Transforming from explorer to emerging graphite producer Investor - - PowerPoint PPT Presentation

Transforming from explorer to emerging graphite producer

Investor Presentation October 2019

Corporate Information

Subs bstantial al Shar areh ehol

• lder

ders

Kabunga Holdings Pty Ltd 13.55% Matt Bull (Technical Director) 8.24% Directors 1.58% Others 76.63% Investor Presentation – October 2019 2

Kabunga Holdings Pty Ltd Matt Bull Directors Others

Key Dat ata Shar are e Pri Price Char art

0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5

Ticker (LSE) ACP Shares in issue 403,189,482 Share Price (1 October 2019) 2.05p 52 week high / low 2.48p/0.85p Market cap £8.27m

October ‘18 October ‘19

Group Overview

• Armadale Capital (ACP) is an AIM-listed diversified investment company focused
• n 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 – October 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 Australia and Africa BSc (Eng) from the University

• f 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, ACA Non-Executive Director

Currently CEO of Power Metal Resources 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

• btaining 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 Lindian Resources (ASX: LIM) Bachelor of Science with honours in geology and geophysics from the University

• f Adelaide

Investor Presentation – October 2019 4

MAHENGE LIANDU GRAPHITE PROJECT

5

Project Overview

• 100% owned, near surface, high grade deposit –

focus on commencing production in 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 underway
• Met test work completed
• Development of transport pathway underway
• Mineral Resource update nearing completion
• Finalisation of production flowsheets and plant design
• On track to deliver DFS Q4 2019
• Considerable sales interest – two MOUs signed and

advanced discussions underway with other potential customers

• Project development funding progressing

Investor Presentation – October 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 port 320km away

• Labour and materials within

10km at Mahenge town

Investor Presentation – October 2019

Tanzania-Zambia Railway Kilombero Bridge

7

Resource & Mine

Investor Presentation – October 2019

• 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, up to

97.1% purity for large and medium flake fractions

• 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 Robus ust t econo nomic ics fro rom m Scopi ping ng Stud udy comp mple lete ted Q1 2018

Tonnage (Mt) % Cut-Off TGC Average % TGC Inferred 12.4 3.5 9.1 Indicated 38.7 3.5 9.3 Measured 3.5 Total 51.1 3.5 9.3

8

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 – October 2019

Flake Size (µm) Expansion Volume at 800 °C Expansion Volume at 1000 °C

Fla lake Siz ize (µm) ) Purity y aft fter acid id 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

9

Peer Comparison

Planned Output & Head 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 – October 2019

Source: Company data (Note: all information from PFS, DFS or BFS to ensure relative consistency)

PLANN NNED ANNU NNUAL OU OUTPUT HE HEAD GRA RADE

10

Peer Comparison

Purity & Resource 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 – October 2019

RESOU OURCE CE GRADE PUR URITY TY “Armadale, Blackrock & Kiba baran are re neighb hbour urs which h expla plains why hy the purities are relatively high & clustered”

11

Peer Comparison

Market Cap & CAPEX

The advanced Mahenge Liandu project is niche and high-grade, comparing favourably to peers in terms of asset vs market cap (based on price close @ 23 Sept 2019)

Investor Presentation – October 2019

CAPEX MA MARKET T CAP

20 40 60 80 100 120 Syrah Magnis Walkabout Blackrock Nextsource Triton Kibaran Volt Sovereign Graphex Armadale (GBPm)

12

Peer Comparison

CAPEX & OPEX per Tonne

The Mahenge Liandu project’s OPEX/t is lower relative to most peers due to the high ore grade

Investor Presentation – October 2019

OP OPEX/t X/t CAPEX/t X/t

13

GRAPHITE MARKET

Investor Presentation – October 2019 14

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 – October 2019

Source: Industrial Minerals

15

Drilling Down to Key Primary Sub-Drivers

Investor Presentation – October 2019

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 le graphit ite e for flammable retardant building materials replacing toxic brominated products, due to changing safety regulatory requirements

16

Secondary Global Graphite Demand Drivers

Incrementall lly, ot

• ther

er traditi tional l and newly ly emer ergin ing appli licati tion

• ns, at the

e ma margin in, are e con

• ntr

trib ibuti ting to to higher r gra raphite dem emand, includin ing:

Investor Presentation – October 2019

Gra Graphite paper er/shee eet for sealing gaskets, tapes & packing Gra Graphite foi

• il used in electronic products like smart phones/tablets

Gr Graphene for electronic, medical, chemical and industrial processes

17

Tighter Global Supply Creates Opportunities

While China has long been the world’s leading natural graphite supplier, tougher environmental rul ules s and nd mi minin ing re regula latio ions s are re re reducin ing its ts out

• utput,

t, re resu sultin ing in: n:

• 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
• More pertinently, suppliers that produce battery grade natural graphite should be able to

command premium pricing

• However, securing premium pricing is a bilateral process that depends on purity, flake-size,

product consistency, supply reliability and suitability for downstream applications

• Notably, testwork from the Mahenge Liandu region continues to show suitability for a wide

range of high-value applications, especially for the rapidly growing lithium-ion battery market

Investor Presentation – October 2019 18

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 and

currently 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 – October 2019 19

Investor Presentation – October 2019

ADDITIONAL INTERESTS

20

Additional Interests

• Armadale also holds a portfolio of royalty, listed company and unlisted company

investments where the Board considers there is an opportunity for material capital appreciation

• The Board continues to review additional investment opportunities in which

Armadale may invest, in line with its investing policy, with any material investments notified to the market as appropriate

Investor Presentation – October 2019 21

INVESTMENT CASE

22

Investment Case

• Building a significant high-grade graphite mine at the Mahenge Liandu Graphite

Project

• Numerous milestones advancing DFS towards completion in Q4 2019
• The March 2018 Scoping Study demonstrated potential to support a 400,000tpa
• peration 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 –

two MOUs signed and significant sales interest

• Experienced team actively reviewing other exciting investment opportunities

Investor Presentation – October 2019 23

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 determinationof a Mineral Resource or Ore Reserve.

Investor Presentation – October 2019 24

Investor Presentation – October 2019 25