Armadale Capital PLC (LON:ACP) shares soared as it lined up a potential new partner to build its gold mine at Mpokoto in the DRC.
African Mining Services (A-MCS), a completely different company from A –CS, the company that had been carrying out due diligence for the past fifteen months, has negotiated an earn-in for an 85% stake.
Mpokoto has a current resource of 678,000oz of gold from 14.58mln tonnes at 1.45g/t or enough to produce approximately 25,000oz per annum over a nine-year mine life.
A scoping study indicated net present value of US$55.3mln based upon a discount rate of 8% and a gold price of US$1,250/oz.
African Mining has ninety days to decide whether to go ahead or not.
If it does, its investment will be in two stages.
Initially it will put up US$1.25mln for a 25% stake, which will rise to 85% if Armadale cannot raise the US$25mln needed to build the mine.
At that point, African Mining will take over full responsibility for building the mine.
William Frewen, chairman, said the deal meant it can now concentrate on its recently acquired Mahenge Liandu graphite project in Tanzania, where drilling has just started.
He added that in African Mining it was also bringing on board a very experienced mining partner at Mpokoto with knowledge of the DRC and, crucially, access to funding.
“With an established resource, a nine-year mine life at 25,000oz per annum, and favourable economics, we have proven Mpokoto’s commercial viability.
“AMS has the requisite skill set and experience to advance Mpokoto into production and ultimately realise the value of the project.”
The deal is being classified as a related party transaction under AIM rules as African Mining is ultimately owned by Kabunga Holdings, a 13% shareholder in Armadale.