with plenty of upside potential. Other highlights included an operating cost of $408/t, based on an average 12.5pc TGC life of mine grade, a pre-tax IRR of 122pc and an NPV of $349m with a low development capex of $35m.

Towards the end of last month, Armadale notably revealed what it described as ‘exceptionally high-grade assay results’ for the first four holes in an 18-hole reverse circulation drill programme at Mahenge Liandu. High-grade near-surface assayed intercepts recorded included 7m at 6.9pc TGC from 31m, 7m at 16.8pc TGC from surface, and 9m @ 14.8pc TGC from surface.

In Tuesday’s update, Armadale’s director Nick Johansen hailed the company’s latest progress as it moves towards ‘aggressively ramping up’ its efforts to transform from explorer to emerging graphite producer.

‘With many moving parts critical to developing a seamless value chain for the Mahenge Liandu Project, it is pleasing to receive metallurgical test-work that is progressing to plan and with results in line with expectations. This will augur favourably as we move more proactively to secure binding off-take commitments and project level financing from our Chinese partners,’  he added. ‘It is also a positive outcome that surface water will be the primary water source as, along with the potential to price our final graphite product at a premium, this will also deliver a positive uplift on the Project’s overall economics.’

To read our recent look into whether investors are missing a major opportunity at Armadale Capital as graphite prices soar, please click here.

Author: Daniel Flynn

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