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Armadale Capital (LON:ACP) shares surged 117% as it struck a "landmark" agreement to fund and develop its Mpokoto project in the Democratic Republic of the Congo (DRC) into production, which is earmarked for the first half of 2016.
The heads of terms is with Africa Mining Contracting Services group (A-MCS), who will fund, construct and operate the project in the Katanga province.
Initial ground works are to kick off immediately, said the firm, which also revealed it had terminated its Bergen financing facility.
A pre- condition of A-MCS becoming mining contractor is that they introduce at least US$20mln of debt funding, said Armadale.
Armadale director Justin Lewis told Proactive the agreement represented the "final major hurdle".
Speaking earlier, he said: "This is a landmark agreement for our strategy of bringing Mpokoto into production within the next 12 months.
"The provision of at least US$20 million project finance is a crucial step in the project’s development and with extensive local experience, we are delighted to have signed with A-MCS.
"We will now work closely with our new partners to finalise the DFS and the definitive agreements to deliver a low cost, low capex mine capable of generating excellent returns for shareholders.
"With this funding and development agreement, an initial NPV of US$55.3m (£36.3m) based on a forecast gold price of US$1,250/oz, and a further potential resource upgrade, Mpokoto continues to show its commercial value.”
Final agreements are expected to be inked in the next quarter, along with the delivery of the definitive feasibility study (DFS).
The project has a 678,000 ounce gold resource and it is modelled to produce around 25,000 ounces a year for nine years. Net present value (NPV) is estimated at around US$55mln (based on US$1,250 gold).
There is also significant additional upside, with an exploration target of between 2.4 and 3 million tonnes grading 1.25-1.5 g/t Au has potential to yield a further 120,000-150,000 ounces of yellow metal.
The company noted that because of A-MCS would now help to work on the DFS, Armadale had decided to delay the publication of the final results from the study until they had been reviewed and agreed by A-MCS.
"However, the overall results of the DFS are anticipated to be in line with the published expanded scoping study and, as a result of this partnership, the overall timeline to commencement for production in HI 2016 is now more secure," it said.
Separately, Armadale said on the Bergen facility, the amount of the convertible security currently outstanding is US$242,815, which will be repaid in full.
The firm will make a £30,000 cash or shares payment and has issued three non-convertible unsecured loan notes with a total value of £200,000.
Shares rocketed 117% to 0.049p but had earlier in the session been up over 200%.