5th Dec 2016 14:01
LONDON (Alliance News) - Armadale Capital PLC on Monday said Kisenge Mining Pty Ltd has exercised its option to take operational control of the Mpokoto gold project in the Democratic Republic of Congo, leaving the London-listed company to focus on its flagship asset.
Kisenge, previously known as African Mining Services, has exercised its option to form a joint venture at Mpokoto under the heads of terms signed in late September.
The first phase will allow Kisenge to earn up to a 25% stake by funding USD1.3 million worth of work, including metallurgical testwork and refining of the definitive feasibility study to incorporate financing the project and initial capital works, Armadale said.
Once the first phase is completed, Kisenge has 30 days to decide whether to exercise another option to proceed with the second phase. If Kisenge exercises that option, it will be responsible for securing funding to bring Mpokoto into production. If it organises 100% of the funding, Kisenge will earn another 60% stake in the project, taking its total holding up to 85%.
Mpokoto has an established resource of 678,000 ounces of gold graded at an average of 1.45 grammes of gold per tonne of ore and a definitive feasibility study has already been completed for the first phase of production that will produce about 25,000 ounces annually over the first four years.
Results from that study, announced in February, set out various parameters for Mpokoto, identifying phased processing routes for the project to support low capital expenditure development. Phase one concentrates on the shallower oxide portion of the resource which will be prioritised for exploitation in advance of the deeper unweathered sulphide ore designated for phase two.
The current estimates from the study, twinned with a gold price of USD1,250 per ounce, would deliver revenue of around USD138.6 million over the first four years. Capital costs are estimated to be of the order of USD25.0 million, with cash operating costs of USD792 per ounce.
Significant further upside is anticipated with an exploration target of 2.4 million to 3.0 million tonnes grading 1.25 grammes to 1.5 grammes of gold per tonne of ore, which the board estimate should yield an additional 120,000 ounces to 150,000 ounces of gold to the project. Furthermore, the project is part of a substantial 800,000 hectares of exploration licences yet to be explored.
"The board is optimistic that once Kisenge has completed the revised definitive feasibility study and other work it will progress to phase two of the joint venture agreement to bring Mpokoto into commercial production. If this materialises, Armadale will enjoy the benefits of owning a material interest in a producing gold mine," said Chairman William Frewen.
"This development means that management's efforts and resources can remain focused on progressing the next phase of the Mahenge Liandu graphite project, where an initial JORC resource estimate is anticipated in the coming weeks, followed by further news in the first quarter of 2017 relating to the results of metallurgical test-work and commencement of feasibility work," he added.
Mahenge Liandu, Tanzania, is being pursued following a very successful drill programme in 2016, with 18 out of 21 holes intersecting high grade coarse flake graphite mineralisation over a 2.0 kilometre strike length.
Graphite is a commodity that is expected to see its price rise over the next few years and beyond as it piggy-backs on the growth in demand for items like batteries, in which it is a key ingredient, coming from developments in industries such as electric cars and energy storage. It is also used for fire retardant building materials, carbon composites and graphene.
Armadale shares were down 1.2% to 3.58 pence per share on Monday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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