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.
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END
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