transforming from explorer to emerging graphite...

Transforming from explorer to emerging graphite producer

Investor Presentation

October 2019

Corporate Information

Substantial Shareholders

Kabunga Holdings Pty Ltd 13.55%

Matt Bull (Technical Director) 8.24%

Directors 1.58%

Others 76.63%

Investor Presentation – October 2019 2

Kabunga Holdings Pty Ltd Matt Bull Directors Others

Key Data

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Ticker (LSE) ACP

Shares in issue 403,189,482

Share Price (1 October 2019) 2.05p

52 week high / low 2.48p/0.85p

Market cap £8.27m

October ‘18 October ‘19

Group Overview

• Armadale Capital (ACP) is an AIM-listed diversified investment company focused on natural resource projects in Africa

• Current focus on advancing the Mahenge Liandu Graphite Project in Tanzania to production

• Low technical risk project - a large, high-grade open cut resource

• Located in East Africa - the world’s largest graphite province

• Potential to become a top producer over the next decade

• Strong market dynamics - accelerating demand for spherical graphite driven by new energy sector and expandable graphite used in flame retardant applications

• Quoted portfolio providing opportunities for capital gain

• Actively reviewing additional value-adding investment opportunities

• Experienced team with notable success advancing projects within the mining sector


Board & Management

Steve Mahede

BEng MBA

Non-Executive Director

Qualified engineer with more than 35 years’ in mining related project management

Experienced CEO in Australiaand Africa

BSc (Eng) from the University of Western Australia and MBA from Murdoch University

Patron of the Tanzanian Community in Western Australia Inc

Nicholas Johansen

BEcon GDLP LLB (Hons)


Experienced legal practitioner based in Northern Territory, Australia

Extensive involvement in junior mining exploration and production companies across many different commodities

Expert in environmental regulation

Law degree with Honours from Charles Darwin University, NT and Bachelor of Economics from the University of Adelaide

Paul Johnson

BSc, ACA


Currently CEO of Power Metal Resources plc, an AIM quoted exploration group

CEO for Value Generation Ltd, a family investment group focused on natural resources and fintech sectors.

Holds a degree in Management Science from University of Manchester and is a Chartered Accountant, Chartered Loss Adjuster and Associate of the Chartered Insurance Institute

Jenny Lee

China Representative

Graphite Marketing

Experienced marketing executive with 24 years in the mining sector focused on raw material procurement

Headed large China-based shipping & logistics group importing into the Chinese market

Highly experienced at obtaining and managing off-take agreements and product transport and logistics

Matt Bull

BSc (Hons)

Technical Director

A geologist with experience in graphite, gold and iron ore across Australia and Africa

Worked greenfield exploration & resource development programs for Rio Tinto, Golden West, Volt & Linden Resources

Former director of Volt Resources (ASX: VRC) and currently on the Board of LindianResources (ASX: LIM)

Bachelor of Science with honours in geology and geophysics from the University of Adelaide


MAHENGE LIANDU GRAPHITE PROJECT

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Project Overview

• 100% owned, near surface, high grade deposit –focus on commencing production in 2021

• Two tenements over 29.9km2 in a highly prospective region

• One of the largest high-grade graphite projects in Tanzania and proven potential as a commercially viable deposit

• 2019 Milestones

• Environmental and social permitting submitted

• Mining licence underway

• Met test work completed

• Development of transport pathway underway

• Mineral Resource update nearing completion

• Finalisation of production flowsheets and plant design

• On track to deliver DFS Q4 2019

• Considerable sales interest – two MOUs signed and advanced discussions underway with other potential customers

• Project development funding progressing


Project Location

• Located close to established infrastructure

• Mains power within 5km

• 80km by sealed and gravel roads to central rail hub at Ifakara

• Direct rail access to Dar es Salaam port320km away

• Labour and materials within 10km at Mahenge town

Investor Presentation – October 2019

Tanzania-Zambia RailwayKilombero Bridge

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Resource & Mine


• Near surface high-grade deposit

• Inferred Resource of 51.1Mt at 9.3% TGC• 38.7Mt indicted at 9.3% and 12.4Mt at 9.1% TGC

• Excellent quality graphite concentrates confirmed

• High purity and excellent flake size distribution, up to 97.1% purity for large and medium flake fractions

• Optimised mine plan of 13Mt @ 12.5% TGC

• DFS underway to confirm 400,000tpa plant over 32-year mine life - represents only 25% of the overall resource

✓ NPV of US$349m and IRR of 122%

✓ Lowest quartile cash costs driven by high mined grade of 12.5% and low strip ratio of 1:1 for LOM

✓ 1.2 year payback on $US35m capex after tax

✓ Based on conservative basket price of $US1,272/t

✓ High-quality graphite product confirmed

✓ Potential to increase throughput as mine life based on conservative assumptions

Robust economics from Scoping Study completed Q1 2018

Tonnage (Mt)

% Cut-Off TGC

Average %TGC

Inferred 12.4 3.5 9.1

Indicated 38.7 3.5 9.3

Measured 0 3.5 0

Total 51.1 3.5 9.3

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Excellent Testwork

• Test work delivered excellent levels of purity up to 99.99% TGC using conventional treatment

• Demonstrable expandability up to 440cm³/g achieved – confirming suitable for a range of high value end uses (i.e. graphite foil)

• These results are typical for high-quality product from the graphite province surrounding the Mahenge Liandu project


Flake Size (µm) Expansion Volume at 800 °C Expansion Volume at 1000 °C

Flake Size (µm) Purity after acid treatment Flake Size Expansion @ 800°C Expansion @ 1000°C

500 µm 440 cm³/g 480 cm³/g

300 µm 370 cm³/g 420 cm³/g

180 µm 300 cm³/g 380 cm³/g

106 µm 210 cm³/g 230 cm³/g

75 µm 165 cm³/g 170 cm³/g

-75 µm N/A 115 cm³/g

Flake Size Purity TGC (%)

500 µm 99.93

300 µm 99.99

180 µm 99.98

106 µm 99.96

75 µm 99.94

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Peer ComparisonPlanned Output & Head Grade

Armadale’s point of difference from peers is its niche focus and high ore grade, which will deliver lower OPEX/t - a key comparative advantage


Source: Company data (Note: all information from PFS, DFS or BFS to ensure relative consistency)

PLANNED ANNUAL OUTPUTHEAD GRADE

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Peer ComparisonPurity & Resource Grade

Armadale ranks top-tier on product purity & resource grade relative to rivals, while enjoying a material proportion of high-value larger flakes (>65% of distribution)

Investor Presentation – October 2019 RESOURCE GRADE

PURITY

“Armadale, Blackrock & Kibaran are neighbours which explains why the purities are relatively high & clustered”

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Peer ComparisonMarket Cap & CAPEX

The advanced Mahenge Liandu project is niche and high-grade, comparing favourably to peers in terms of asset vs market cap (based on price close @ 23 Sept 2019)

Investor Presentation – October 2019CAPEX

MARKET CAP

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Syrah Magnis Walkabout Blackrock Nextsource Triton Kibaran Volt Sovereign Graphex Armadale

(GBPm)

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Peer ComparisonCAPEX & OPEX per Tonne

The Mahenge Liandu project’s OPEX/t is lower relative to most peers due to the high ore grade

Investor Presentation – October 2019OPEX/t

CAPEX/t

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GRAPHITE MARKET


Primary Global Graphite Demand Drivers

• Increasing global graphite demand reflects new product innovation in the high-tech manufacturing sector moving from niche to mainstream plus other applications, while traditional uses (i.e. steel sector) remain flat at best

• Industrial Minerals estimates natural flake graphite could reach 1.6Mtpa by 2025E which is up circa 180% on 2014’s level


Source: Industrial Minerals

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Drilling Down to Key Primary Sub-Drivers


Spherical graphite for lithium-ion battery manufacturers, which are rapidly expanding capacity via new mega-giga factories, reflecting growing end user demand for:

▪ Electric vehicles

▪ Electronic equipment

▪ Power storage equipment to enable off-peak use of power generated by solar/wind

Expandable graphite for flammable retardant building materials replacing toxic brominated products, due to changing safety regulatory requirements

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Secondary Global Graphite Demand Drivers

Incrementally, other traditional and newly emerging applications, at the margin, are contributing to higher graphite demand, including:


Graphite paper/sheet for sealing gaskets, tapes & packing

Graphite foil used in electronic products like smart phones/tablets

Graphene for electronic, medical, chemical and industrial processes

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Tighter Global Supply Creates Opportunities

While China has long been the world’s leading natural graphite supplier, tougher environmental rules and mining regulations are reducing its output, resulting in:

• China slowly moving to net-natural graphite importer, which will lead to severe supply deficits moving into the 2020s (BMI)

• Growing opportunities for east African producers to fill an expanding void

• More pertinently, suppliers that produce battery grade natural graphite should be able to command premium pricing

• However, securing premium pricing is a bilateral process that depends on purity, flake-size, product consistency, supply reliability and suitability for downstream applications

• Notably, testwork from the Mahenge Liandu region continues to show suitability for a wide range of high-value applications, especially for the rapidly growing lithium-ion battery market


Legislative Environment

• Tanzania is a stable democracy with a legal system founded on English common law

• The official languages are Swahili and English

• Tanzania has a long mining history andcurrently the 4th largest gold producer in Africa

• 30% corporate tax rate

• New mining legislation introduced in July 2017 had a moderate impact on the graphite sector

• 3% royalty levied for industrial minerals

• Mining Commission established in April 2018 to facilitate grant, renewal and transfer of mining licences



ADDITIONAL INTERESTS

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Additional Interests

• Armadale also holds a portfolio of royalty, listed company and unlisted company investments where the Board considers there is an opportunity for material capital appreciation

• The Board continues to review additional investment opportunities in which Armadale may invest, in line with its investing policy, with any material investments notified to the market as appropriate


INVESTMENT CASE

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Investment Case

• Building a significant high-grade graphite mine at the Mahenge Liandu Graphite Project

• Numerous milestones advancing DFS towards completion in Q4 2019

• The March 2018 Scoping Study demonstrated potential to support a 400,000tpa operation over a 32-year mine life

• Ability to generate meaningful value with an NPV of US$US349m and IRR of 122%

• Significant upside - 32 year mine life based on a quarter of the Resource

• Project potential underpinned by increasing global demand for graphite products –two MOUs signed and significant sales interest

• Experienced team actively reviewing other exciting investment opportunities


Disclaimer

This presentation does not constitute investment advice. Neither this presentation nor the information contained in it constitutes an offer, invitation,

solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction. This presentation does not take into account any person's

particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations in this presentation are not

intended to represent recommendations of particular investments to particular persons. To the fullest extent permitted by law, Armadale Capital PLC does

not make any representation or warranty, express or implied, as to the accuracy or completeness of any information, statements, opinions, estimates,

forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of

negligence or otherwise is accepted.

This presentation may include forward looking statements. Forward looking statements are only predictions and are subject to risks, uncertainties and

assumptions which are outside the control of Armadale Capital Plc. These risks, uncertainties and assumptions include commodity prices, currency

fluctuations, economic and financial market conditions in various countries and regions, environmental risks and legislative, fiscal or regulatory

developments, political risks, project delay or advancement, approvals and cost estimates. Actual values, results or events may be materially different to

those expressed or implied in this presentation. Given these uncertainties, readers are cautioned not to place reliance on forward looking statements. Any

forward looking statements in this presentation speak only at the date of issue of this presentation subject to any continuing obligations under applicable

law, Armadale Capital Partners Ltd does not undertake any obligation to update or revise any information or any of the forward looking statements in this

presentation only changes in events, conditions or circumstances on which any such forward looking statement is based.

Exploration Targets: It is common practice for a company to comment on and discuss its exploration in terms of target size and type. The information in this

presentation relating to exploration targets should not be misunderstood or misconstrued as an estimate of Mineral Resources or Ore Reserves. Hence the

terms Resource(s) or Reserve(s) have not been used in this context in this presentation. The potential quantity and grade of resource targets are conceptual

in nature since there has been insufficient work completed to define them beyond exploration targets and that it is uncertain if further exploration will

result in the determination of a Mineral Resource or Ore Reserve.


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