Acquisition

Acquisition

Armadale Capital Plc

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

15 November 2013

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

Acquisition of Mpokoto Gold Project, Democratic Republic of Congo

Armadale, the AIM quoted investment company focused on natural resource projects in Africa, is pleased to announce that it has entered into agreements to acquire the remaining Netcom Global Inc (‘Netcom’) share capital not already held by Armadale, thereby gaining the right to an 80 per cent interest in the highly prospective, low-cost, Mpokoto Gold Project in the Katanga Province in the south of the Democratic Republic of Congo (‘Mpokoto’ or ‘the Project’). This investment underlines Armadale’s commitment to the Project as the Company continues to build a portfolio of revenue generating African resource assets. In line with this investment, Armadale has a defined development strategy in place, targeting commercial gold production within 24 months.

Overview

Project Highlights:

• Mpokoto is a low-capex, low-opex project with a 10 year mine life, which Armadale is targeting to bring into production within 24 months
• Indicated and Inferred resource estimated at 380,000oz gold (‘Au’) from 7.2 million tonnes @ 1.65g/t Au with a cut-off grade of 0.5 g/t Au (75% Indicated category)
• Exploration Target potential* of 20-24 million tonnes @ 1.5-1.8 g/t Au and resource amenable to low cost heap leach operation
• Well explored project with multiple targets – previous owners including Cluff Gold Plc, Gold Fields Ltd and Casa Mining Limited have collectively invested in excess of US$20 million
• Defined development strategy in place to rapidly advance the Project – pre-feasibility study targeted for completion by end of Q1 2014
• Low capital expenditure – estimated to total around US$10-15 million
• Targeting cash operating costs of US$650/oz and capital costs of US$70-100/oz

*Tetra Tech Consultancy estimate. The quantity and grade of the Exploration Target is conceptual and there has been insufficient exploration to define a Mineral Resource.

Transaction Highlights:

• Following its previous investment of, in aggregate, US$255,000, Armadale currently owns 22% of Netcom and will acquire the remaining 78% of the share capital of Netcom, which holds the rights to an 80% interest in the Mpokoto Project, in two transactions:
  • Pursuant to the option announced on 21 August 2013, the acquisition of 68% of Netcom for an aggregate consideration of 700 million ordinary shares in the capital of Armadale (“Ordinary Shares”), to be issued in two tranches(the ‘Initial Acquisition’):
    • 350 million Ordinary Shares to be issued at completion (‘Initial Consideration Shares’); and
    • a further 350 million Ordinary Shares upon the grant of Exploitation Licences for the Mpokoto Project to the Company (anticipated by the end of June 2014) (the ‘Further Consideration Shares’)
  • The acquisition of a further 10% interest from New Talisman Mines Limited (“NTL”) (together with a loan note of US$250,000 in Netcom) for an issue of 93 million Ordinary Shares at completion (‘NTL Shares’) (‘Minority Acquisition’)

Peter Marks, Chairman of Armadale said, “Mpokoto is a highly prospective, low capex, low cost gold project. With an estimated resource of 380,000oz Au from 7.2 million tonnes @ 1.65g/t gold (‘Au’) at a cut-off grade of 0.5 g/t Au and a potential exploration target of 20-24 million tonnes @ 1.5-1.8 g/t Au, Mpokoto represents a compelling investment opportunity.

As a result, we are delighted to announce that we have agreed to acquire the remaining issued share capital of Netcom, taking our interest to 100%. Furthermore, in order to unlock the inherent value potential of Mpokoto, we have a defined development strategy in place, which is targeting commercial gold production within 24 months. I look forward to updating shareholders on our progress in due course, as we build a solid portfolio of revenue generating African resource projects.”

Further Information

Background

Armadale made an initial US$150,000 investment for a 15% equity interest in Netcom, in August 2013 (see announcement dated 21 August 2013), and at the same time was granted an option to takes its interest to approximately 90% of the shares it does not own. Since the initial investment, Armadale has invested a further US$105,000 to take its interest in Netcom to 22%. As well as exercising the option, the Company is also pleased that it has negotiated to acquire the remaining minority interest shares in Netcom to take its aggregate interest following the Acquisitions to 100%.

Netcom is currently working on completing studies to enable it to apply for a Mining Exploitation Licence over the Project. It is anticipated that these studies will be completed by the end of the first quarter of 2014, allowing the application to be made.

Initial Acquisition

As set out in the announcement of 21 August 2013, the Company was granted an option to take its interest to approximately 90% of Netcom for an aggregate consideration of 700 million Ordinary Shares at a price of 0.1p per Ordinary Share. The Company has today entered into a share sale agreement to acquire a further 68% of Netcom for an aggregate consideration of 700 million Ordinary Shares in two tranches:

• 350 million Initial Consideration Shares ; and
• a further 350 million Further Consideration Shares to be issued upon a Mining Exploitation Licence being granted for the Project.

In addition, the Company has agreed to issue up to a further 220 million Ordinary Shares upon the completion of three key milestones:

• 60 million Ordinary Shares upon completion of a pre-feasibility study, targeted for early 2014;
• 60 million Ordinary Shares upon the delineation of a JORC reserve of at least 120,000 ounces of gold; and
• 100 million Ordinary Shares upon the production of the first 5,000 ounces of gold from the Project.

The Initial Acquisition will take Armadale’s shareholding to 90% of the issued share capital of Netcom.

The recipients of the Initial and Further Consideration Shares have agreed not to offer, dispose of, or agree to offer or dispose of (directly or indirectly) any of the Ordinary Shares at any time within one year of the respective date of issue of those shares, except through the Company’s broker and without prior written consent of the Company, for which consent will not be unreasonably withheld.

Minority Acquisition

The Company has also entered into an agreement to acquire the remaining 10% of the issued share capital of Netcom, together with a $250,000 loan owed by Netcom, from NTL (the ‘Minority Acquisition’), for a consideration of 93 million Ordinary Shares (the ‘NTL Shares’).

Following the completion of the Initial and Minority Acquisition, Armadale will own 100% of Netcom and have a right to an 80% interest in the Project, subject to the grant of the Mining Exploitation Licence.

Application has been made for the Initial Consideration Shares and NTL Shares to be admitted to trading on the AIM Market of the London Stock Exchange (“Admission”). Admission is expected to occur and trading in the shares is expected to begin at 8.00 a.m. on 20 November 2013. The Initial Consideration Shares and NTL Shares will rank pari passu in all respects with the existing Ordinary Shares.

Following Admission, the Company will have 2,891,041,150 Ordinary Shares in issue, each with voting rights (which figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure and Transparency Rules).

Next Steps

The Company and its technical consultants have been studying how best to realise the Project’s full potential, which is targeting commercial gold production in the next 24 months, with the following outline timetable:

• Q1 2014 – Mining Licence application
• Q2-Q3 2014 – Granting of Mining Licence and completion of Definitive Feasibility Study (‘DFS’)
• Q3 2014 – Finalise Project funding (US$10-15 million)
• H2 2014-H1 2015 – construction phase for plant and mining operation
• H2 2015 – Commence commercial gold production

Importantly, Mpokoto is amenable to low cost heap leach operations. Metallurgical test work conducted by previous operators at the Project established gold recovery rates of over 85% from oxide mineralisation and over 65% from transitional material.

The Company has prepared a presentation providing further detail on the Project which will be available at the Company’s website, www.armadalecapitalplc.com.

Change of Registered Address:

The registered address of the Company is now11 Bolton Street, London W1J 8BB.

**ENDS**

Enquiries:	Â
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Company
Justin Lewis, Director		[phone]
Charles Zorab, Investor Relations		[phone]
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Nomad and broker: finnCap Limited
Stuart Andrews/Christopher Raggett		[phone]
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Press relations: St Brides Media & Finance Ltd
Susie Geliher/Charlotte Heap		[phone]
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More information can be found on the website www.armadalecapitalplc.com.

Notes

Armadale

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

Following the completion of the Acquisitions, Armadale will own 100% of Netcom, which owns the right to an 80% interest in the Mpokoto Gold project in the Democratic Republic of the Congo, with an estimated 380,000oz of JORC defined gold resource.

Armadale also holds approximately a 40% interest in Mine Restoration Investments Ltd, a South African listed company, which aims to develop profitable operations within the South African mining industry through its coal briquetting operation in KwaZulu Natal and ownership of Intellectual Property for acid mine drainage technology applicable to a number of projects.

In addition, Armadale has a small portfolio of listed investments which are focused on gold production and exploration. The Directors continue to review investment opportunities that they believe have the potential to be accretive in terms of shareholder value.

Mpokoto Gold Project

Mpokoto is located in the western part of the Katanga Province approximately 250 km west of Kolwezi in the Democratic Republic of Congo, and approximately 25km from the Zambian border. The area is highly prospective, with local operators including Ivanplats Limited and GlencoreXstrata Plc.

The Project is located close to a national highway and the railway from the Atlantic port of Lobito in Angola to the Congolese border at Luao/Dilolo, which has recently been reconstructed by a Chinese consortium. Reconstruction of the line between the Angolan border and Kolwezi is planned for the next two years.

To view a map of the Project’s location and local infrastructure, please visit the Company’s website, www.armadalecapital.com.

Since 1998 approximately US$20 million has been spent on gold exploration at the Project. Consequently, a good understanding exists of both the regional and local geological setting, due in part to this long exploration history and to the historic mining of manganese in the area. A gold anomaly was discovered over the deposit area in 2005 following geophysical data interpretation, systematic geochemical sampling and reconnaissance drilling conducted by previous operators.

In 2012, mining consultancy TetraTech completed a resource estimation in line with JORC and NI 43-101 guidelines. At a cut off of 0.5 g/t Au the deposit contains 7.2 million tonnes at 1.6g/t Au for approximately 380,000 ounces of gold (Table 1). Of this, approximately 5.3 million tonnes at 1.6g/t Au are classified in the Indicated category for 290,000 ounces Au.

Table 1: Mineral Resource estimate at 0.5g/t Au cut-off grade.

Â

Â

Oxide

Â

Transitional

Â

Sulphide

Â

Â

Â

Â

Category

Â

Tonnes (Kt)

Â

Au g/t

Â

Oz (000)

Â

Tonnes (Kt)

Â

Au g/t

Â

Oz (000)

Â

Tonnes (Kt)

Â

Au g/t

Â

Oz (000)

Â

TOTAL (Kt)

Â

Oz (000)

Indicated

Â

1,125

Â

1.66

Â

60

Â

830

Â

1.58

Â

42

Â

3,405

Â

1.79

Â

196

Â

5,360

Â

298

Inferred

Â

382

Â

1.23

Â

15

Â

189

Â

1.28

Â

8

Â

1,250

Â

1.55

Â

62

Â

1,821

Â

85

Â

Â

7,181

Â

383

In addition to the defined resources, Tetra-Tech estimates that the Mpokoto deposit has potential for an Exploration Target of between 20 and 24 million tonnes at 1.5g/t - 1.8g/t Au. The potential for additional resources and reserves is therefore good. Should this target mineralisation be converted to Inferred and Indicated resources and then to reserves, it is likely that the project throughput rate can be substantially upgraded. Delineation drilling programmes are planned to test the target potential.

Management of Project

Mr Alain Van Landuyt, a qualified chemical engineer and engineering geologist and resident in Lubumbashi, DRC, will work with Armadale to develop the Project, as country manager. Alain was involved in the discovery of the deposit and has been associated with it throughout its development. Consequently, he is well suited to advance the project’s development. He is very familiar with local government structures and the Congolese Mines Department.