REG - Armadale Capital PLC - Final Results and Notice of AGM
23/05/2022 07:00
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RNS Number : 3418M Armadale Capital PLC 23 May 2022
Armadale Capital Plc / Index: AIM / Epic: ACP / Sector: Investment Company
23 May 2022
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 2021 ('Final Results' or 'Annual Report'). The
Company also announces that its Annual General Meeting ('AGM') will be held at
Suite 2, 23 Railway Road. Subiaco, Western Australia 2016 on 20 June 2022 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 2021, will be
posted to shareholders. Copies will also be available to view on the Company's
website: www.armadalecapitalplc.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.armadalecapitalplc.com&esheet=52230450&newsitemid=20200603005976&lan=en-US&anchor=www.armadalecapitalplc.com&index=1&md5=9801c0c7a7343b17a80cecb854a43b6a)
.
Strategic Report
For the year ended 31 December 2021
Operational and Corporate Highlights for Period Ending 31 December 2021
Significant progress made in delivering key accretive milestones in advancing
the Mahenge Liandu Graphite Project in Tanzania
1. In January 2021, the Company reported on the CSIRO (Australia's
Commonwealth Scientific and Industrial Research Organisation) test work which
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. In March 2021, the Environmental and Social Impact Assessment
('ESIA') was formally granted by National Environment Management Council
('NEMC') of Tanzania.
3. In September 2021, the Company announced the formal confirmation and
receipt of the Mining Licence (ML/007744/2020) for the Mahenge Graphite
Project from the Tanzanian Ministry of Energy and Minerals. The Mining
Licence provides the Company with exclusive development and mining rights
over the graphite resources within the 8.54km(2) Mining Licence and is a
major de-risking milestone for investors. The mining licence was granted for
an initial 10-year term which can be extended. Should it be extended, it
would cover the initial 15-year mine life utilising only 25% of the estimated
Resource.
4. 1st phase of Front-End Engineering Design Studies undertaken
by Chinese EPCM Xinhai Mineral EPC completed with positive results received
confirming a premium quality high purity graphite concentrate, also suitable
for the battery anode market and can be produced from Mahenge using
conventional plant as outlined in the Company's existing Definitive
Feasibility Study. This included metallurgical a test work programme which
further confirmed the efficacy of the Company's intended process flow sheet
and helped ratify project economics.
5. The main focus going forward is gaining project development finance
and binding off take agreements to bring the project to production.
6. In December 2021, the Company appointed Mr. Greg Entwhistle as Project
Director. Over the past five years, Mr Entwistle has specialised in the
emerging graphite sector in East Africa consulting to several groups that are
advancing projects towards production. Mr. Entwhistle brings considerable
skills and experience to expedite progress of the Group's Mahenge Graphite
project towards commissioning production.
Post Period End
1. In February 2022 the Company applied for three incremental
exploration licences which are prospective for graphite mineralisation and
materially enhance the Mahenge Liandu Project's exploration potential.
2. Ongoing review of quoted portfolio, where the Directors believe there
are opportunities for capital gains.
3. Continue to actively review other exciting investment opportunities.
During the year under review, Armadale continued to operate as a diversified
investing group focused on 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. At present, the Company is actively marketing
the Project to potential industry partners and end users (offtakers) of
graphite products. The Company is also pursuing a range of potential options
relating to development finance for the project.
PASSIVELY MANAGED INVESTMENTS
Mine Restoration Investments Limited ('MRI'), South Africa
The shares in MRI are being carried at Nil market value (2020: 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, valued at £150,000
on 16 May 2022, 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.
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,
environmental 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:
· Although reducing throughout the year under review, the COVID-19
pandemic continues to have 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 the COVID-19
pandemic on the project is so far minimal as the Company's site activities
were substantially completed in 2019.
· Through the Mahenge Liandu Graphite Project the Group is very exposed
to graphite. Graphite is a relatively new commodity whose market is being
driven by demand in renewable energy. The Company believes it is thus
vulnerable to changing global energy policies.
· 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 availability and access to future funding within the global
economic environment.
· 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.
· The Group is exposed to gold as the holder of a royalty on gold
production from its previously held gold project. The Group's potential future
royalty stream will be affected by fluctuations in the prevailing market price
of gold and to variations of the US dollar in which gold sales will be
denominated.
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 manager 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
In March 2021, Ms Amne Suedi and Mr Steve Mahede resigned from the Board as
non-executive Directors and the Company wishes them well in the future. The
Board is actively considering potential replacements for former Board members
with a focus on a potential appointment of a UK based Board member.
Financial Results
For the year ended 31 December 2021 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 £0.333 million (2020: £0.196 million)
for the year ended 31 December 2021. Expenditure on the Mahenge Liandu
project during the year amounted to £0.272 million (2020: £0.662
million), which was capitalised as additional exploration and evaluation
assets.
Funds raised during the year amounted in total to £1,279,000 of which £850,000 came from a placing of shares and £429,000 came from the exercise of warrants and options. Other share issues during the year were in respect of loan note conversions.
At 31 December 2021, the Group had cash of £886,000 (2020: £252,000 )
and no debt finance (2020: loan notes of £577,000 ). At 16 May 2022,
following the exercise of further warrants, the Group had cash of £1,942,000.
Outlook
The year under review shows that Mahenge Liandu continues to represent 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. The
Directors continue to keep other investment opportunities, in line with the
Group's investment objectives, under review, which the board believe could
deliver significant value to shareholders.
Nicholas Johansen
Director
20 May 2022
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
£'000 £'000
Administrative expenses (330) (378)
Share based payment charges - -
Change in fair value of derivative - 37
Change in fair value of investments 8 176
Operating loss (322) (165)
Finance costs (11) (31)
Loss before taxation (333) (196)
Taxation - -
Loss after taxation (333) (196)
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign entities (61) 39
Total comprehensive loss attributable to the equity holders of the parent (394) (157)
company
Loss per share attributable to the equity holders of the parent company Pence Pence
Basic and diluted loss per share (0.07) (0.04)
Consolidated Statement of Financial Position
At 31 December 2021
2021 2020
£'000 £'000
Assets
Non-current assets
Exploration and evaluation assets 4,727 4,417
Investments 138 282
4,865 4,699
Current assets
Trade and other receivables 150 121
Cash and cash equivalents 886 252
1,036 373
Total assets 5,901 5,072
Equity and liabilities
Equity
Share capital 3,275 3,207
Share premium 23,906 22,348
Shares to be issued 286 286
Share option and warrant reserve 925 762
Foreign exchange reserve 66 127
Retained earnings (22,636) (22,406)
Total equity 5,822 4,325
Current liabilities
Trade and other payables 79 170
Loans - 577
Total Liabilities 79 747
Total equity and liabilities 5,901 5,072
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share Capital Share Premium Shares to be issued Share Foreign Exchange Reserve Retained Earnings Total
Option and Warrant Reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 3,140 21,037 286 661 88 (22,400) 2,812
Loss for the period - - - - - (196) (196)
Other comprehensive loss - - - - 39 - 39
Total comprehensive loss for the year - - - - 39 (196) (157)
Issue of shares and warrants 68 1,311 - 240 - - 1,619
Release on conversion of loan notes - - - - - 51 51
Transfer on exercise of warrants - - - (139) - 139 0
Total other movements 68 1,311 - 101 - 190 1,670
At 31 December 2020 3,208 22,348 286 762 127 (22,406) 4,325
Loss for the period - - - - - (333) (333)
Other comprehensive loss - - - - (61) - (61)
Total comprehensive loss for the year (61) (333) (394)
Issue of shares and warrants 67 1,558 - 266 - - 1,891
Transfer on exercise of warrants - - - (103) - 103 -
Total other movements 67 1,558 - 163 - 103 1,891
At 31 December 2021 3,275 23,906 286 925 66 (22,636) 5,822
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
2021 2020
£'000 £'000
Cash flows from operating activities
Loss before taxation (333) (196)
Adjustment for:
Change in fair value of derivative - (37)
Change in fair value of investments (8) (176)
Finance costs 11 31
(330) (378)
Changes in working capital 1 11
Receivables
Payables (39) (7)
Net cash used in operating activities (368) (374)
Cash flows from investing activities
Expenditure on exploration and evaluation assets (399) (689)
Sale of listed investments 152 -
Net cash used in investing activities (247) (689)
Cash flows from financing activities
Proceeds from share issues 1,249 1,246
Proceeds from loan (Note 15) - 50
Loan repayment - (50)
Interest paid - (27)
Net cash from financing activities 1,249 1,219
Net increase in cash and cash equivalents 634 156
Cash and cash equivalents at 1 January 252 96
Cash and cash equivalents at 31 December 886 252
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU No.
596/2014) which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
**ENDS**
Enquiries:
Armadale Capital Plc +44 (0) 20 7236 1177
Nick Johansen, Non-Executive Director
Tim Jones, Company Secretary
Nomad and Broker: finnCap Ltd +44 (0) 20 7220 0500
Christopher Raggett / Teddy Whiley
Notes
Armadale's wholly-owned Mahenge Liandu Graphite Project is located in a highly
prospective region, with a high-grade JORC compliant indicated and inferred
mineral resource estimate announced February 2018 - 59.5Mt at 9.8% TGC. This
includes 11.5Mt @ 10.5% Measured 32.Mt Indicted at 9.6% and 15.9Mt at 9.8%
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.
The Company's updated Definitive Feasibility Study (June 2020) confirmed
Mahenge as a long-life low-cost graphite project with a US$430m NPV and IRR of
91% based on a two-stage expansion strategy comprising:
· Stage One - processing plant and infrastructure at a nominal
design basis rate of 0.4-0.5 Mt/pa to produce a nominal 60,000t/pa graphite
concentrate in the first three years of production
· Stage Two - a second 0.5 Mt/y plant and associated additional
infrastructure doubling throughput to 1 Mt/y from Year 5 of operation
The DFS shows that Armadale can be a significant low-cost supplier to the
graphite industry with the potential to generate pre-tax cashflows of US$985m
over an initial 15 year mine-life and scope for further improvement as this
utilises just 25% of the current resource, which remains open in multiple
directions.
Projected timeline to first production is expected to be approximately 10-12
months from the start of construction and the 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, with a 1.6 year payback for Stage 1 (after tax) based on an
average sales price of US$1,112/t. Stage 2 expansion is expected to be funded
from cashflow.
More information can be found on the website www.armadalecapitalplc.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.armadalecapitalplc.com&esheet=52244720&newsitemid=20200702005192&lan=en-US&anchor=www.armadalecapitalplc.com&index=1&md5=7209221bbf1231bc13f525c3f5835785)
.
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