Armadale Capital’s rise continues as it kicks off work to advance graphite offtake talks (ACP)

By James Moore


Graphite firm Armadale Capital (LSE:ACP) jumped 11.45pc on Wednesday after announcing the beginning of critical downstream test-work aimed at advancing offtake talks for its Mahenge Liandu project in Tanzania.

The firm, currently trading at 1.95p, has expanded the definitive feasibility study (DFS) at its flagship asset to include analysis of high-quality, high-purity flake graphite concentrate produced during metallurgical work. It said this work would be ‘critical’ in highlighting the degree to which Mahenge Liandu’s graphite can be used to produce battery cells. With the electric vehicle market set to soar over coming years, Armadale believes this will be a ‘key data point’ for the prospective Chinese off-take partners with whom it is currently in discussions.

Elsewhere, the business said it is hopeful that the results of its newly-commissioned analyses will replicate those achieved by nearby projects in the Mahenge region of Tanzania. In particular, ASX-listed Black Rock Mining recently released downstream test-work results for its nearby graphite project that exceeded the industry standard for battery anode materials.

Armadale director Nick Johansen said the firm’s priority in the months before the release of its Mahenge Liandu DFS – due towards end-2019 – is to ‘demonstrate that [its] commercialisation strategy is gaining momentum’.

‘To this end, we are delighted to commence downstream analysis of graphite concentrate, which will generate key data for our prospective Chinese off-take partners,’ he added. ‘With others in the region, such as Black Rock Mining, achieving their own excellent downstream test-work results, we are optimistic that Mahenge Liandu will deliver similar results to further enhance its already robust economics.’

In August, Armadale revealed that its metallurgical test work programme at Mahenge Liandu had completed, confirming that graphite flakes of up to 97.1pc purity could be produced consistently at the asset. As the organisation 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.

Mahenge Liandu is wholly-owned by Armadale and located in a highly prospective graphite region called Mahenge. It holds a JORC-compliant indicated and inferred mineral resource estimate of 51.1Mt at 9.3pc TGC.   Armadale is currently completing a DFS based on the results of a scoping study based on a throughput of 400,000tpa over 32-year mine life. According to the business, this showed that the project offers ‘robust economics and warrants further development’.

Mahenge Liandu’s scoping study suggested that the project would deliver an average of 49,000tpa of high-quality graphite over its life. This coupled 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 over Armadale’s current £6.94m 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.