Armadale Publishes DFS for Mahenge Liandu Graphite Project

London-listed Armadale Capital (LSE:ACP) has published the results of a definitive feasibility study (DFS) for its Mahenge Liandu graphite project in Tanzania. 

The study includes a staged ramp up to facilitate near-term production, with 60,000 tonnes per year of graphite concentrate to be produced for the first four years before increasing to 90,000 tonnes per year.

The project has an estimated pre-tax net present value of US$358 million and an internal rate of return of 91 percent, with a 1.6 year after-tax payback for Stage 1 based on an average sales price of US$1,179 per tonne. An optimized DFS could further improve these numbers.

“The DFS confirms Mahenge in the board’s view as a large, long life, low cost graphite deposit with a focus on high quality graphite concentrate for the rapidly emerging electric vehicle market,” the company said in a statement on Tuesday (March 31). Graphite is a key element in the anodes of lithium-ion batteries, which are used to power electric cars.

Mahenge Liandu has the potential to generate pre-tax cash flow of US$882 million over an initial 17 year mine life. The capital cost estimate for Stage 1 is US$38.6 million, which includes a contingency of US$S4.1 million, while operating costs are estimated at US$385 per tonne of concentrate.

The company plans to fund Stage 2 from cash flow.

Africa-focused Armadale said the timeline to first production is expected to be approximately 10 to 12 months from the start of construction.

“As previously advised, agreements with a number of potential offtake partners have already been secured,” Armadale Chairman Nick Johansen said.

“With the delivery of the data from the DFS, the company is now in a strong position to move these agreements further forward in addition to advancing workstreams on potential debt finance packages and project level development funding for construction.”

Looking ahead, the company also plans to begin working on an application for a mining license, with the aim of starting in the second quarter of this year.

Mahenge Liandu has a high-grade JORC-compliant indicated and inferred mineral resource estimate of 59.48 million tonnes at 9.8 percent total graphite content.

Aside from its flagship Mahenge Liandu asset, Armadale also holds an interest in the Mpokoto gold project in the Democratic Republic of Congo.

On Tuesday (March 31), shares of Armadale were trading down 10.75 percent at GBX 2.49.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.