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The proposed deal, signed with Chinese company Matrass, is for 30,000 tonnes per year of graphite concentrate for an initial five-year term.
London-listed Armadale Capital (LSE:ACP) has signed an offtake memorandum of understanding (MOU) for its Mahenge Liandu graphite project in Tanzania.
The proposed deal, signed with Chinese graphite mining and processing company Matrass Group, is for 30,000 tonnes per year of graphite concentrate for an initial five-term. This represents over 60 percent of the company’s target annual production.
The price will be agreed based on the Chinese benchmark for the quality of the graphite produced.
According to the company, demand for high-quality graphite products has been highlighted through other offtake agreements, including Black Rock Mining’s (ASX:BKT) binding offtake for 205,000 tonnes per year from its project, which is proximal to Mahenge Liandu.
“This speaks volumes for the growing market demand for graphite from the region, which boasts some of the highest purity graphite concentrates globally and reinforces our confidence that binding offtake agreements will be secured for our entire 49,000 tonnes per year forecast production,” Nick Johansen, director of Armadale said.
In fact, the company said discussions for the remaining 19,000 tonnes per year of production are ongoing with a number of potential customers.
“As recent activities have focused on securing offtake agreements and mine permitting, both of which are making positive progress, we look forward to recommencing activities for the feasibility study and we look forward to updating the market further in this regard,” Johansen added.
To progress the MOU to a binding agreement, the company is looking to start a test-work program before the end of Q1 2019.
Additionally, Armadale has already completed the environmental and social impact study for the project.
Mahenge Liandu has a high-grade JORC-compliant inferred mineral resource estimate of 51.1 million tonnes at 9.3 percent total graphite content, including 38.8 million tonnes which is classified as indicated.
After the news, the company’s share price went up over 15 percent, but on Wednesday (February 20), shares of Armadale were trading down 4.13 percent at GBX 1.10. Year-to-date, shares of the company are up 27.78 percent.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
