Interim Results

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Armadale Capital Plc / Index: AIM / Epic: ACP / Sector: Investment Company

10 September 2015

Armadale Capital Plc

(‘Armadale’ or the ‘Company’)

Interim Results for the six months ended 30 June 2015

Armadale, the AIM-quoted investment company primarily focused on the Mpokoto Gold Project (‘Mpokoto’ or the ‘Project’) in the Democratic Republic of the Congo (‘DRC’), announces its interim results for the six months ended 30 June 2015.

Highlights

  • Targeting low capex, low opex commercial gold production at the Mpokoto Gold Project in the Katanga province in the south of the DRC
  • Heads of agreement with Africa-Mining Contracting Services (‘A-MCS’) with a view to constructing, operating and providing up to US$20 million of financing for Mpokoto
  • Established resource of 678,000 oz gold (‘Au’) from 14.58 million tonnes ore at 1.45 g/t Au to produce approximately 25,000 oz per annum over a nine year life of mine
  • Average projected operating cost of US$647/oz
  • NPV of approximately US$55.3 million based on a forecast gold price of US$1,250/oz - even at US$1,100/oz the NPV of the Project is approximately US$32.3 million
  • Significant further upside - exploration target of 2.4-3.0 million tonnes grading 1.25-1.5 g/t Au should yield an additional 120,000-150,000 oz Au
  • Defined route to production – two phased development route defined post period end
  • Focused on identifying ways to realise value of interest in Mine Restoration Investments Ltd
  • Loss for the six months ended 30 June 2015 of £365,000 (2014: (£442,000)) relates to expenses incurred developing the Project, as is typical of a company exposed to mining exploration
  • Bolstered cash balance post period end - placements raised £1.1 million

Peter Marks, Chairman, commented “We continue to make progress, both on the ground and on a wider corporate level, in advancing our 678,000 oz Mpokoto Gold Project towards production in the first half of 2016. A significant step in this journey is the agreement we have entered into with Africa-Mining Contracting Services, a highly experience mining contractor, to work alongside Armadale, with a view to constructing and operating the Project as well as providing up to US$20 million of finance to bring the Project into production. With a clear path to production and significant further upside available, which has the potential to enhance the already favourable economics of the Project, the next 6-12 months are expected to be extremely active and we look forward to keeping shareholders updated with our progress.”

Enquires:

For further information please visit www.armadalecapitalplc.com or contact:

Armadale Capital plc

Peter Marks, Chairman +44 207 233 1462
Charles Zorab, Investor Relations
 

Nomad and broker: finnCap Ltd

Christopher Raggett/Simon Hicks +44 (0) 207 220 0500
 

Joint Broker: Beaufort Securities Ltd

Jon Belliss +44 (0) 20 7382 8300
 

Joint Broker: VSA Capital Ltd

Andrew Raca/Richard Buckle +44 (0) 203 005 5000
 

Press relations: St Brides Partners Ltd.

Hugo de Salis/Charlotte Heap +44 (0) 207 236 1177

Interim Results for the six months ended 30 June 2015

CHAIRMAN’S STATEMENT

We continue to make progress, both on the ground and on a wider corporate level, in advancing the Mpokoto Gold Project in the Democratic Republic of the Congo towards production in the first half of 2016. Importantly, and as announced on 8 June 2015, we have entered in an agreement with A-MCS to work alongside Armadale with a view to constructing and operating the Project, as well as providing up to US$20 million of finance to bring the Project into production.

In conjunction with developing Mpokoto and our other investments, your board continues to look at options to realise our interest in Mine Restoration Investments Ltd (‘MRI’). MRI has recently announced its intention to acquire an interest in Iron Mineral Beneficiation Services Proprietary Limited (‘IMBS’) and undertake a significant fundraising, which the board believes will provide a good opportunity to divest of this stake.

Mpokoto

We continue to progress Mpokoto, and are working with both our consultants and A-MCS to complete the Definitive Feasibility Study, which will be finalised in conjunction with the final funding arrangements with A-MCS. With an established resource of 678,000 oz Au from 14.58 million tonnes ore at 1.45 g/t Au and a clear line to production, we are delighted with the rapid progress achieved since acquiring the Project in August 2013.

The key economic metrics of Mpokoto, identified in the scoping study, include average operating costs (ex royalties and tax) of US$647/oz Au to produce approximately 25,000 oz per annum over the current life of mine of nine years. We expect the initial capital cost to treat the oxide ore to be in the order of US$20.4 million. This would give an NPV of US$55.3 million based on a forecast gold price of US$1,250/oz and a discount rate of 8%. Even at US$1,100/oz, the NPV of the Project is highly attractive at US$32.3 million. Accordingly, we believe substantial value has been created, and we remain positive about the prospects of production in H1 2016.

Importantly, whilst the resource we have established holds notable commercial value, there remains significant further upside potential at Mpokoto, which should in turn favourably impact the economics of the Project.

Investment Portfolio

During the period under review MRI announced it has entered into an agreement to acquire a significant interest in IMBS, together with a fundraising of up to R200 million (£9.4m) at R0.07 per share. At R0.07 per share Armadale’s shareholding in IMBS is valued at approximately £0.82 million.

Taking a longer term view, and given our size and resources, it makes sense for Armadale to focus on Mpokoto and the potential cash generation that can be derived from this early next year, as well as other investment opportunities in line with our investing policy. Your board is therefore intending to dispose of this shareholding and believe that the transaction with IMBS will serve to both underpin the value of the MRI shares as well assisting in the disposal of our shares.

We maintain a watching brief over our remaining quoted investments, with corporate activity in the small resources sector increasing. ASX listed Redcliffe Resources has recently announced a significant acquisition and ASX listed West Wits Mining continues to make good progress at its gold project in Papua.

Board

During the first half, I was delighted to welcome Dr Andrew Tunks to the board as a non-executive director. Andrew is a highly qualified geologist who has extensive experience in both gold and operating in Africa. Andrew has already demonstrated that his established relationships, leadership and experience in developing gold projects around the world is a perfect fit for Armadale as it progresses the Mpokoto Gold Project through its final development phases and into production.

Results

As at the date of this report the group does not have any revenue and has reported a loss of which a substantial proportion of our costs relate to expenses incurred developing Mpokoto, as is typical of a company exposed to mining exploration. Since the period end the Company has raised further £1.1 million to ensure the group has sufficient funds to maintain the momentum on the development of Mpokoto.

Outlook

Armadale continues to make significant progress in its transition from an exploration into a production company. With an established resource, commercially attractive economic fundamentals, a defined processing route, and an agreement in place to construct, operate and finance the operation, Mpokoto continues to show its value as a low CAPEX, low OPEX project. The commencement of production in H1 2016 consequently remains our primary goal. With this in mind, the completion of our Definitive Feasibility Study and in turn the finalisation of our agreement with A-MCS will represent a major achievement.

We look forward to reporting to shareholders on the progress of Mpokoto as we continue to unlock its inherent value potential and thank all shareholders for their ongoing support. The board remains fully focused on building a solid emerging mining operation whose value, we believe, is greater than that currently reflected in the share price. Your board continues to work tirelessly to build shareholder value through the Mpokoto Project and our other investments.

Peter Marks

Chairman

10 September 2015

Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2015

     
    Unaudited

Six months ended

      Audited

Year Ended

30 June
2015
£’000

 

     

30 June
2014
£’000

 

31 December
2014
£’000

 

Revenue - - -
Cost of sales -       -       -
Gross profit - - -
Interest Income - 49 7
Administrative expenses (307) (448) (694)
Share based payment charge - - (84)
Impairment of investment - - (68)
Provision against loan - - (225)
Finance costs (58) - (14)
Share of loss of associated company -       (43)       -
Loss before tax (365) (442) (1,078)
Taxation -       -       -

Loss after tax attributable to equity holders of the parent
company

(365)       (442)       (1,078)
 
Pence Pence Pence
Loss per share attributable to equity holders of the
parent company (note 3) (1.05) (1.50) (4.50)
Basic and fully diluted

Consolidated Statement of Financial Position
At 30 June 2015

       
    Unaudited       Audited

30
June 2015

     

30 June
2014

 

31 December
2014

£’000 £’000 £’000
Assets
Non-Current assets
Exploration and evaluation assets 4,074 2,911 3,516
Property, plant and equipment 28 - 34
Investments 30       745       30
4,132 3,656 3,580
Current assets
Investment 689 - 689
Trade and other receivables 133 622 183
Cash and cash equivalents 26       612       238
848       1,234       1,110
                 
Total assets 4,980       4,890       4,690
 
Equity and liabilities
Equity
Share capital (note 4) 2,779 2,510 2,563
Share premium 15,174 13,680 14,808
Shares to be issued 286 1,352 286
Share option reserve 1,610 1,526 1,610
Retained earnings (15,353)       (14,351)       (14,988)
Total equity 4,496       4,717       4,279
 
Current liabilities
Trade and other payables 342 173 153
Loan notes 142       -       -
484       173       153
Non-current liabilities
Convertible loan notes - - 217
Derivative liability -       -       41
-       -       258
                 
Total equity and liabilities 4,980       4,890       4,690

Unaudited Consolidated Statement of Changes in Equity
For the period ended 30 June 2015

                                                   
     

Share
Capital
£’000

 

     

Share
Premium
£’000

 

     

Shares to be
Issued
£’000

 

     

Share Option
Reserve
£’000

 

     

Retained
Earnings
£’000

 

     

Total

£’000

 

 
Balance 1 January 2014 2,472 13,240 1,352 1,526 (13,909) 4,681
Loss for the period -       -       -       -       (442)       (442)
Total comprehensive loss for the period -       -       -       -       (442)       (442)
 
Issue of shares 38 488 - - - 526
Expenses of issue -       (48)       -       -       -       (48)
Total other movements 38       440       -       -       -       478
 
Balance 30 June 2014 2,510 13,680 1,352 1,526 (14,351) 4,717
Loss for the period -       -       -       -       (637)       (637)
Total comprehensive loss for the period -       -       -       -       (637)       (637)
 
Share based payments - - - 84 - 84
Issue of shares 53       1,128       (1.066)       -       -       115
Total other movements 53       1,128       (1,066)       84       -       199
 
Balance 31 December 2014 2,563 14,808 286 1,610 (14,988) 4,279
Loss for the period -       -       -       -       (365)       (365)
Total comprehensive loss for the period -       -       -       -       (365)       (365)
 
Issue of shares 216 397 - - - 613
Expenses of issue -       (31)       -       -       -       (31)
Total other movements 216       366       -       -       -       582
 
Balance 30 June 2015 2,779 15,174 286 1,610 (15,353) 4,496

The following describes the nature and purpose of each reserve within shareholders’ equity:

Reserve Description and purpose

Share capital Amount subscribed for share capital at nominal value

Share premium Amount subscribed for share capital in excess of nominal value, net of allowable expenses

Shares to be issued Value of share capital to be issued in connection with the acquisition of Netcom

Share option reserve Reserve for share options granted but not exercised

Retained earnings Cumulative net gains and losses recognised in the statement of comprehensive income

Consolidated Statement of Cash Flows
For the period ended 30 June 2015

                 
    Six Months ended      
30 June 2015       30 June 2014 31 December 2014
£’000 £’000 £’000
 
Cash flows from operating activities
Loss before taxation (365) (442) (1,078)
Depreciation 6 - 3
Unrealised foreign exchange differences (2) (3) (5)
Loan note accretion 34 - 9
Impairment of investment - - 68
Provision against loan - - 225
Interest income - (49) (7)
Loan note interest accrued 1 - -
Share based payments - - 84
Share of loss of associated company - 43 -
Shares issued in settlement of liabilities - - 115
Shares received for services -       -       (3)
(326) (451) (589)
 
Changes in working capital
Receivables 50 (191) 103
Payables 189       (12)       (99)
Net cash used in operating activities (87)       (654)       (585)
 
Cash flows from investing activities
Expenditure on exploration and evaluation assets (478) - (651)
Loan to associated company - (117) (111)
Purchase of listed investments - (32) (32)
Interest income -       49       3
Net cash used in investing activities (478)       (100)       (791)
 
Cash flows from financing activities
Proceeds from issue of shares 404 525 525
Issue costs (31) (48) (48)
Proceeds from issue of loan notes 200 - 248
Repayment of loan notes (220)       -       -
Net cash from financing activities 353       477       725
 
Net decrease in cash and cash equivalents (212) (277) (651)
Cash and cash equivalents at 1 January 2015 238       889       889
Cash and cash equivalents at 30 June 2015 26       612       238

Notes to the unaudited condensed consolidated financial statements
For the period ended 30 June 2015

                                                             

1. Incorporation and principal activities

Country of incorporation

Armadale Capital Plc was incorporated in the United Kingdom as a public limited company on 19 August 2005. Its registered office is 55 Gower Street, London WC1E 6HQ.

Principal activities

The principal activity of the Group during the period was that of an investment company.

2. Accounting policies

1. Statement of compliance

The financial information for the six months ended 30 June 2015 and 30 June 2014 is unreviewed and unaudited and does not constitute the Group’s statutory financial statements for those periods within the meaning of Section 434 of the Companies Act 2006. The comparative financial information for the year ended 31 December 2014 has been derived from the Annual Report and Accounts, which were approved by the Board of Directors on 21 May 2015 and delivered to the Registrar of Companies. The report of the Auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

This condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. This condensed set of financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2014 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2014 as described in those annual financial statements.

2.2. Going Concern

The financial statements have been prepared on the going concern basis as, in the opinion of the Directors, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

2.3. Exploration and evaluation assets

These assets are recorded at cost and are amortised over their expected useful life on a pro rata basis of actual production for the period to expected total production.

2.4. Investments

Investments are stated at cost less provision for impairment.

3. Loss per share

The calculation of basic loss per share is based on a loss of £365,000 (2014, £442,000) and on 34,819,494 (2014, 23,396,126) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.

On 22 June 2015, the members approved a consolidation and a subdivision of the company’s share capital whereby in exchange for every 150 existing Ordinary Shares of 0.01 pence, shareholders received one Consolidated Share of 1.5 pence which was then subdivided into one New Ordinary Share of 0.1p and one Deferred Share of 1.4p. Loss per share has been calculated on the basis that the revised capital structure was in place throughout the period and comparative information has been restated on a consistent basis.

There is no difference between basic loss per share and diluted loss per share as the Group reported a loss for the period.

Share capital

During the period, the company placed a total of 9,527,777 (restated) Ordinary Shares in the capital of the Company to raise £404,000 (£373,000 after expenses) with institutional and other investors.

During the period, £209,000 nominal of convertible loan notes were converted into 5,383,414 (restated) Ordinary Shares in the capital of the company.

**ENDS**

Short Name: Armadale Capital Plc
Category Code: MSC
Sequence Number: 483520
Time of Receipt (offset from UTC): 20150909T114713+0100

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Armadale Capital Plc

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Armadale Capital Plc