Interim Results for the six months ended 30 Jun...

Interim Results for the six months ended 30 June 2014

Armadale Capital Plc

11 September 2014

Armadale Capital Plc

(‘Armadale’ or the ‘Company’)

Interim Results for the six months ended 30 June 2014

Armadale, the AIM-quoted investment company primarily focused on the Mpokoto Gold Project (‘Mpokoto’ or ‘the Project’) in the Democratic Republic of the Congo (‘DRC’), announces its interim results for the six months ended 30 June 2014.

Overview

• Robust economics demonstrated from Initial Scoping Study at Mpokoto and significant value upside anticipated from Expanded Scoping Study
• Initial Scoping Study highlights:
  • Post tax NPV of US$30m at US$1250/oz Au
  • IRR of 141% with capex of US$20.2m
  • Operating cost estimated at US$ 649/oz Au
  • Initial Scoping Study focussed on only a fraction of the Project’s total mineralisation
  • Expanded Scoping Study expected to provide considerable further upside from additional oxide mineralisation and deeper fresh ore
• Acquisition of Kisenge announced on 1 September 2014 giving full ownership and title to the Mpokoto gold project as well as rights to 32 additional exploration licences
• Sizeable increase in JORC Resource delivered from re-interpretation of data in April 2014 – current JORC Resource of 507,000oz Au
• Further JORC Resource increase expected from recently announced drilling results which also delineated a new mineralised zone to be included in the Expanded Scoping Study covering oxide and sulphide zones
• Mine Restoration Investments (in which Armadale holds approximately a 30% interest) put in place offtake agreements having commenced commercial production from its coal plant
• Further diversified portfolio with acquisition of stake in ASX listed Redcliffe Resources – provides exposure to Mbesa Copper Project in Tanzania

Peter Marks, Chairman, said: “Since the beginning of the year the Company has made important advances in achieving our strategy of becoming a diversified natural resource-focused investment company. Whilst we await the results of the expanded Scoping Study, the first stage has demonstrated that Mpokoto is a project with real company building prospects. Our exploration efforts remain centred firmly on Mpokoto and in this vein I believe our strengthened in-country position and bolstered development team following our acquisition of Kisenge holds us in good stead for future development.

“To support the move into production in 2015 we are now focussed on incorporating the recent positive drilling results into an updated JORC Mineral Resource estimate, which will further increase the resource base at Mpokoto. This will in turn be incorporated into an expanded and updated Scoping Study which I am confident will further underpin Mpokoto as a solid gold development project with attractive economic fundamentals even at low gold prices.”

Results Summary

Loss after tax for the six month period ended 30 June 2014 was £442,000 (2013: £607,000), a loss of 0.01p per share (2013: 0.04p per share). The loss included exploration project costs of £55,000 and foreign exchange losses of £70,000 arising principally on the restatement of loan receivables. The cash position of the Company at 30 June 2014 was approximately £612,000.

For further information please visit www.armadalecapitalplc.com or contact:

Enquiries:

Company
Peter Marks, Chairman [phone]
Justin Lewis, Director
Charles Zorab, Company Secretary

Nomad and broker: finnCap Limited
Stuart Andrews/ Christopher Raggett [phone]

Press relations: St Brides Media & Finance Ltd
Susie Geliher/ Charlotte Heap [phone]

INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2014

CHAIRMAN’S STATEMENT

Armadale remains focussed on advancing its flagship Mpokoto project which has a current resource of 507,000oz of contained gold (‘Au’) and an Exploration Target of 10Mt-15Mt at 1.2g/t-1.5g/t Au. In line with this, activity during the period has centred on advancing this asset in order to increase the resource potential of the Project and ultimately commence production before the end of 2015.

Mpokoto Gold Project

Mpokoto is located in the western part of the Katanga Province, DRC, approximately 250km west of Kolwezi and 25km from the Zambian border. The area is highly prospective, with local operators including Ivanplats Limited and Glencore Plc. Significantly, Mpokoto has already demonstrated robust economics with highly attractive returns and near term production potential even at a low gold price of US$1,100/oz. These value fundamentals were demonstrated in the Initial Scoping Study, completed in April 2014, which targeted the shallow oxide ore to a depth of approximately 30-40m. Based on a gold price of US$1,250 per ounce and an internal rate of return (‘IRR’) of 141%, Mpokoto was shown to have a post-tax net present value (‘NPV’) of US$33.0 million, with potential to generate average annual production of 24,600oz across an initial five year life of mine.

Importantly, and as mentioned, the Initial Scoping Study was based on only a fraction of the Project’s total known mineralisation and as a result significant upside potential remains. Following completion of the recent drilling programme, we are now in the process of finalising the Expanded Scoping Study, which will cover the enlarged oxide resource identified by the drilling as well as the deeper sulphide ore (>30m depth). I am confident that these results will further underpin Mpokoto’s value as a robust gold development project.

In July 2014 Armadale completed a 2,307m reverse circulation drilling programme over a total of 46 holes at Mpokoto, the initial results of which were recently announced. The drilling programme was designed and conducted with the aim of expanding and upgrading the current JORC resources and I am delighted to report that the Project’s mineralisation is proven to be open along strike and at depth in all areas tested, with significant assays including 20m @ 2.56g/t Au from 14.0m, 14m @ 2.67g/t Au from 31.0m and 4m @ 4.42g/t Au from 56.0m. Encouragingly, the drilling campaign also identified a new zone of continuous mineralisation over a strike length of approximately 750m to an average depth of 60m down dip. These results demonstrate the excellent potential for economic exploitation of the shallow oxide mineralisation and it is anticipated that the results will also support the conversion of part of the existing 10Mt-15Mt at 1.2g/t-1.5g/t Au exploration target to a classified resource. This will feed into the aforementioned Expanded Scoping Study, to further increase the overall value of the Project.

Kisenge Limited

Post-period end, Armadale entered into an agreement to acquire Kisenge Limited (‘Kisenge’) for an aggregate consideration of US$520,000. Kisenge holds the exploration rights to a significant area totalling approximately 0.89 million hectares in the Katanga Province in the south of the DRC where Mpokoto is situated; as a result this deal gives Armadale direct ownership over its 80% interest in the Project. Although now less urgent given Armadale’s direct ownership, the Mining Licence application continues to progress with the majority of the procedural steps before grant having been completed.

In addition to consolidating Project tenure, the acquisition significantly expands Armadale’s project portfolio, with the rights to 32 mineral exploration licences, which are prospective for minerals including gold, manganese and diamonds. Kisenge also brings to the Group an important in-country platform, including an experienced development team based in Lubumbashi and Kisenge. We intend to leverage our increased land holding and strengthened position in-country to not only drive growth at Mpokoto but also to create future exploration opportunities in line with our investment strategy of building a diverse investment portfolio.

Investment Portfolio

Aside from Mpokoto, we hold a 30% stake in Mine Restoration Investments (‘MRI’), a company quoted on the AltX market of the Johannesburg Stock Exchange. MRI has a coal fines processing and briquetting operation at Vaalkrantz Colliery in KwaZulu Natal (‘the Plant’). From a slow start, MRI continues to make significant progress with levels of production from the Plant, Nonetheless, MRI is now trading profitably and it has agreed a commercial agreement with Keaton Energy Holdings Ltd, owner of the Vaalkrantz Colliery, for the joint marketing of coal fines. In June 2014 MRI also completed a re-organisation of its balance sheet by way of a conversion of all existing debt into equity (including ZAR3.2m currently owed to the Company). As a result, MRI will no longer be burdened with significant debt and profits will not be encumbered by these repayments. Armadale continues to pursue legal recovery of the loan secured on MRI shares and guaranteed by Trinity Asset Management. Finally, it is worth noting that a similar size shareholding in MRI has been recently traded at a premium to the market price and at twice the value at which Armadale carries its MRI related investment in its balance sheet.

In addition, in March 2014 Armadale further diversified its portfolio through the acquisition of an interest in ASX listed Redcliffe Resources, following a c£32,000 investment. Redcliffe is focused on the exploration and development of the highly prospective Mbesa Copper Project in Tanzania

We maintain a watching brief over our remaining investment which has been affected by the downturn in the market for small resource stocks although there are signs that sentiment is starting to improve in some instances.

Outlook

With a first set of highly encouraging drill results in place, which confirm that mineralisation at Mpokoto is open along strike and at depth in all tested areas, and a significant new zone of mineralisation identified over a strike length of approximately 750m, we have an excellent platform in place from which to develop a commercial gold asset. Our exploration efforts going forward remain centred firmly on Mpokoto and in this vein I believe our strengthened in-country position and bolstered development team following our acquisition of Kisenge, holds us in good stead for future development. To support this move into production we are now focussed on incorporating the recent positive drilling results into an updated and classified Mineral Resource estimate, which will further expand the resource base at Mpokoto. This will in turn be incorporated into an expanded and updated Scoping Study which I am confident will further underpin Mpokoto’s robust value as a solid gold development project with attractive economic fundamentals even at low gold prices. Mpokoto can then enter into it final development stages of completing a feasibility study before commencing the financing of the project early next year.

Finally, I would like to take this opportunity to thank our Board, shareholders and advisers for their continued support and I look forward to providing further updates on our progress in due course.

Peter Marks
Chairman

Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2014

	Â	Â	Unaudited Six months ended			Â	Audited Year Ended
			30 June 2014 £’000	Â	30 June 2013 £’000		31 December 2013 £’000
Revenue			-		-		-
Cost of sales			-		-		-
Gross profit			-		-		-
Interest Income			49		60		117
Administrative expenses			(448)		(283)		(770)
Share based payment charge			-		-		(98)
Impairment of investment			-		(328)		(95)
Provision against loan			-		-		(773)
Share of loss Associated Company			(43)		(56)		(1,529)
Loss before tax			(442)		(607)		(3,148)
Taxation			-		-		-
Loss after tax attributable to equity holders of the parent company			(442)		(607)		(3,148)
								Â
			Pence		Pence		Pence
Loss per share attributable to equity holders of the
parent company (note 3)			(0.01)		(0.04)		(0.16)
Basic and fully diluted

Consolidated Statement of Financial Position
At 30 June 2014

	Â	Â	Unaudited			Â	Audited
			30 June 2014	Â	30 June 2013		31 December 2013
			£’000		£’000		£’000
Assets
Non-Current assets
Mineral properties			2,911		-		2,911
Investments – associated company			668		-		592
– other			77		1,863		45
			3,656		1,863		3,548
Current assets
Trade and other receivables			622		1,178		430
Cash and cash equivalents			612		236		889
			1,234		1,414		1,319
								Â
Total assets			4,890		3,277		4,867
								Â
Equity and liabilities
Equity
Share capital (note 4)			2,510		2,297		2,472
Share premium account			13,680		10,856		13,240
Shares to be issued			1,352		-		1,352
Share option reserve			1,526		1,428		1,526
Retained earnings			(14,351)		(11,368)		(13,909)
Total equity			4,717		3,213		4,681
								Â
Current liabilities
Trade and other payables			173		64		186
			Â		Â		Â
Total equity and liabilities			4,890		3,277		4,867

Unaudited Consolidated Statement of Changes in Equity
For the period ended 30 June 2014

	Â	Share Capital £’000	Â	Share Premium £’000	Â	Shares to be Issued	Â	Share Option Reserve £’000	Â	Retained Earnings £’000	Â	Total   £’000
													Â
Balance 1 January 2013		2,297		10,856		-		1,428		(10,761)		3,820
Loss for the period		-		-		-		-		(607)		(607)
		Â		Â		Â		Â		Â		Â
Total comprehensive loss for the period		-		-		-		-		(607)		(607)
													Â
Balance 30 June 2013		2,297		10,856				1,428		(11,368)		3,213
Loss for the period		-		-				-		(2,541)		(2,541)
		Â		Â		Â		Â		Â		Â
Total comprehensive loss for the period		-		-		Â		-		(2,541)		(2,541)
													Â
Share based payments		-		-		-		98		-		98
Shares issued and to be issued		175		2,430		1,352		-		-		3,957
Expenses of issue		-		(46)		-		-		-		(46)
		Â		Â		Â		Â		Â		Â
Total other movements		175		2,384		1,352		98		-		4,009
													Â
Balance 31 December 2013		2,472		13,240		1,352		1,526		(13,909)		4,681
Loss for the period		-		-		-		-		(442)		(442)
		Â		Â		Â		Â		Â		Â
Total comprehensive loss for the period		-		-		-		-		(442)		(442)
													Â
Shares issued		38		488		-		-		-		526
Expenses of issue		-		(48)		-		-		-		(48)
Total other movements		38		440		-		-		-		478
													Â
Balance 30 June 2014		1,510		13,680		1,352		1,526		(14,351)		4,717

The following describes the nature and purpose of each reserve within shareholders’ equity:

Reserve	Â	Â	Â	Description and purpose
Share capital				Amount subscribed for share capital at nominal value
Share premium				Amount subscribed for share capital in excess of nominal value, net of allowable expenses
Shares to be issued				Value of share capital to be issued in connection with the acquisition of Netcom
Share option reserve				Reserve for share options granted but not exercised
Retained earnings				Cumulative net gains and losses recognised in the statement of comprehensive income
Foreign exchange reserves				Cumulative net gains and losses recognised on consolidation

Consolidated Statement of Cash Flows
For the period ended 30 June 2014

	Â	Six Months ended			Â
		30 June 2014	Â	30 June 2013		31 December 2013
		£’000		£’000		£’000
							Â
Cash flows from operating activities
Loss before taxation		(442)		(607)		(3,148)
Unrealised foreign exchange differences		(3)		-		(15)
Loss on sale of listed investments		-		-		16
Impairment of investment		-		328		95
Provision against loan		-		-		773
Interest income		(49)		(60)		(117)
Share based payments		-		-		98
Share of loss of associated company		43		56		1,529
		(451)		(283)		(769)
							Â
Changes in working capital
Receivables		(192)		(10)		24
Payables		(12)		18		11
Net cash used in operating activities		(655)		(275)		(734)
							Â
Cash flows from investing activities
Purchase of shares in subsidiary		-		-		(171)
Loan to associated company		(117)		-		(68)
Purchase of listed investments		(32)		(99)		(140)
Sale of listed investments		-		-		80
Interest income		49		60		117
Net cash used in investing activities		(100)		(39)		(182)
							Â
Cash flows from financing activities
Proceeds from share placement		526		-		1,300
Issue costs		(48)		-		(46)
Net cash from financing activities		478		-		1,254
							Â
							Â
Net (decrease)/increase in cash and cash equivalents		(277)		(314)		338
Cash and cash equivalents at 1 January 2014		889		550		550
Cash and cash equivalents acquired with subsidiary		-		-		1
Cash and cash equivalents at 30 June 2014		612		236		889

Notes to the unaudited condensed consolidated financial statements
For the period ended 30 June 2014

1. Incorporation and principal activities

Country of incorporation
Armadale Capital Plc was incorporated in the United Kingdom as a public limited company on 19 August 2005. Its registered office is 11 Bolton Street, London W1J 8BB.

Principal activities
The principal activity of the Group during the period was that of an investment company.

2. Accounting policies

1. Statement of compliance

These condensed financial statements are unreviewed, unaudited and do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The financial information contained in these condensed financial statements in respect of the year ended 31 December 2013 has been extracted from the Annual Report and Accounts, which were approved by the Board of Directors on 29 May 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

This condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. This condensed set of financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2013 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2013 as described in those annual financial statements.

2.2. Going Concern

The financial statements have been prepared on the going concern basis as, in the opinion of the Directors, there is a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

2.3. Mineral properties

Mineral properties are recorded at cost and are amortised over their expected useful life on a pro rata basis of actual production for the period to expected total production.

2.4. Investments

Investments in associated companies are recorded at cost plus the Group’s share of post-acquisition profits or losses less any provision for impairment.

Other investments are stated at cost less any provision for impairment.

3. (Loss)/earnings per share

The calculation of basic loss per ordinary share is based on a loss of £442,000 (2013, £607,000) and on 3,509,418,863 (2013, 1,531,374,350) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

There is no difference between the basic loss per share and the fully diluted loss per share as the group’s outstanding share options are non-dilutive because their exercise price is above the market price of the underlying shares.

4. Share capital

On 12 March 2014 the company placed 375,000,000 new ordinary shares of 0.01 pence each in the capital of the Company at a price of 0.14 pence per share to raise £526,000 (£478,000 after expenses) with institutional and other investors.

**ENDS**