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Building a high-grade graphite mine
Investor Presentation
May 2019
Corporate Information
Ticker (LSE) ACP
Shares on issue 375m
Share Price (15 May 2019) 1.4p
52 week high / low 1.92p/0.88p
Market cap £5.1m
Avg. daily volume (shares) 1.75m (3 mths)
Substantial Shareholders
Kabunga Holdings Pty Ltd 13.1%
Resource Corporate Pty Ltd 8.4%
Directors 1.0%
Private Investors 16.4%
finnCap Ltd Nomad & Joint Broker
SI Capital Joint Broker
Advisers
0.8
1
1.2
1.4
1.6
1.8
2
Key Data Share Price Chart
Investor Presentation – May 2019 2
Group Overview
• Armadale Capital (ACP) is an AIM-listed diversified investment company focused on natural resource projects in Africa
• Current focus on advancing the Mahenge Liandu Graphite Project in Tanzania to production
• Low technical risk project - a large, high-grade open cut resource
• Located in east Africa - the world’s largest graphite province
• Potential to become a top producer over the next decade
• Strong market dynamics - accelerating demand for spherical graphite driven by new energy sector and expandable graphite used in flame retardant applications
• Quoted portfolio providing opportunities for capital gain
• Actively reviewing additional value-adding investment opportunities
• Experienced team with notable success advancing projects within the mining sector
Investor Presentation – May 2019 3
Board & Management
Steve Mahede
BEng MBA
Non-Executive Director
Qualified engineer with more than 35 years’ in mining related project management
Experienced CEO in Australiaand Africa
BSc (Eng) from the University of Western Australia and MBA from Murdoch University
Patron of the Tanzanian Community in Western Australia Inc
Nicholas Johansen
BEcon GDLP LLB (Hons)
Non-Executive Director
Experienced legal practitioner based in Northern Territory, Australia
Extensive involvement in junior mining exploration and production companies across many different commodities
Expert in environmental regulation
Law degree with Honours from Charles Darwin University, NT and Bachelor of Economics from the University of Adelaide
Paul Johnson
BSc, CA
Non-Executive Director
Currently ED for African Battery Metals plc, an AIM quoted exploration group
CEO for Value Generation Ltd, a family investment group focused on natural resources and fintech sectors.
Holds a degree in Management Science from University of Manchester and is a Chartered Accountant, Chartered Loss Adjuster and Associate of the Chartered Insurance Institute
Jenny Lee
China Representative
Graphite Marketing
Experienced marketing executive with 24 years in the mining sector focused on raw material procurement
Headed large China-based shipping & logistics group importing into the Chinese market
Highly experienced at obtaining and managing off-take agreements and product transport and logistics
Matt Bull
BSc (Hons)
Technical Director
A geologist with experience in graphite, gold and iron ore across Australia and Africa
Worked greenfield exploration & resource development programs for Rio Tinto, Golden West, Volt & Linden Resources
Former director of Volt Resources (ASX: VRC) and currently on the Board of LindianResources (ASX: LIM)
Bachelor of Science with honours in geology and geophysics from the University of Adelaide
Investor Presentation – May 2019 4
MAHENGE LIANDU GRAPHITE PROJECT
5
Project Overview
• 100% owned, near surface, high grade deposit –focus on commencing production 2021
• Two tenements over 29.9km2 in a highly prospective region
• One of the largest high-grade graphite projects in Tanzania and proven potential as a commercially viable deposit
• 2019 Milestones
• Environmental and social permitting submitted
• Mining licence – expect to submit August 2019
• On track to deliver DFS Q4 2019
• Development of transport pathway underway
• Finalisation of production flowsheets and plant design
• FEED Study to commence Q4 2019
• Considerable sales interest - MOU with Matrass Group, a China based graphite mining/processing company and advanced discussions with other potential customers
• Project development funding progressing
Investor Presentation – May 2019 6
Project Location
• Located close to established infrastructure
• Mains power within 5km
• 80km by sealed and gravel roads to central rail hub at Ifakara
• Direct rail access to Dar es Salaam port320km away
• Labour and materials within 10km at Mahenge town
Investor Presentation – May 2019 7
Tanzania-Zambia RailwayKilombero Bridge
Resource & Mine
Investor Presentation – May 2019 8
• Near surface high-grade deposit
• Inferred Resource of 51.1Mt at 9.3% TGC• 38.7Mt indicted at 9.3% and 12.4Mt at 9.1% TGC
• Excellent quality graphite concentrates confirmed
• High purity and excellent flake size distribution, with >65% large-to-super jumbo category
• Optimised mine plan of 13Mt @ 12.5% TGC
• DFS underway to confirm 400,000tpa plant over 32-year mine life - represents only 25% of the overall resource
✓ NPV of US$349m and IRR of 122%
✓ Lowest quartile cash costs driven by high mined grade of 12.5% and low strip ratio of 1:1 for LOM
✓ 1.2 year payback on $US35m capex after tax
✓ Based on conservative basket price of $US1,272/t
✓ High-quality graphite product confirmed
✓ Potential to increase throughput as mine life based on conservative assumptions
Robust economics from Scoping Study completed Q1 2018
Tonnage (Mt)
% Cut-Off TGC
Average %TGC
Inferred 12.4 3.5 9.1
Indicated 38.7 3.5 9.3
Measured 0 3.5 0
Total 51.1 3.5 9.3
Excellent Testwork
• Test work delivered excellent levels of purity up to 99.99% TGC using conventional treatment
• Demonstrable expandability up to 440cm³/g achieved – confirming suitable for a range of high value end uses (i.e. graphite foil)
• These results are typical for high-quality product from the graphite province surrounding the Mahenge Liandu project
Investor Presentation – May 2019 9
Flake Size (µm) Expansion Volume at 800 °C Expansion Volume at 1000 °C
Flake Size (µm) Purity after acid treatment Flake Size Expansion @ 800°C Expansion @ 1000°C
500 µm 440 cm³/g 480 cm³/g
300 µm 370 cm³/g 420 cm³/g
180 µm 300 cm³/g 380 cm³/g
106 µm 210 cm³/g 230 cm³/g
75 µm 165 cm³/g 170 cm³/g
-75 µm N/A 115 cm³/g
Flake Size Purity TGC (%)
500 µm 99.93
300 µm 99.99
180 µm 99.98
106 µm 99.96
75 µm 99.94
Value Triggers
Multiple work streams underway on various areas of the Definitive Feasibility Study
• Development of the transport and logistics pathway – expected June 2019
• Resource update targeting high grade near surface mineralisation – expected June 2019
• Metallurgical work results confirming product quality and downstream test-work confirming the
potential uses of Mahenge Liandu concentrates – expected July 2019
• Updating and optimisation of the pit design – expected September 2019
• Construction of water bores and assessment of flow rates and ground water conditions –
expected November 2019
• Completion of the full DFS – expected November 2019
Investor Presentation – May 2019 10
Peer ComparisonPlanned Output & Ore Grade
Armadale’s point of difference from peers is its niche focus and high ore grade, which will deliver lower OPEX/t - a key comparative advantage
Investor Presentation – May 2019 11
Source: Company data (Note: all information from PFS, DFS or BFS to ensure relative consistency)
PLANNED ANNUAL OUTPUTHEAD GRADE
Peer ComparisonPurity & Head Grade
Armadale ranks top-tier on product purity & resource grade relative to rivals, while enjoying a material proportion of high-value larger flakes (>65% of distribution)
Investor Presentation – May 2019 12RESOURCE GRADE
PURITY
“Armadale, Blackrock & Kibaran are neighbours which explains why the purities are relatively high & clustered”
Peer ComparisonMarket Cap & CAPEX
The advanced Mahenge Liandu project is niche and high-grade, comparing favourably to peers in terms of asset vs market cap
Investor Presentation – May 2019 13CAPEX
MARKET CAP
Peer ComparisonCAPEX & OPEX per Tonne
The Mahenge Liandu project’s OPEX/t is lower relative to most peers due to the high ore grade
Investor Presentation – May 2019 14OPEX/t
CAPEX/t
15
GRAPHITE MARKET
Investor Presentation – May 2019
Primary Global Graphite Demand Drivers
• Increasing global graphite demand reflects new product innovation in the high-tech manufacturing sector moving from niche to mainstream plus other applications, while traditional uses (i.e. steel sector) remain flat at best
• Industrial Minerals estimates natural flake graphite could reach 1.6Mtpa by 2025E which is up circa 180% on 2014’s level
Investor Presentation – May 2019 16
Source: Industrial Minerals
Drilling Down to Key Primary Sub-Drivers
Investor Presentation – May 2019 17
Spherical graphite for lithium-ion battery manufacturers, which are rapidly expanding capacity via new mega-giga factories, reflecting growing end user demand for:
▪ Electric vehicles
▪ Electronic equipment
▪ Power storage equipment to enable off-peak use of power generated by solar/wind
Expandable graphite for flammable retardant building materials replacing toxic brominated products, due to changing safety regulatory requirements
Secondary Global Graphite Demand Drivers
Incrementally, other traditional and newly emerging applications, at the margin, are contributing to higher graphite demand, including:
Investor Presentation – May 2019 18
Graphite paper/sheet for sealing gaskets, tapes & packing
Graphite foil used in electronic products like smart phones/tablets
Graphene for electronic, medical, chemical and industrial processes
Tighter Global Supply Creates Opportunities
While China has long been the world’s leading natural graphite supplier, tougher environmental rules and mining regulations are reducing its output, resulting in:
• China slowly moving to net-natural graphite importer, which will lead to severe supply deficits moving into the 2020s (BMI)
• Growing opportunities for east African producers to fill an expanding void
Investor Presentation – May 2019 19
BMI data highlights upward price trends over past two years
Securing premium pricing depends on purity, flake-size, product consistency,
supply reliability and suitability for downstream applications
Legislative Environment
• Tanzania is a stable democracy with a legal system founded on English common law
• The official languages are Swahili and English
• Tanzania has a long mining history andcurrently the 4th largest gold producer in Africa
• 30% corporate tax rate
• New mining legislation introduced in July 2017 had a moderate impact on the graphite sector
• 3% royalty levied for industrial minerals
• Mining Commission established in April 2018 to facilitate grant, renewal and transfer of mining licences
Investor Presentation – May 2019 20
INVESTMENT CASE
21
Investment Case
• Building a significant high-grade graphite mine at the Mahenge Liandu Graphite Project
• Notable value triggers:
• Application for a mining lease expected to be submitted in August 2019
• Numerous milestones advancing DFS towards completion in Q4 2019
• Potential to support a 400,000tpa operation over a 32-year mine life
• Ability to generate meaningful value with an NPV of US$US349m and IRR of 122%
• Significant upside - 32 year mine life based on a quarter of the Resource
• Project potential underpinned by increasing global demand for graphite products –first MOU signed and significant sales interest
• Experienced team actively reviewing other exciting investment opportunities
Investor Presentation – May 2019 22
Disclaimer
This presentation does not constitute investment advice. Neither this presentation nor the information contained in it constitutes an offer, invitation,
solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction. This presentation does not take into account any person's
particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations in this presentation are not
intended to represent recommendations of particular investments to particular persons. To the fullest extent permitted by law, Armadale Capital PLC does
not make any representation or warranty, express or implied, as to the accuracy or completeness of any information, statements, opinions, estimates,
forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of
negligence or otherwise is accepted.
This presentation may include forward looking statements. Forward looking statements are only predictions and are subject to risks, uncertainties and
assumptions which are outside the control of Armadale Capital Plc. These risks, uncertainties and assumptions include commodity prices, currency
fluctuations, economic and financial market conditions in various countries and regions, environmental risks and legislative, fiscal or regulatory
developments, political risks, project delay or advancement, approvals and cost estimates. Actual values, results or events may be materially different to
those expressed or implied in this presentation. Given these uncertainties, readers are cautioned not to place reliance on forward looking statements. Any
forward looking statements in this presentation speak only at the date of issue of this presentation subject to any continuing obligations under applicable
law, Armadale Capital Partners Ltd does not undertake any obligation to update or revise any information or any of the forward looking statements in this
presentation only changes in events, conditions or circumstances on which any such forward looking statement is based.
Exploration Targets: It is common practice for a company to comment on and discuss its exploration in terms of target size and type. The information in this
presentation relating to exploration targets should not be misunderstood or misconstrued as an estimate of Mineral Resources or Ore Reserves. Hence the
terms Resource(s) or Reserve(s) have not been used in this context in this presentation. The potential quantity and grade of resource targets are conceptual
in nature since there has been insufficient work completed to define them beyond exploration targets and that it is uncertain if further exploration will
result in the determination of a Mineral Resource or Ore Reserve.
Investor Presentation – May 2019 23