Armadale Capital to advance graphite project ahead of schedule after confirming ‘highly encouraging’ grades (ACP)

By James Moore


Armadale Capital (LSE:ACP) jumped 15.6pc to 1.3p on Thursday morning after confirming ‘highly encouraging’ graphite flake grades at its flagship project in Tanzania.

The business said it has now completed its metallurgical test work programme at Mahenge Liandu, with the results confirming that graphite flakes of up to 97.1pc purity can be produced consistently at the asset. As Armadale has highlighted before, prices for graphite concentrate with a purity of more than 95pc can demand much higher rates than the standard grade of 95pc or less.

With its metallurgical work now complete, Armadale has moved into the next stage of its definitive feasibility study (DFS) for Mahenge Liandu ahead of schedule. The company will now begin the plant design phase of its DFS, with its process engineering team already working on designing a process flow-sheet. Work has also started to create the layout of a mine site at the project, with locations for a plant, a tailings dam, access roads, and the camp already ‘largely defined’.

Elsewhere, Armadale said that discussions with prospective Chinese off-take and project finance partners for Mahenge Liandu are continuing. Director Nick Johansen noted that the organisation’s ‘highly encouraging’ metallurgical test results should help these talks to advance:

‘Our focus this year has been increasingly demonstrating to our shareholders that we are in the process of transitioning from explorer to emerging producer. To this end, it is pleasing to see that we have now successfully completed an outstanding metallurgical test-work programme that convincingly demonstrates Armadale can produce a high-quality graphite concentrate.

‘Our engineering team is now fast-tracking the next phase of the DFS, which should result in the main layout and flow-sheet being completed shortly. Against this technical backdrop, our marketing team now has significant incremental data points and is progressing discussions with our prospective Chinese off-take and project finance partners.’

Mahenge Liandua is one of the most substantial high-grade graphite resources in Tanzania, containing a high-grade indicated and inferred mineral resource estimate of 51.1Mt at 9.3pc total graphite content (TGC). Armadale released a scoping study for the project in March last year based on a 400,000tpa throughput over a 32-year mine life. The project would deliver an average of 49,000tpa of high-quality graphite over its life with a low operating cost of US$408/t, a pre-tax IRR of 122pc, and an NPV of $349m under these assumptions.

This final figure is already well in excess of Armadale’s current £4.86m market cap. However, the scoping study was also based around a conservative $1,272/t graphite price and 95pc average concentrate purity. Graphite prices are currently sitting much higher than this, and Mahenge Liandu is proven to be able to produce the material consistently at a grade considerably higher than 95pc. With this in mind, the project could, in reality, pack a much greater economic punch than its scoping study currently suggests.

We recently looked at whether investors are missing a significant opportunity at Armadale given these conservative figures on our sister site As we highlighted, Australian miner Black Rock recently agreed to supply ‘premium’ graphite with a nominal grade of between 97.5-98.5pc for $1,490/t and ‘ultra’ graphite grading more than 99pc for $2,161/t. 

Both of these prices come in at a significant premium to the $1,272/t used by Armadale in the scoping study for Mahenge Liandu, which neighbours and shares many similarities with Black Rock’s Mahenge asset. If Armadale can secure binding sales agreements at a much higher price than $1,272, then Mahenge Liandu’s fundamentals would be enhanced even further.

For example, if Armadale could agree on a graphite sale price of $2,161/t, then the project’s NPV would nearly double. If this occurred, then the argument for Armadale being undervalued would strengthen, and the likelihood of a re-rate could increase. To read more, please click here.


Author: James Moore

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.