Armadale Capital forges joint-venture to develop Mpokoto gold project
Investors considering this stock should not base decisions on historical share price performances. Furthermore, the Mpokoto gold project is located in a region which carries sovereign risk. As an early stage initiative operating in a high risk region where getting mining projects up and running is no simple feat, those considering this high risk stock as an investment should seek independent financial advice.
Investors responded positively to Armadale Capital Plc’s (LSE:ACP) decision to exercise its option regarding the formation of a joint venture with Kisenge Mining (KMP) with a view to developing and operating the Mpokoto gold project in the Katanga Province of the Democratic Republic of the Congo.
ACP is an AIM quoted investment company focused on natural resource projects in Africa, and its proposed involvement in the development of the Mpokoto project is in line with the group’s mandate.
Consequently, the circa 3% increase in the company’s shares was a reasonable response, particularly given investors appear to have shifted their focus from precious metals to base metals in recent weeks.
Current DFS to be refined
In terms of the joint venture agreement, Phase I will enable KMP to earn a 25% interest in ACP’s subsidiary, Kisenge Ltd, the joint venture entity, through providing funding and projected related services up to US$1.25 million, including incremental metallurgical test work, refining the current Definitive Feasibility Study (DFS) to incorporate financing the project and initial capital works.
In accordance with the Heads of Agreement, completion of Phase I would provide KMP with an option to proceed with Phase 2 which would involve further funding to bring Mpokoto into production.
Should KMP successfully arrange 100% of the funding it will receive a further 60% in Kisenge, lifting its aggregate interest to 85%, providing Armadale is satisfied KMP has fulfilled its obligations.
Clear line of sight to production
Reflecting on these developments and highlighting project metrics, ACP’s chairman William Frewen said, “Mpokoto has an established resource of 678,000 ounces of gold grading 1.45 grams per tonne and has completed a DFS based on annualised production of circa 25,000 ounces over an initial four year mine life for the first phase of mining”.
Importantly, the results of an expanded scoping study demonstrated a post-tax present value of US$55.3 million based on a discount rate of 8% and a gold price of US$1250 per ounce, slightly below the current price of circa US$1170.
Frewen views the project’s economics as attractive and is buoyed by the fact that there is a defined route to production.
Should the development strategy go to plan, ACP’s profile will change considerably given that it will have a material interest in a producing gold mine.
In tandem with the Mpokoto initiative management is progressing the next phase of the Mahenge Liandu graphite project where an initial JORC resource estimate is anticipated in coming weeks.
This is a potential share price catalyst, as is the upcoming release of results from metallurgical test work and the commencement of feasibility work which will be a key focus in the first quarter of 2017.