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

5 December 2016

Armadale Capital Plc (‘Armadale’ or ‘the Company’)

Joint Venture Agreement Proceeding on Mpokoto Gold Project

Armadale, the AIM quoted investment company focused on natural resource projects in Africa, is delighted to announce that Kisenge Mining Pty Ltd (‘KMP’), formerly known as African Mining Services (‘AMS’), has completed due diligence and exercised its option to form a joint venture with Armadale to develop and operate the Mpokoto gold project (‘Mpokoto’ or the ‘Project’) in the Katanga Province of the Democratic Republic of Congo.

Summary:

• Pursuant to the binding Heads of Agreement between the two parties (refer to RNS dated 28 September 2016 “Binding HOA to form joint venture to develop the Mpokoto gold project…”), KMP has completed due diligence and decided to exercise its option to proceed with the formation of a joint venture.
• Phase I of the joint venture agreement will enable KMP to earn a 25% interest in Armadale’s subsidiary, Kisenge Limited (‘Kisenge’), the joint venture entity, through providing funding and projected related services up to US$1.25m, including incremental metallurgical test-work, refining the current Definitive Feasibility Study (‘DFS’) to incorporate financing the Project and initial capital works.
• Upon completion of Phase I in accordance with the HoA, KMP has 30 days to decide whether to exercise an option to proceed with Phase II of the joint venture agreement.
• If KMP proceeds with Phase II, it will seek to arrange funding to put Mpokoto into production.
• If KMP successfully arranges 100% of the funding, it will receive a further 60% in Kisenge (lifting its aggregate interest to 85%), providing Armadale is satisfied KMP has fulfilled its obligations.

William Frewen, Chairman of Armadale said: “Mpokoto has an established resource of 678,000oz of gold (‘Au’) at 1.45 g/t Au and has completed a DFS based on a production rate of circa 25,000oz annually over an initial four-year mine life for the first phase of mining. With attractive economics and a defined route to production we are confident that the Project offers significant potential and we are pleased that the completion of KMP’s due diligence has led to the commencement of Phase I of the joint venture agreement.

“KMP will assume operational responsibility and provide funding to further advance Mpokoto. The Board is optimistic that once KMP has completed the revised DFS and other work it will progress to Phase II of the joint venture agreement to bring Mpokoto into commercial production. If this materialises, Armadale will enjoy the benefits of owning a material interest in a producing gold mine, This development means that management’s efforts and resources can remain focused on progressing the next phase of the Mahenge Liandu graphite project, where an initial JORC resource estimate is anticipated in the coming weeks, followed by further news in Q1 2017 relating to the results of metallurgical test-work and commencement of feasibility work.”

FURTHER INFORMATION

Related Party Transaction:

The entering into of a Joint Venture Agreement by KMP is considered a related party transaction under the AIM Rules for Companies on the basis that Kabunga Holdings Pty Ltd, a substantial shareholder in the Company, is the ultimate controlling shareholder of KMP.

The independent directors (being William Frewen, Emmanuel Steve Mahede and Nicholas Johansen) consider, having consulted with the Company’s nominated adviser, finnCap Ltd, believe that the terms of the Joint Venture Agreement are fair and reasonable insofar as independent shareholders of the Company are concerned.

The transfer of management of the Mpokoto Gold Project to KMP means that all existing staff employed by Kisenge will be made redundant. Retiring executives of the wholly owned operator at the Mpokoto Gold Project are to be allotted 2,014,343 shares of 0.1p each (“Ordinary Shares”) in lieu of notice and severance payments at a deemed price of 3.5p per Ordinary Share. The Company has applied for admission of the 2,014,343 new Ordinary Shares to trading on AIM. Dealings are expected to become effective on 8 December 2016 (‘Admission’). Following Admission, the Company will have 210,516,310 Shares in issue with each Ordinary Share carrying the right to one vote. There are no Ordinary Shares currently held in treasury. The total number of voting rights in the Company therefore will be 210,516,310 and this figure may be used by shareholders as the denominator for the calculations by which they determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority’s Disclosure Rules and Transparency Rules.

Mpokoto Gold Project:

Mpokoto has a current total mineral resource of 678,000oz Au from 14.58m tonnes @ 1.45g/t Au at a cut-off grade of 0.5g/t to produce approximately 25,000oz per annum over a nine-year mine life. The results of an expanded scoping study demonstrated a post-tax net present value of US$55.3 million based upon a discount rate of 8% and a gold price of US$1,250/oz.

Results from a DFS, announced February 2016, set out various parameters for Mpokoto, identifying phased processing routes for the project to support low capex development (Phase one concentrates on the shallower oxide portion of the resource which will be prioritised for exploitation in advance of the deeper unweathered sulphide ore designated for Phase two). The technical financial model shows solid economic fundamentals coming from annual mine throughput of 720,000 tonnes of ore over a four and half year mine life from which an average 24,900oz gold per annum could be produced. At a gold price of US$1,250 per oz, the revenue is US$138.6 million from Phase one alone. Capital costs are estimated to be of the order of US$25 million, with cash operating costs of US$792 per oz.

The Mpokoto project comprises four mining licences, which are valid for an initial term of 30 years from 30 September 2014. Significant further upside is anticipated with an exploration target of 2.4-3.0m tonnes grading 1.25-1.5 g/t Au which the Board estimate should yield an additional 120,000-150,000oz Au to the project. Furthermore, the Project is part of a substantial 800,000 hectares of exploration licences yet to be explored.

**ENDS**

Notes

Armadale Capital Plc is focused on investing in and developing a portfolio of investments, targeting the natural resources and/or infrastructure sectors in Africa. The company, led by a team with operational experience and a strong track record in Africa, has a strategy of identifying high growth businesses where it can take an active role in their advancement.

The Company owns the Mahenge Liandu graphite project in south-east Tanzania, which is now its main focus. The project is located in a highly prospective region with proven coarse flake, high grade graphite.

Other assets Armadale has an interest in include the Mpokoto Gold project in the DRC and a portfolio of quoted investments.

More information can be found on the website www.armadalecapitalplc.com

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

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