Armadale Capital announces high-grade results at Mahenge Liandu
AIM quoted investment company, Armadale Capital Plc (ACP), has released initial assay results from its Mahenge Liandu graphite project located in Tanzania.
It should be noted that for political and social reasons, this is a very high-risk stock. Getting mining projects up and running in countries such as Tanzania is no simple feat, and there may be challenges ahead. Investors interested in this stock should seek professional financial advice.
ACP’s chairman, William Frewen expressed his delight at the results saying, “These initial assay results are outstanding and of particular importance is the confirmation of near surface high grade graphite mineralisation of up to 26% Total Graphitic Carbon (TGC)”.
Importantly, the grades listed below are consistent with those delineated from assay results gathered in 2015 which included 60 metres grading 10.7% TGC and 5 metres grading 21.5% TGC.
To provide some perspective regarding these results, management noted the confirmed resources of other prominent players in Africa including Black Rock Mining (131 million tonnes at 7.9% TGC), Kibaran Resources (10.9 million tonnes at 8.6% TGC) and Volt Resources (446 million tonnes at 5.01 TGC)
Further positive news may be imminent with the remaining assay results for 2016 to be announced shortly. Management also said that further feedback on JORC modelling would be completed by the end of the December 2016 quarter, while also expressing a degree of optimism regarding the size of its graphite resource.
One of the promising aspects of these most recent results is the fact that they continue to provide evidence of near surface mineralisation, a factor that is important in terms of reducing extraction costs and optimising commercial viability.
Existing infrastructure provides clear path to development
ACP has recently undertaken a preliminary review of infrastructure and logistics requirements for mining operations to commence, including options regarding bringing its product to market.
Key takeaways were the proximity of mains power within 5 kilometres of the mine site and plentiful supply of groundwater.
From a transport perspective, it is approximately 80 kilometres by road from the mine site to a rail hub at Ifakara. Product could then be transported by rail (320 kilometres) to the deep sea port of Dar es Salaam.
Adequate labour and materials can be accessed from the town of Mahenge which is situated only 10 kilometres from the mine site.
Graphite remains a macro driven story
As highlighted by management, the macro environment for graphite remains buoyant, driven by new technologies including electric vehicles.
ACP referenced a Deutsche Bank report which cited lithium-ion battery capacity to grow by 200 GWh by 2020 as a result of more than 10 groups building gigafactories, including Tesla’s US$20 billion Nevada facility.
Translating this to industry dynamics for spherical graphite, an additional 400,000 tonnes would be required to meet these needs, implying a four to fivefold increase relative to 2015 levels.
Extrapolating these numbers further, ACP suggested that should 65% of the feedstock be naturally sourced, the application of a yield ratio of 50% would potentially imply an additional 520,000 tonnes of graphite concentrate is required.
Forward-looking estimates may or may not be met. As such, conclusions drawn in relation to interim and incomplete data should be considered speculative in nature and independent financial advice should be sought if considering this stock.