Armadale Capital Plc / Index: AIM / Epic: ACP / Sector: Investment Company

27 February 2024

Armadale Capital Plc

('Armadale' the 'Company' or the 'Group')

Mahenge Project Update

Armadale, the AIM quoted investment company focused on natural resource projects in Africa, announces an update on its Mahenge Liandu Project in Tanzania (the "Project").

The Company continues to focus on finalising the structure of the Government of Tanzania's 16% free carried interest of the Project and on securing project funding to allow the commencement of commercial production at the Project. While securing funding continues to remain challenging in the resources sector, strong global demand for high quality graphite remains.

Discussions continue to progress with the Government of Tanzania regarding the framework and structure for their 16% carried interest. The Company is hopeful this will be finalised in conjunction with project funding.

The Company is continuing the baseline environmental monitoring on site and has continued to work on the transport logistics planning for the Project. However, work on the FEED study has been scaled back in light of the challenging market conditions in order to preserve funds available on achieving development funding.

The Company is continuing discussions with several potential financiers regarding the debt funding required for Project development. Continued strong demand fundamentals for graphite remain in place and there is projected to be an increasing demand as production of electric vehicles continues to increase.

Graphite prices remain substantially above the prices used in the Company's feasibility study and the Board believes that these pricing levels will continue to be robust due to expected demand from the electric vehicle sector. Discussions with potential offtake partners continue.

Nick Johansen, Director of Armadale, said: "With the global graphite market in the midst of a cyclical upswing, due to strong underlying fundamentals stemming from the buoyant EV sector, the Board remains focused on plans to finalise the framework agreement with the Tanzanian government regarding their 16% ownership. More importantly, the Board is re-doubling efforts to secure long-term project finance from a reputable provider to generate a clear road map to commissioning commercial operations."

The feasibility study completed in March 2020 confirmed Mahenge Liandu potential to be a significant supplier of high quality graphite with a relatively low capex.

·    US$882m pre-tax cashflow generated from initial 17 year mine life utilises just 25% of the resource, which remains open in multiple directions offering significant further upside

·    Estimated pre-tax NPV of US$358m and IRR of 91% with scope for further positive improvement upon economics in near-term through delivery of optimised DFS

·    Staged ramp-up planned to facilitate near term production with 60,000tpa graphite concentrate to be produced for the first four years (Stage 1) before increasing to 90,000tpa (Stage 2)

·    Capital cost estimate for Stage 1 is US$38.6m, which includes a contingency of U$S4.1m or 15% of total direct capital cost, a slight increase on the scoping study allowing for the staged ramp up

·    1.6 year payback for Stage 1 (after tax) based on an average sales price of US$1,179/t

·    Stage 2 expansion is expected to be funded from cashflow