TIDMACP

Armadale Capital PLC

01 November 2019

1 November 2019

Armadale Capital Plc ('Armadale' or 'the Company')

Further Information - Strategic Financing

Armadale Capital plc (LON:ACP) the AIM quoted investment company focused on natural resource projects in Africa is pleased to provide further information for shareholders in respect of the Company's recent strategic financing activities.

Strategic Financing Overview Q4 2019

On 16 September 2019 Armadale announced a placing and subscription for GBP500,000 to complete the Definitive Feasibility Study ("DFS") at the high-grade Mahenge Liandu Graphite Project ("Mahenge Liandu" or "the Project") and take it to the point of construction financing. The placing was undertaken at a premium to the then market price.

On 30 October 2019 Armadale announced a further strategic financing Including a convertible loan note ("CLN") for GBP400,000 and renegotiated drawdown facilities for additional working capital of up to GBP300,000.

Armadale Capital's Strategic Financing Rationale

Mahenge Liandu is at a value inflection point moving into the final stages of the DFS completion phase and transitioning the Company to an emerging producer.

It is very important to have access to sufficient working capital to complete the final work for the DFS and thereafter to implement the steps needed to prepare the project for production at the earliest opportunity.

The Company has taken a portfolio approach to business financing for some time, with market equity financings complemented by loan notes and drawdown facilities, which provides financing flexibility.

This has helped the Company to avoid over dependency on the equity capital markets which can lead to discounted equity financings and excessive dilution, something the Armadale team are determined to avoid.

Also, and importantly, a financially robust company is in a better position to pursue commercial discussions with potential partners, something of particular significance for Armadale at this time.

Background to the Convertible Loan Note for GBP400,000

Mahenge Liandu is a considerable asset and, as the Scoping Study from March 2018 demonstrated, the economics are compelling with an NPV of US$349million, an IRR of 122% and a low development capex of US$35million (see below for further information).

The Company's financing strategy is, as outlined above, based on a portfolio of working capital and the new CLN complements the existing market equity financings undertaken in 2019 and the underlying drawdown facilities that provide additional reserve working capital should this be needed.

Above all, at this crucial stage of development, it is vital to have sufficient working capital to enable the accelerated development of Mahenge Liandu, particularly during this phase as the Company works complete the DFS and prepare the project for production status.

In essence the Company has, through this CLN issue, made sure it has a robust working capital position during a highly significant phase.

Convertible Loan Note Operation

The CLN is a one-year instrument which runs to a maturity date of 6 November 2020. There is interest of 10% per annum (calculated on a daily basis).

A CLN holder may at any time during the 12 month term (up to the 11(th) trading day prior to the maturity date of 6 November 2020) elect to convert their CLN value into shares in Armadale Capital at a fixed price of 3.0 pence per Armadale share. This is called a Voluntary Conversion and means that for the period from now until late October 2020, CLN holders may only convert at the fixed price of 3.0 pence.

In the final ten trading days up to the maturity date of 6 November 2020, CLN holders may issue a notice to convert their CLN into shares in Armadale Capital at a price set as 90% of the Volume Weighted Average Share Price ("VWAP") of the previous ten trading days. This is called a Conversion or Redemption at the Maturity Date.

In the event of a Conversion or Redemption at the Maturity Date and by way of example:

- if the ten day VWAP share price of Armadale Capital is 10 pence, then the price at which the CLN may be converted would be 90% of 10 pence or 9.0 pence per Armadale Capital share

Therefore in simple terms the CLN:

   -      Lasts for a maximum of one year 
   -      Apart from the last ten trading days may only be converted during the year at 3.0 pence 
   -      In the last ten trading days may be only be converted at 90% of the ten day VWAP 
   -      Or, is repaid in cash at the maturity date of 6 November 2020 

Background to the two new Drawdown Facilities

Armadale had two drawdown facilities from October 2017 that expired in October 2019, subject to extension and renegotiation. The balance due on the drawdown facilities totalled GBP150,000, which is being repaid by the Company as outlined in the announcement on 30 October 2019.

Repayment of the old drawdown facilities was important as they contained a security against the assets of Armadale and through repayment that security has been eliminated. This elimination is an important step as Armadale seeks to commercialise Mahenge Liandu and pursue a growth strategy within the Company.

The two new drawdown facilities total GBP300,000 and add to the working capital portfolio and financing flexibility. Importantly, both are unsecured.

Drawdown Facility Operation

Both drawdown facilities have a one year term to 30 October 2020.

The GBP300,000 funds available under the facilities can be drawn down if the Company chooses to do so. The costs of drawdowns are detailed below, but it should be emphasised that there are no other fees or charges, so that if the drawdown is not used, this facility carries no cost to the Company.

If an amount is drawn down an additional 10% is added to the amount drawn and this becomes the amount to be repaid ("Face Value"). There is no interest payable, just the addition of 10% to any drawn amounts.

By way of example if the Company elects to draw down GBP50,000, then GBP5,000 is added to create a Face Value of GBP55,000.

The Face Value of the facility due will be repaid to the lender on 30 October 2020 in cash, or if the lender chooses, by converting into Armadale Capital shares at a fixed price of 3.0p.

At any time during the one year term Armadale Capital can notify the lender that they will repay the Face Value in cash, unless within 5 days the lender chooses to convert the Face Value at a fixed price of 3.0 pence or at 90% of the VWAP in the ten trading days prior to Armadale's notice of repayment.

It should be emphasised that early repayment of the drawdown facilities would be entirely at Armadale's choosing.

Current Working Capital Position

With the measures announced in September and October Armadale is now in a robust position and able to continue the shift from explorer to emerging producer.

Armadale has multiple fully funded work streams underway that will deliver a regular flow of news to the market over the coming weeks and months.

The Company's initial focus is completion of the DFS for Mahenge Liandu, however Armadale is also preparing for the steps after the DFS completion to accelerate the project into production.

The Mahenge Liandu Graphite Project, Tanzania

Armadale Capital's wholly-owned Mahenge Liandu Graphite Project is located in a highly prospective region, with a high-grade JORC compliant inferred, indicated and measured mineral resource estimate announced October 2019 - 59.5Mt at 9.8% TGC. This includes 15.90Mt inferred at 9.75% TGC, 32.06Mt indicated at 9.58% TGC and 11.52MT measured at 10.54% TGC making it one of the largest high-grade resources in Tanzania.

The work to date has demonstrated the Project'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.

Currently, Armadale Capital is completing a DFS based on the results of a Scoping Study that was completed in March 2018. The study was based on a throughput of 400,000tpa over a 32-year mine life and showed the project has robust economics and warrants further development.

The Scoping Study verified the project could produce a coarse flake, high-purity graphite product underpinning a compelling business case to progress commercialisation plans.

The Scoping Study, based on a 400,000tpa throughput, highlighted the following key positive metrics:

   --     Producing an average of 49,000tpa of high-quality graphite products for a 32-year mine life; 

-- The near surface nature of the deposit produced a low 1:1 strip ratio for the life of the mine;

-- The project has a low operating cost of US$408/t, based on an average 12.5% TGC life of mine grade;

-- The project has a pre-tax IRR of 122% and NPV of US$349m, with a low development capex of US$35m; and

-- The maximum draw-down during the construction of the project is US$34.9m and the after-tax payback period is 1.2 years.

There remains significant scope to further improve returns, with staged expansions as the current mine plan is based on circa 25% of the total resource.

**S**

 
 Enquiries: 
  Armadale Capital Plc 
   Paul Johnson, Non-Executive Director 
   (UK) 
   Tim Jones, Company Secretary              +44 (0) 20 7236 1177 
 Nomad and broker: FinnCap Ltd 
  Christopher Raggett / Max Bullen-Smith    +44 (0) 20 7220c 0500 
 Joint Broker: SI Capital Ltd 
  Nick Emerson                              +44 (0) 1483 413500 
 Press Relations: St Brides Partners 
  Ltd 
  Isabel de Salis / Juliet Earl             +44 (0) 20 7236 1177 
 

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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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