The Company has exposure to the gold sector through its interest in the Mpokoto Gold Project in Democratic Republic of Congo. The Board believes that it is an important component of its portfolio
Mpokoto Gold Project
The Mpokoto Gold Project is being developed by Armadale Capital’s joint venture partner, Kisenge Mining Pty Ltd (‘KMP). The project has a current total mineral resource of 678,000oz gold (‘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 Definitive Feasibility Study (‘DFS’), announced February 2016, set out various parameters for Mpokoto, identifying phased processing routes for the project to support low capex development (Phase 1 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 2). 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 1 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 total licence area of 800,000 hectares yet to be explored.
Under the terms of the joint venture agreement KMP will earn a 25% interest in Armadale’s subsidiary, Kisenge, the entity which holds the Mpokoto Gold Project, through providing funding and projected related services up to US$1.25m, including incremental metallurgical test-work, refining the current DFS to incorporate financing the project and initial capital works. Collectively, this work is described as Phase 1.
Upon completion of Phase 1, KMP has 30 days to decide whether to exercise an option to proceed with Phase 2 of the joint venture agreement. If KMP proceeds with Phase 2, it will seek to arrange funding to proceed into production. If KMP arranges 100% of the funding, it will receive a further 60% in the Mpokoto Gold Project, lifting its aggregate interest to 85% with Armadale retaining 15% free carried interest. Armadale may decide to arrange part of the funding itself, in which case the 60% stake will be split pro rata with KMP.