Armadale Capital Plc Interim Results

 
TIDMACP 
 
 

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

26 September 2017

Armadale Capital Plc

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

Interim Results

Armadale, the AIM quoted investment company focused on natural resource projects in Africa, is pleased to announce its interim results for the six months ended 30 June 2017.

Overview

 
 
    -- Primary focus on advancing the high grade Mahenge Liandu Graphite 

Project in Tanzania ('Mahenge Liandu' or 'the Project')

 
    -- High concentrate grades of up to 99.1% TGC produced using low-cost 

processing methods

 
    -- Resource upgrade and increase targeted by the end of 2017 to build 

upon current resource of 40.9Mt @ 9.41% Total Graphitic Carbon

 
    -- Excellent flake size distribution and graphite expandability underpins 

the Project's commercial viability and amenability to range of

applications, including the high growth battery market

 
    -- Additional upside available from the Mpokoto Gold Project in the DRC 

which is being advanced as part of a Joint Venture Agreement

 
    -- Active growth strategy - committed to identifying and investing in 

African resource projects, which offer prospective upside opportunity

Nicholas Johansen, Director of Armadale, said: "Armadale continues to make excellent progress in proving up the commercial viability of our 100% owned Mahenge Liandu graphite project in Tanzania, which is currently our primary development focus within our investment portfolio. Our exploration work in the first half of 2017 has added significant value to the Project, proving that a high-quality graphite concentrate can be produced using relatively simple and ultimately low-cost processing methods. We look forward to building upon these results through an upgrade to both the size and confidence level of the deposit with a resource update targeted later this year. In addition to this being an important step in the overall development of this asset, we also hope this will provide investors with a tool through which to more accurately value Armadale, particularly when comparing our asset to other graphite companies, including neighbouring peers and those listed on the ASX.

"Based on the results received to date, we believe Mahenge Liandu has the potential to produce a high quality, commercial graphite concentrate, which should be suitable for a number of applications, including the fast-growing battery market. Accordingly, we remain committed to the continued advancement of Mahenge Liandu as we establish it as a significant new graphite discovery. Alongside this, we continue to follow the progress of development work being undertaken by our Joint Venture partner at the Mpokoto Gold Project in the DRC, and we maintain an active growth strategy in line with our commitment to build value for shareholders."

Directors' Statement

The six months ended 30 June 2017 have been a productive time forArmadale, which highlighted the Company's ability to execute on its strategic development objectives whilst maintaining a low-cost expenditure model. Our primary focus during the period has been on advancing the Mahenge Liandu Graphite Project in Tanzania, which we believe offers significant value upside potential thanks to its high-grade resource and low-cost processing requirement.

Having declared a maiden resource of 40.9Mt @ 9.41% Total Graphitic Carbon ('TGC') in December 2016, our work efforts during 2017 have centred on further proving up the resource potential of the Project, and we are pleased to report on the success of this strategy.

Looking first at the metallurgical test work we have undertaken during the period, we have successfully produced high concentrate grades of up to 99.1% TGC with low levels of potentially deleterious elements without the use of toxic industrial chemicals. Indeed, the process used to return these grades involved a conventional crushing and flotation circuit, indicating that concentrates of excellent quality can be produced with relatively low processing cost, which should positively impact opex and capex moving forward.

Crucially, during the metallurgical test work, excellent flake size distributions were maintained, with 75% in the higher value sizes above 106µ. It is the larger flake graphite that is most desirable, as this is widely used in the rapidly expanding technology sector and battery market. Of course, whilst flake size is important, it must also be expandable. Thankfully, test work undertaken during the period confirmed the expandability of the graphite mineralisation at Mahenge Liandu, with expansion up to 480 cm³/g reported. With expandability, the range of potential commercial applications increases.

In addition to proving the quality of the resource, the size is also critical. Post period end in August 2017 we completed the first phase of a drill programme, designed to upgrade and expand the existing JORC compliant inferred mineral resource estimate. 2,500m reverse circulation drill holes were completed, which led to the discovery of a 1,200m mineralised strike, with 24 of the 25 holes intersecting at or near surface mineralisation. Alongside this drill work, geological mapping discovered additional areas of graphite mineralisation previously untested. Whilst we await the full results from the drill campaign, a preliminary on-site review of the drilling and mapping gives management confidence that an increase in the resource size and category will be achieved. To deliver this, we plan to undertake a second drill programme over a strike length of 2,400m. This is targeted to commence early next year and we hope to deliver an upgraded resource by the end of the year.

Aside from current operational activity, investors should be aware of the recent legislative changes in Tanzania that have recently become effective - being the Written Laws (Miscellaneous Amendments) Act 2017, the Natural Wealth and Resources (Permanent Sovereignty) Act and the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act 2017. The Board will continue to consider these laws as part of its assessment of the overall viability of Mahenge Liandu, but given that the Project is currently at the exploration level and accordingly does not have a mining licence, there is currently no change to the economic prospectivity of the Project as the legislative changes - as currently passed by the Tanzanian parliament - would not prevent Armadale from progressing with its current business strategy and plans for the development of the Project. Armadale will continue to monitor the implementation of these legislative changes by the Tanzanian Government and where appropriate, engage with the Tanzanian government to ensure the best outcome for both the Government and the Company.

Whilst Mahenge Liandu is our current primary operating focus, we are an investment company and accordingly are committed to the development of our wider portfolio.

Armadale's secondary investment, the Mpokoto Gold Project, which is located in the Democratic Republic of Congo ('Mpokoto') is managed by our partners, Kisenge Mining Pty Ltd ("KMP"), in a joint venture agreement whereby KMP has the option to earn up to an 85% interest (through a two-phase process) in the project through providing funding and projected related services in exchange for advancing the project to a number of development milestones.

Phase I of the joint venture agreement will enable KMP to earn an initial 25% interest by investing up to US$1.25m in the project. This will include undertaking incremental metallurgical test-work, refining the current Definitive Feasibility Study ('DFS') to incorporate financing the project and initial capital works. Over the past six months, KMP has continued to focus on completing a gap analysis of the project data to determine the required steps to bring Mpokoto into production as soon as possible. In addition, KMP has continued to reassess the Mpokoto project with a view to significantly reducing the capex requirements, and this may include adopting a staged production plan. We continue to follow KMP's progress and will keep shareholders updated with progress reports as and when we receive them from KMP.

Armadale also continues to hold a historic interest in Mine Restoration Investments Ltd, which the Board is seeking to divest as we believe this holding is no longer complementary to our investment portfolio. Despite this divestment, we continue to maintain an active growth strategy to identify and invest in African resource projects, which we believe have the potential to offer incremental value in accordance with our stated investing policy.

In terms of corporate matters, Armadale continues to assess opportunities to bring experienced individuals into Armadale's management team, particularly in the role of a UK-based executive, to bolster Armadale's corporate presence in London. The directors hope to be able to update shareholders in the near future.

Cash at the period end stood at GBP292k and the Company continues to manage its cash resources carefully. Armadale is constantly reviewing its capital requirements and is in advanced dialogue with potential sources of finance that will ease the cash constraints on the Company. While there can be no guarantee that such negotiations will be concluded successfully or that any cash will be forthcoming, the Board is confident that it has sufficient support from its major stakeholders and other interested parties to continue its operations over the coming year and beyond.

Finally, we would like to take this opportunity to express our optimism for the future opportunities ahead. Mahenge Liandu continues to exceed our expectations and distinguish itself as a quality graphite project, with the potential to produce a concentrate that we believe will be highly sought after by end customers. With favourable market dynamics thanks to the growing demand for technology metals such as graphite due to developments within the industry, such as the rise of electric vehicles, we believe this is a strategic time to be advancing a project such as Mahenge Liandu and accordingly are keen to prove up the Project's commercial potential. With an active development strategy in place, which should result in a resource upgrade later this year, we look forward to the growth opportunities ahead.

The directors would like to take this opportunity to thank our shareholders, employees and partners for their on-going support and commitment to date in 2017.

For and on behalf of the Board

25 September 2017

FINANCIAL STATEMENTS

FOR THE SIX MONTHSED 30 JUNE 2017

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2017

 
                                         Unaudited           Audited 
                                         Six months ended    Year Ended 
                                         30 June  30 June    31 December 
                                         2017     2016       2016 
                                         GBP'000    GBP'000      GBP'000 
Revenue                                  -        -          - 
Cost of sales                            -        -          - 
Gross profit                             -        -          - 
Administrative expenses                  (252)    (350)      (691) 
Impairment of investments                -        71         (301) 
Profit on disposal of investments        -        -          82 
Finance costs                            (14)     -          (12) 
Loss before tax                          (266)    (279)      (922) 
Taxation                                 -        -          - 
Loss after tax attributable to equity    (266)    (279)      (922) 
holders of the parent  company 
Loss after taxation                      (266)    (279)      (922) 
Other comprehensive income 
Items that may be reclassified 
to profit or loss: 
Exchange differences on translating      9        202        1,017 
foreign entities 
Total comprehensive loss                 (257)    (77)       95 
attributable to the 
equity holders of  the parent company 
                                         Pence    Pence      Pence 
Loss per share attributable 
to equity holders of the 
parent company (note 3)                  (0.11)   (0.29)     (0.62) 
Basic and fully diluted 
 
 

Consolidated Statement of Financial Position

At 30 June 2017

 
                               Unaudited               Audited 
                               30 June 2017  30 June   31 December 2016 
                                             2016 
                               GBP'000         GBP'000     GBP'000 
Assets 
Non-Current assets 
Exploration and evaluation     9,056         5,591     8,779 
assets 
Property, plant                14            20        16 
and equipment 
Investments                    7             45        7 
                               9,077         5,656     8,802 
Current assets 
Investment                     -             257       - 
Trade and other receivables    184           423       160 
Cash and cash equivalents      292           614       116 
                               476           1,294     276 
Total assets                   9,553         6,950     9,078 
Equity and liabilities 
Equity 
Share capital (note 4)         2,978         2,876     2,946 
Share premium                  19,686        17,559    19,010 
Shares to be issued            286           286       286 
Share option reserve           94            182       86 
Loan note reserve              37            -         37 
Foreign exchange reserve       1,119         295       1,110 
Retained earnings              (15,608)      (14,830)  (15,342) 
Total equity                   8,592         6,368     8,133 
Current liabilities 
Trade and other payables       552           582       495 
Loan notes                     409           -         450 
                               961           582       945 
Total equity and liabilities   9,553         6,950     9,078 
 
 

Unaudited Consolidated Statement of Changes in Equity

For the period ended 30 June 2017

 
                Share    Share Premium  Shares to be  Share Option  Loan Note  Foreign   Retained  Total 
                Capital  GBP'000          Issued        Reserve       Reserve    Exchange  Earnings 
                GBP'000                   GBP'000         GBP'000         GBP'000      Reserve   GBP'000     GBP'000 
                                                                               GBP'000 
Balance         2,824    16,585         286           182           -          93        (14,551)  5,419 
1 
January 
2016 
Loss for        -        -              -             -             -          -         (279)     (279) 
the 
period 
Other           -        -              -             -             -          202       -         202 
comprehensive 
income 
Total           -        -              -             -             -          202       (279)     (77) 
comprehensive 
loss 
for the 
period 
Issue of        52       1,074          -             -             -          -         -         1,126 
shares 
Expenses        -        (100)          -             -             -          -         -         (100) 
of issue 
Total           52       974            -             -             -          -         -         1,026 
other 
movements 
Balance         2,876    17,559         286           182           -          295       (14,830)  6,368 
30 
June 
2016 
Loss for        -        -              -             -             -          -         (642)     (642) 
the 
period 
Other           -        -              -             -             -          815       -         815 
comprehensive 
income 
Total           -        -              -             -             -          815       (642)     173 
comprehensive 
income 
for the 
period 
Issue of        70       1,467          -             -             -          -         -         1,537 
Shares 
Expenses        -        (16)           -             -             -          -         -         (16) 
of issue 
Share           -        -              -             34            -          -         -         34 
based 
payment 
charges 
Transfer        -        -              -             (130)         -          -         130       - 
on 
expiry 
of 
options 
Equity          -        -              -             -             37         -         -         37 
element 
of 
convertible 
loan 
notes 
issued 
Total           70       1,451          -             (96)          37         -         130       1,592 
other 
movements 
Balance         2,946    19,010         286           86            37         1,110     (15,342)  8,133 
31 
December 
2016 
Loss for        -        -              -             -             -          -         (266)     (266) 
the 
period 
Other           -        -              -             -             -          9         -         9 
comprehensive 
income 
Total           -        -              -             -             -          9         (266)     (257) 
comprehensive 
loss 
for the 
period 
Issue of        32       737            -             -             -          -         -         769 
shares 
Expenses        -        (61)           -             -             -          -         -         (61) 
of issue 
Share           -        -              -             8             -          -         -         8 
based 
payment 
charges 
Total           32       676            -             8             -          -         -         716 
other 
movements 
Balance         2,978    19,686         286           94            37         1,119     (15,608)  8,592 
30 
June 
2017 
 
 

The following describes the nature and purpose of each reserve within shareholders' equity:

 
Reserve                    Description and purpose 
Share capital              Amount subscribed for share 
                           capital at nominal value 
Share premium expenses     Amount subscribed for share capital in excess 
                           of nominal value, net  of allowable 
Shares to be issued        Value of share capital to 
                           be issued in connection 
                           with the  acquisition of Netcom 
Share option reserve       Reserve for share options granted 
                           but not exercised 
Foreign exchange reserve   Gains/losses arising on re-translating the net 
                           assets of overseas  operations into sterling 
Retained earnings          Cumulative net gains and losses recognised 
                           in the statement of  comprehensive income 
 
 

Consolidated Statement of Cash Flows

For the period ended 30 June 2017

 
                                 Unaudited              Audited 
                                 Six Months ended 
                                 30 June 2017  30 June  31 December 2016 
                                               2016 
                                 GBP'000         GBP'000    GBP'000 
Cash flows from operating 
activities 
Loss before taxation             (266)         (279)    (922) 
Depreciation                     2             6        12 
Unrealised foreign exchange      22            8        - 
differences 
Loan note accretion              6             -        5 
Impairment of investments        -             (71)     301 
Profit/Loss on sale              -             85       (82) 
of investments 
Loan note interest accrued       8             -        7 
Share based payment charge       8             -        34 
Shares issued in settlement      31            110      327 
of liabilities 
                                 (189)         (141)    (318) 
Changes in working capital 
Receivables                      (24)          (240)    22 
Payables                         57            327      155 
Net cash used in operating       (156)         (54)     (141) 
activities 
Cash flows from investing 
activities 
Expenditure on exploration       (258)         (560)    (1,046) 
and evaluation assets 
Purchase of listed investments   -             -        - 
Sale of listed investments       -             62       154 
Net cash used in investing       (258)         (498)    (892) 
activities 
Cash flows from financing 
activities 
Proceeds from issue of shares    651           1,105    1,105 
Issue costs                      (61)          (100)    (117) 
Net cash from financing          590           1,005    988 
activities 
Net increase in cash             176           453      (45) 
and cash equivalents 
Cash and cash equivalents        116           161      161 
at 1 January 2017 
Cash and cash equivalents        292           614      116 
at 30 June 2017 
 
 

Notes to the unaudited condensed consolidated financial statements

For the period ended 30 June 2017

1.Incorporation and principal activities

Country of incorporation

Armadale Capital Plc was incorporated in the United Kingdom as a public limited company on 19 August 2005. Its registered office is 55 Gower Street, London WC1E 6HQ.

Principal activities

The principal activity of the Group during the period was that of an investment company.

2.Accounting policies

1.Statement of compliance

The financial information for the six months ended 30 June 2017 and 30 June 2016 is unreviewed and unaudited and does not constitute the Group's statutory financial statements for those periods within the meaning of Section 434 of the Companies Act 2006. The comparative financial information for the year ended 31 December 2016 has been derived from the Annual Report and Accounts, which were approved by the Board of Directors on 31 May 2017 and delivered to the Registrar of Companies. The report of the Auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

This condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. This condensed set of financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2016 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2016 as described in those annual financial statements.

2.2.Going Concern

The financial statements have been prepared on the going concern basis as, in the opinion of the Directors, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

2.3.Exploration and evaluation assets

These assets are recorded at cost and are amortised over their expected useful life on a pro rata basis of actual production for the period to expected total production.

2.4.Investments

Investments are stated at cost less provision for impairment.

3.Loss per share

The calculation of basic loss per share is based on a loss of GBP266,000 (2016, GBP279,000) and on 235,679,376 (2016, 95,438,033) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.

There is no difference between basic loss per share and diluted loss per share as the Group reported a loss for the period.

Share capital

During the period, the Company placed 26,030,000 Ordinary Shares in the Capital of the Company to raise GBP651,000 (590,000 after expenses) with institutional and other investors.

During the period, GBP86,874 of convertible loan notes, including accrued interest, were converted into 4,343,724 Ordinary Shares in the capital of the Company.

During the period, payment was made for services costing GBP31,000 supplied to the Company by the issue of 1,250,000 Ordinary Shares in the capital of the Company.

For further information, please visit www.armadalecapitalplc.com or follow us on Twitter @ArmadaleCapital.

**ENDS**

 
Enquiries: 
Armadale Capital Plc                        [phone] 
Tim Jones, Company Secretary 
Nomad and broker: finnCap Ltd               [phone] 
Christopher Raggett / Simon Hicks 
Joint Broker: Beaufort Securities Limited   [phone] 
Jon Belliss 
PR & IR: St Brides Partners Ltd             [phone] 
Susie Geliher / Charlotte Page 
 
 

Notes

Armadale Capital Plc is focused on investing in and developing a portfolio of investments, targeting the natural resources and/or infrastructure sectors in Africa. The company, led by a team with operational experience and a strong track record in Africa, has a strategy of identifying high growth businesses where it can take an active role in their advancement.

The Company owns the Mahenge Liandu graphite project in south-east Tanzania. The project is located in a highly prospective region with proven coarse flake, high grade graphite resources - ASX listed Kibaran and Black Rock have both identified and are developing significant proven and valuable graphite projects immediately adjacent to Mahenge Liandu. A mineralised trend about 1.6km in strike length and up to 500m wide has been identified at the project, which remains open at depth. Armadale geologists have mapped and sampled the graphite schist, with results from seven previous samples ranging from 12.8% - 24.0% TGC. Exploration drilling completed at the project in December 2015 has further confirmed the mineral potential of the license area, with results including 10mt at 6.54% TGC, 24mt at 12.9% TGC and 5mt at 21.5% TGC. Armadale is targeting a maiden resource estimation in late 2016.

In addition, Armadale is developing of the Mpokoto Gold project in the Democratic Republic of the Congo, in which it owns an 80% interest. Mpokoto has a current Total Mineral Resource of 678,000oz gold ('Au') from 14.58mt @ 1.45g/t Au at a cut-off grade of 0.5g/t. The company has recently announced the results of a feasibility study for Mpokoto which demonstrated a pre-tax net present value of US$43m based upon a discount rate of 5% and a gold price of US$1,250/oz. The project is subject to four mining licenses which are valid for an initial term of 30 years from 30 September 2014.

Armadale has a portfolio other quoted investments.

More information can be found on the website www.armadalecapitalplc.com.

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September 26, 2017 02:00 ET (06:00 GMT)