Armadale Capital Plc / Index: AIM / Epic: ACP / Sector: Investment Company
Armadale Capital Plc
('Armadale' or 'the Company')
Final Results and Notice of AGM
Armadale Capital plc (LON: ACP), the AIM quoted investment group focused on natural resource projects in Africa, is pleased to announce its final results for the year ended 31 December 2020 ('Final Results' or 'Annual Report'). The Company also announces that its Annual General Meeting ('AGM') will be held at Suite 2, 1 Altona Street, West Perth, Western Australia on 28 June 2021 at 17.00 AWST (10:00 BST). A notice of AGM, together with printed copies of the Company's full Annual Report for the year ended 31 December 2020 will be posted to shareholders. Copies will also be available to view on the Company's website: www.armadalecapitalplc.com.
Strategic Report
Operational and Corporate Highlights for Period Ended 31 December 2020
Significant progress made in delivering key accretive milestones in advancing the Mahenge Liandu Graphite Project in Tanzania
1. Completed Definitive Feasibility Study for Mahenge Liandu graphite project (March 2020)
2. Updated Mine Plan to materially increase production increasing average annual output from 80ktpa to 109ktpa of concentrate over life of mine
3. Delivered update to Definitive Feasibility Study (June 2020) folding in results from revised Mine Schedule using higher-grade cut off of 9% Total Graphitic Carbon ('TGC'), higher strip ratio of 1.95:1, and a rescheduled Stage 2 expansion. A significantly increased production profile (30%) over the March 2020 Definitive Feasibility Study
Updated Definitive Feasibility Study - Key Data
i) US$985m pre‐tax cashflow generated from initial 15 year mine life
ii) Estimated pre‐tax NPV of US$430m (utilising a discount rate of 10%) and IRR of 91%
iii) Staged ramp‐up planned to facilitate near term production with 60,000tpa graphite concentrate to be produced for the first three years (Stage 1) before increasing to 109,000tpa (Stage 2)
iv) Capital cost estimate for Stage 1 is US$39.7m, which includes a contingency of U$S4.1m or 15% of total direct capital cost
v) 1.6-year payback for Stage 1 (after tax) based on an average sales price of US$1,112/tonne. Stage 2 expansion is expected to be funded from cashflow
4. Metallurgical test work carried out by Bureau Veritas in Perth confirms Mahenge can produce high quality, high purity graphite, with conventional technology achieving consistent purity of above 97% TGC, some of the highest grades in the sector.
This work also confirmed:
i) Large proportion of concentrates in the medium size fractions, ideally suited to the battery market
ii) Coarser grind sizes can retain a larger proportion of larger flake sizes, suited to the expandable and graphite foil markets
iii) Results are typical of the high purity smaller and medium flake size in the Mahenge graphite province
5. Engagement of leading supplier of graphite process plants Xinhai Mineral EPC, to commence metallurgical bulk test work as part of the first phase of the Front-End Engineering Design Studies ('FEED Studies')
6. Mining licence application submitted
7. Advancing workstream to secure project level funding mandate, with NDAs signed with a number of parties (strategic investors, debt providers and potential JV partners)
8. Offtakes MOU signed with a number of parties with significant interest shown from additional offtake partners keen to secure high-grade, high-purity Mahenge graphite. Advancing workstream to progress to binding offtakes
Post Period End - advancing all workstreams
1. CSIRO (Australia's Commonwealth Scientific and Industrial Research Organisation) testwork confirmed natural flake graphite from Mahenge graphite project as a premium quality product with the exceptionally high purity and characteristics required for use in lithium-ion batteries
2. Successful results from first phase FEED studies by Xinhai establishes that the selection of equipment used in the feasibility study and confirms the low capex high margin project economics. Positive testwork a major de-risking step in confirming process flowsheet as per Definitive Feasibility Study
3. Environmental and Social Impact Assessment ('ESIA') formally granted by National Environment Management Council ('NEMC') of Tanzania
4. Ongoing review of quoted portfolio, where the Directors believe there are opportunities for capital gains
5. Continue to actively review other exciting investment opportunities
During the year under review, Armadale continued to operate as a diversified investing company natural resource projects in Africa. To this end, its portfolio is divided into two groups:
· Actively managed investments where the Company has majority ownership of the investment; and
· Passively managed investments where the Company has a minority investment, typically in a quoted company, and does not have management control.
Currently, the Company's key actively managed investment is the Mahenge Liandu Graphite Project in Tanzania.
PASSIVELY MANAGED INVESTMENTS
Mine Restoration Investments Limited ('MRI'), South Africa
The shares in MRI are being carried at Nil market value (2019: Nil) as MRI shares were suspended from trading on the Johannesburg Stock Exchange. The MRI shares continued to be suspended throughout the year.
Quoted Portfolio
The Company has a small portfolio of quoted investments, principally in resource companies where the Directors believe there are opportunities for capital gain. The Company continues to keep its portfolio under review. The Company's strategy with its quoted portfolio is to gain exposure in projects that have the potential to create short to medium term returns for the Company as well as diversify the Company's exposure to a broader range of commodities while being able to enter and exit the position with minimal cost and time.
The Company continues to hold its strategic investment in Forum Energy Metals Corp, a company incorporated in Canada and listed on the Toronto Stock Exchange, which the Company acquired in 2019.
SUSTAINABLE DEVELOPMENT
The Company is committed to sustainable development and conducting its business ethically. Given that the Company invests in the mining industry, one of its key focuses is on maintaining a high level of health and safety, environmentally responsibility, and support for the communities close to its investments.
CORPORATE INFORMATION
Principal risks and uncertainties
There are known risks associated with the mineral industry, especially in Africa. The Board regularly reviews the risks to which the Group is exposed and endeavours to minimise them as far as possible. The following summary, which is not exhaustive, outlines some of the risks and uncertainties currently facing the Group:
· The COVID-19 pandemic has risks for the Group in terms of its ability to travel to and from its projects and ability for key personnel to access its projects. As previously reported, the impact of COVID-19 pandemic on the project is so far minimal as the Company's site activities were substantially completed in 2019. However, the financial impact on the Company is continuing to be evaluated and strategies implemented to reduce cash outflow.
· The Group is exposed to graphite. Graphite is a relatively new commodity whose market is being driven by demand in renewable energy. It is thus vulnerable to global energy policies.
· In order to achieve its long term strategy of developing its exploration project, the Group depends on the availability of and access to future funding within the global economic environment.
· The impact of Brexit on companies operating in the UK is still being monitored. Thus far Brexit has not impacted the Group's ability to raise funds.
· The exploration for and development of mineral resources involves technical risks, infrastructure risks and logistical challenges, which even a combination of careful evaluation and knowledge may not eliminate.
· There can be no assurance that the Group's project will be fully developed in accordance with current plans.
· Future development work and subsequent financial returns arising may be adversely affected by factors outside the control of the Group.
· The Group operates in multiple national jurisdictions and is therefore vulnerable to changes in government policies which are outside its control. The mining regulation changes in Tanzania are still being evaluated, however they seem to have minimal impact on investment in graphite mining. The Group continues to monitor the implementation of the changes to evaluate and mitigate sovereign risks.
Some of the mitigation strategies the Group applies in its present stage of development include, among others:
· Proactive management to reducing fixed costs.
· Rationalisation of all capital expenditures.
· Maintaining strong relationships with government (employing local staff and partial government ownership), which improves the Group's position as a preferred small mining partner.
· Engagement with local communities to ensure our activities provide value to the communities where we operate.
· Alternative and continued funding activities with a number of options to secure future funding to continue as a going concern.
· The Directors regularly monitor such risks and will take actions as appropriate to mitigate them. The Group manages its risks by seeking to ensure that it complies with the terms of its agreements, and through the application of appropriate policies and procedures, and via the recruitment and retention of a team of skilled and experienced professionals.
Key Performance Indicators
The Group's current key performance indicators ('KPIs') are the performance of its underlying investments, measured in terms of the development of the specific projects they relate to, the increase in capital value since investment and the earnings generated for the Group from the investment. The Directors consider that it is still too early in the investment cycle of any of the investments held, for meaningful KPIs to be given.
Success is also measured through the identification and investment in suitable additional opportunities that fit the Group's investment objectives.
Section 172 Statement
Section 172(1): A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to -
Section 172(1) (b) the interests of the company's employees,
Company's Comment: While the company is largely staffed by contractor employees (rather than direct employees of the Company), the directors consider that continuing active work on the Mahenge Liandu Graphite Project to be in the best interest of such staff to utilise their skills and develop their local communities. The board seeks regular feedback from its key stakeholders (including staff and advisers) to ensure that the corporate culture of the Company remains highly ethical in terms of our Company's values and behaviours.
Section 172(1) (c) the need to foster the company's business relationships with suppliers, customers and others,
Company's Comment: The directors ensure that suppliers are available and meeting commitments and there is good communication with staff as a key requirement for high levels of engagement. This is done by periodic and ad-hoc briefings and discussions.
Reasons to engage shareholders are to meet regulatory requirements and understand shareholder sentiments on the business, its prospects and performance of management.
This is done by regulatory news releases, keeping the investor relations section of the website up to date, annual and half-year reports and presentations and AGM.
Section 172(1) (d) the impact of the company's operations on the community and the environment,
Company's Comment: The Company's activities impact communities in the places where we operate and elsewhere. The Company engages communities with employment / business development arrangements within guidelines. Through preparation and compliance with environmental and social management plans, which include the regulatory requirements for the Company on its Mahenge Liandu Graphite Project, the directors ensure that wherever possible its activities have a positive impact on the community and avoid adverse environmental impacts.
The Company has engaged the services of a local contact person in Liandu who provides information to the community about our intended project activities and is responsible for managing local affairs and feedback to the Company.
Section 172(1) (e) the desirability of the company maintaining a reputation for high standards of business conduct, and
Company's Comment: The directors consider standards of business conduct in all dealings of the Company. The members of the board have a collective responsibility and obligation to promote the interests of the Company and are collectively responsible for defining standards of business conduct which includes corporate governance arrangements. The board provides strategic leadership for the Company and operates within the scope of our corporate governance framework and sets the strategic goals for the Company.
Section 172(1) (f) the need to act fairly as between members of the company.
Company's Comment: The board takes feedback from a wide range of shareholders (large and small) and endeavours at every opportunity to pro-actively engage with all shareholders (via regular news reporting-RNS) and engage with any specific shareholders in response to particular queries they may have from time to time. The board considers that its key decisions during the year have impacted equally on all members of the Company.
Board
Post period end, in March 2021, Ms Amne Suedi and Mr Steve Mahede resigned from the Board as a Non-executive Directors and the Company wishes them well in the future.
The Board is initiating a process to review its composition and consider suitable candidates for the vacancies made recently.
Financial Results
For the year ended 31 December 2020 the Group did not earn any revenues as its business related solely to the making of investments in non-revenue producing resource projects and companies.
The Group made a loss after tax of £0.196 million (2019: £0.273 million) for the year ended 31 December 2020. Expenditure on the Mahenge Liandu project during the year amounted to £0.662 million (2019: £0.593 million), which was capitalised as additional exploration and evaluation assets.
Funds raised during the year amounted in total to £1.218 million of which £0.550 million came from a placing of shares and £0.668 million came from the exercise of warrants and options. Other share issues during the year were in respect of loan note conversions.
At 31 December 2020, the Group had cash of £252,000 (2019: £96,000) and debt of £577,000 (2019: £867,000). Since the year end, the Board has determined that the Company will exercise its right to convert all the remaining loan notes together with the associated accrued interest into ordinary shares in the Company with the result that the Group will be debt free.
Outlook
The Directors continue to believe that Mahenge Liandu represents an exciting opportunity for the Group. As identified in the going concern note to the Directors' Report, the Company's ability to achieve its strategy with respect to the project is dependent on the further fundraising. Furthermore, other notable investment opportunities are under review, which the board believe could replicate this success and deliver significant value to shareholders.
Nicholas Johansen
Director
28 May 2021
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
| | Note | 2020 | 2019 |
| | | £ | £ |
| Administrative expenses | | (377,912) | (468,948) |
| Share based payment charges | | - | (22,550) |
| Change in fair value of derivative | | 37,143 | (45,467) |
| Change in fair value of investments | 13 | 176,006 | 46,145 |
| Operating loss | | (164,763) | (490,820) |
| | | | |
| Finance costs | | (31,162) | (21,241) |
| Loss before taxation | 6 | (195,925) | (512,061) |
| Taxation | 9 | - | - |
| Loss for the year from continuing operations | | (195,925) | (512,061) |
| | | | |
| Profit from discontinued operations, net of tax | 10 | - | 239,513 |
| | | | |
| Loss after taxation | | (195,925) | (272,548) |
| | | | |
| Other comprehensive income | | | |
| Items that may be reclassified to profit or loss: | | | |
| Reclassification of foreign exchange gain | | - | (239,513) |
| Exchange differences on translating foreign entities | | 39,070 | (93,571) |
| Total comprehensive loss attributable to the equity holders of the parent company | | (156,855) | (605,632) |
| | | | |
| Loss per share attributable to the equity holders of the parent company | | Pence | Pence |
| Basic and diluted total loss per share | 11 | (0.04) | (0.07) |
| Basic and diluted loss per share from continuing operations | 11 | (0.04) | (0.14) |
Consolidated Statement of Financial Position
At 31 December 2020
| | Note | 2020 £ | 2019 £ |
| Assets Non-current assets | | | |
| Exploration and evaluation assets | 12 | 4,417,440 | 3,705,210 |
| Investments | 13 | 281,761 | 105,755 |
| | | 4,699,201 | 3,810,965 |
| Current assets | | | |
| Trade and other receivables | 14 | 121,062 | 159,495 |
| Cash and cash equivalents | | 251,738 | 95,641 |
| | | 372,800 | 255,136 |
| | | | |
| Total assets | | 5,072,001 | 4,066,101 |
| Equity and liabilities | | | |
| Equity | | | |
| Share capital | 18 | 3,207,382 | 3,139,135 |
| Share premium | 21 | 22,348,000 | 21,037,478 |
| Shares to be issued | 21 | 286,000 | 286,000 |
| Share option and warrant reserve | 21 | 762,347 | 661,676 |
| Foreign exchange reserve | 21 | 127,238 | 88,168 |
| Retained earnings | 21 | (22,406,009) | (22,400,310) |
| Total equity | | 4,324,958 | 2,812,147 |
| Current liabilities | | | |
| Trade and other payables | 15 | 170,375 | 267,566 |
| Loans | 16 | 576,668 | 866,854 |
| Derivative liability | 17 | - | 119,534 |
| Total Liabilities | | 747,043 | 1,253,954 |
| | | | |
| Total equity and liabilities | | 5,072,001 | 4,066,101 |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
| | Share Capital | Share Premium | Shares to be issued | Share Option and Warrant Reserve | Foreign Exchange Reserve | Retained Earnings | Total |
| | £ | £ | £ | £ | £ | £ | £ |
| At 1 January 2019 | 3,038,605 | 20,569,844 | 286,000 | 94,884 | 421,252 | (21,129,940) | 2,280,645 |
| | | | | | | | |
| Loss for the year | - | - | - | - | - | (272,548) | (272,548) |
| Other comprehensive loss | | | | | (333,030) | | (333,030) |
| Total comprehensive loss for the year | - | - | - | - | (333,030) | (272,548) | (605,578) |
| Issue of shares and warrants | 100,530 | 658,308 | - | 546,420 | - | - | 1,305,258 |
| Expenses of issue | - | (190.674) | - | - | - | - | (190,674) |
| Transfer on exercise of warrants | - | - | - | (2,178) | - | 2,178 | - |
| Share based payment charges | - | - | - | 22,550 | - | - | 22,550 |
| Total other movements | 100,530 | 467,634 | - | 568,970 | - | - | 1,137,134 |
| | | | | | | | |
| At 31 December 2019 | 3,139,135 | 21,037,478 | 286,000 | 661,676 | 88,168 | (22,400,310) | 2,812,147 |
| | | | | | | | |
| Loss for the year | - | - | - | - | - | (195,925) | (195,925) |
| Other comprehensive income | - | - | - | - | 39,070 | - | 39,070 |
| Total comprehensive loss for the year | - | - | - | - | 39,070 | (195,925) | (156,855) |
| Issue of shares and warrants | 68,247 | 1,310,522 | - | 239,556 | - | - | 1,618,325 |
| Release on conversion of loan notes | - | - | - | - | - | 51,341 | 51,341 |
| Transfer on exercise of warrants | - | - | - | (138,885) | - | 138,885 | - |
| Total other movements | 68,247 | 1,310,522 | - | 100,671 | - | 190,226 | 1,669,666 |
| | | | | | | | |
| At 31 December 2020 | 3,207,382 | 22,348,000 | 286,000 | 762,347 | 127,238 | (22,406,009) | 4,324,958 |
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
| | | 2020 | 2019 |
| | | £ | £ |
| | | | |
| Cash flows from operating activities | | | |
| Loss before taxation | | (195,925) | (272,548) |
| Adjustment for: | | | |
| Release of exchange gains on overseas operation | | - | (239,513) |
| Share based payment charge | | - | 22,550 |
| Change in fair value of derivative | | (37,143) | 45,467 |
| Change in fair value of investments | | (176,006) | (46,145) |
| Finance costs | | 31,162 | 21,241 |
| | | (377,912) | (468,948) |
| Changes in working capital Receivables | | 11,182 | (44,103) |
| Payables | | (6,729) | (14,868) |
| Net cash used in operating activities | | (373,459) | (527,919) |
| | | | |
| Cash flows from investing activities | | | |
| Expenditure on exploration and evaluation assets | | (689,254) | (474,049) |
| Purchase of listed investments | | - | (58,637) |
| Net cash used in investing activities | | (689,254) | (532,686) |
| | | | |
| Cash flows from financing activities | | | |
| Proceeds from share issues | | 1,245,576 | 968,696 |
| Issue costs | | - | (46,500) |
| Issue of loan notes | | - | 400,000 |
| Proceeds from loan (Note 16) | | 50,000 | 30,000 |
| Loan repayment | | (50,000) | (235,071) |
| Interest paid | | (26,766) | (5,189) |
| Net cash from financing activities | | 1,218,810 | 1,111,936 |
| | | | |
| Net increase in cash and cash equivalents | | 156,097 | 51,331 |
| Cash and cash equivalents at 1 January | | 95,641 | 44,310 |
| Cash and cash equivalents at 31 December | | 251,738 | 95,641 |
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
**ENDS**
| Enquiries: |
|
| Armadale Capital Plc Nick Johansen, Non-Executive Director Tim Jones, Company Secretary | +44 (0) 20 7236 1177 |
| Nomad and Broker: finnCap Ltd Christopher Raggett / Teddy Whiley | +44 (0) 20 7220 0500 |
| | |
| | |
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, which is now its main focus. The Project is located in a highly prospective region with a high-grade JORC compliant Indicated and inferred mineral resource estimate of 59.48Mt @ 9.8% TGC, making it one of the largest high-grade resources in Tanzania, and work to date has demonstrated Mahenge Liandu's potential as a commercially viable deposit with significant tonnage, high-grade coarse flake and near surface mineralisation (implying a low strip ratio) contained within one contiguous ore body.
Other assets Armadale has an interest in, include the Mpokoto Gold project in the Democratic Republic of Congo and a portfolio of quoted investments.
More information can be found on the website www.armadalecapitalplc.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20200603005976/en/
Armadale Capital Plc
Source: Armadale Capital Plc
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