Mahenge Graphite Project

Armadale owns a 100% interest in the Mahenge Graphite Project in south-east Tanzania

 
 
Overview

Armadale acquired a 100% interest in the large flake, high purity Mahenge Graphite Project in July 2016.

The project is located in a highly prospective region in south-east Tanzania, with a high-grade JORC compliant indicated and inferred mineral resource estimate of 59.5Mt @ 9.8% TGC, which establishes Mahenge as one of the largest high-grade projects in Tanzania. Work to date has demonstrated Mahenge’s value potential as a commercially viable, long-life, low-cost graphite project and the board have devised a staged development plan giving a fast-tracked, low-cost route to production.

Regional Geology

Regionally, the Mahenge Project area is within the Usagaran (Mozambique belt) Neoproterozoic system which principally comprises high-grade (amphibolites-grade) metamorphic rocks of both sedimentary and igneous origin ranging from schists to gneisses, including marbles, amphibolites, graphitic schist, mica and kyanite schist, acid gneisses, hornblende, biotite and garnet gneisses, quartzite and granulites which are overlain by Cretaceous sedimentary rocks in the east and Karoo Sediments in south west.

Structural Geology

The prospect is within the Pan-African Mozambique Belt, which is the orogenic belt resulting from orogenic activities that happened during Neo Proterozoic times. The belt extends along the eastern border of Africa from Ethiopia, Kenya to Tanzania. The orogenic event resulted in a complex series of geological events and was later affected by the east African rift system. The belt consists of high-grade mid-crustal rocks with a Neoproterozoic metamorphic overprint. It is divided into the Western Granulite and Eastern Granulite. The deposit is situated in the Usagaran association, where a younger sequence of sedimentary rocks (Cretaceous) has been thrust over the older Western Granulite Complex

Local Geology

The local geological setting of the Mahenge prospect is characterised by complex deformation and metamorphism. The rocks are dipping roughly east to north east with dips ranging from 30° to 80° (degrees). An interpretation of structural measurements from both the regional and local mapping suggests synformal folding plunging to the north, which has the original mapping by government geologists overlain with the more detailed 2015-2016 field mapping.

The main lithology in the area include medium to high-grade metamorphic rocks, predominately a graphitic mica schist and hornblende gneiss. Other lithologies include marbles, muscovite gneisses/granitic gneisses and amphibolites. The rocks are sometimes silicified and, in many cases, have retained their original sedimentary bedding properties.

Resource

Mahenge has a current JORC 2012 compliant resource of 59.5Mt @ 9.8% TGC using a 7.5% TGC lower cut-off following an upgrade in October 2019. This resource estimate is broken down as follows:

• Measured: 1.60Mt @ 12.30%

• Indicated: 12.70Mt @ 12.90%

• Inferred: 6.10Mt @ 12.60%

Notably, this includes two coherent high-grade 3.1Mt @ 15% TGC near surface zones including 1.2Mt at 17.3% TGC. The implication of the resource model is that more high-grade near surface graphite can potentially be mined at a lower extraction cost in the early years to bolster potential cashflow and enhance the project’s overall valuation.

A summary of the Resource is shown in Table 1.

 

Tonnage (Mt)

% Cut-Off TGC

Average %TGC

Inferred

6.10

7.5

12.60

Indicated

12.70

7.5

12.90

Measured

1.60

7.5

12.30

Total

20.40

7.5

12.70

Competent Person statement

The information in this Resource estimate is based on information compiled by Mr Matt Bull, a competent person, who is a Member of the Australian Institute of Geoscientists. Mr Bull has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a competent person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Bull consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Definitive Feasibility Study

In June 2020, Armadale completed an updated Definitive Feasibility Study that reaffirmed Mahenge as a long-life low-cost graphite project with a US$430m NPV and IRR of 91% based on a two-stage expansion strategy to facilitate near term production comprising:

• Stage One – processing plant and infrastructure at a nominal design basis rate of 0.4-0.5 Mt/pa to produce 60,000t/pa graphite concentrate in the first three years of production

• Stage Two – a second 0.5 Mt/y plant and associated additional infrastructure doubling throughput to 1 Mt/y from Year 4 of operation to increase production to a life of mine average of 109,000t/pa

The updated DFS shows that Armadale can be a significant low-cost supplier to the graphite industry with the potential to generate pre-tax cashflows of US$985m over an initial 15 year mine-life and scope for further improvement as this utilises just 25% of the current resource, which remains open in multiple directions.

Stage 1 has a low capital cost estimate of US$39.7m, which includes a contingency of U$S4.1m or 15% of total direct capital cost, with a 1.6 year payback (after tax) based on an average sales price of US$1,112/t. Stage 2 expansion is expected to be funded from cashflow.

Production

Projected timeline to first production is expected to be approximately 10-12 months from the start of construction.

Suitable strategies for the development and construction of Mahenge have been identified following a detailed consultation process with a range of potential mining contractors. The ROM ore will be two-stage crushed, followed by grinding in a rod mill, with graphite recovered by flotation. The process includes multi-stage re-grind milling and cleaner flotation to improve liberation and product purity. The flotation concentrate is then dewatered by filtration and drying. The product is screened and bagged as final product in five different sized fractions and bagged for transport to port. The tailings will be thickened and pumped to the tailings storage facility (‘TSF’).

The Stage 2 expansion in Year 4 is expected to comprise a duplicate parallel production plant.

Power for the project will be supplied from diesel generators under a BOOM contract. Additional power for the second stage expansion plant is expected to be supplied from than upgraded local grid network.

Graphite concentrate produced will be road hauled to the Port of Dar Es Salaam for shipment to market.