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

28 June 2024

Armadale Capital Plc

('Armadale' or 'the Company')

Final Results and Notice of AGM

Armadale Capital plc (LON: ACP), the AIM quoted investment group focused on natural resource projects in Africa, is pleased to announce its final results for the year ended 31 December 2023 ('Final Results' or 'Annual Report'). The Company also announces that its Annual General Meeting ('AGM') will be held at Level 2, 23 Railway Road, Subiaco, Western Australia 6008 on 30 July 2024 at 16.00 AWST (9.00 BST).  A notice of AGM, together with printed copies of the Company's full Annual Report for the year ended 31 December 2023, will be posted to shareholders. Copies will also be available to view on the Company's website: www.armadalecapitalplc.com.

Strategic Report

Armadale Capital plc (LON: ACP), the AIM quoted investment group primarily focused on natural

resource projects in Africa and the development of the long‐life low‐cost Mahenge Liandu Graphite

Project in Tanzania is pleased to announce its Final Results for the Year Ended 31 December 2023.

Operational and Corporate Highlights for Year Ended 31 December 2023

While it was a difficult year for the company and the graphite developers in general progress was

made in delivering key accretive milestones in advancing the Mahenge Liandu Graphite Project in

Tanzania

1.    Armadale is accessing its option to recommence the FEED study now that Blackrock Mining (ASX:BKT) have progressed project financing. This will allow the company to optimise the Definitive Feasibility Study, ensuring further de-risking of the production process.

2.    In Logistics, routes for the product were assessed to determine the optimum methods to ensure the final product will enter the market at the desired price level. In light of the advancement of regional infrastructure projects, Armadale are positioned to take advantage of future reductions in CAPEX and OPEX, with final results to be incorporated into an updated DFS.

3.    The Group is continuing discussions with several potential financing partners regarding the debt and equity funding required for project development. Armadale remains committed to sourcing terms that would prove to be friendly to shareholders and reduce dilutionary risk.

4.    The significantly improved market fundamentals for graphite concentrates has made a steady impact on the interest from stakeholders capable of providing long-term project finance.

5.    Armadale continued to improve ESG credentials by continuing to collect environmental baseline data for the compliance of the mining lease, which will also assist in the design and planning of the proposed mining operations.

6.    Through the year, the Company's primary focus was on securing project development funding for the Mahenge Liandu Graphite project while advancing the permitting and local community engagement.

Post Period End

1.    The Company continues to collect environmental baseline data as is required for the compliance of the mining lease and to assist in the design and planning of the proposed mining operations. In addition, the base line data for temperature, pressure, wind, moon phase, humidity, solar radiation, rainfall and stream flow data assists the local community to have access to regional weather data for local planning requirements in the Mahenge region.

2.    Earn-in of the high-grade "Canyon Silver" project in Idaho, USA. This Silver-Lead-Zinc Project is located in the heart of a Silver producing district and provides Armadale with a pathway to reducing the dilutionary risk in developing Mahenge.

3.    Logistics routes for the Mahenge Liandu product continue to be assessed to determine the optimum methods to ensure the final product will enter the market at the desired price level.

4.    At Canon silver work commenced to re-open Number 2 and Number 3 portals to directly access the historical mineralisation. This includes re-timbering, laying track and renovating the hoist room. Electrification, air and power line installation are also part of the re-opening process.

5.    At the Canyon Silver Project historically trucked grades include hand sorted ore at 36 Oz/t (over 1,000 g/t) Ag, with 66% Pb and 10% Zn, in various prior truckloads. These historic hand sorted ore batches represent the possibility of a high-grade, simple operation to truck ore to nearby mills.

6.    Addition of Greg Entwistle to the board. Greg's addition to the board brings vast engineering experience to advance commercial production in a shareholder friendly manner.

7.    Share subscription for £650,000 to procure Canyon Silver and advance Mahenge. This amount was raised in a challenging market and was Armadale's first fundraise in over 3 years.

8.    £100,000 of the issue was subscribed for by the Executive Director, Matt Bull.

Ongoing review of quoted portfolio; the Directors are confident that  there are opportunities for capital gains.

Investments

During the year under review, Armadale continued to operate as a diversified investing group

focused on natural resource projects in Africa. To this end, its portfolio is divided into two groups:

·    actively managed investments where the Company has majority ownership of the investment; and

·    passively managed investments where the Company has a minority investment, typically in a

quoted company, and does not have management control.

In the 2023 year, the Company's key actively managed investment is the Mahenge Liandu Graphite

Project in Tanzania. At present, the Company is actively marketing the Project to potential industry

partners and end users (offtakers) of graphite products.

Passively managed investments

The Company has a small portfolio of quoted investments, valued at £249,000 on 20 June 2024, principally in resource companies where the Directors believe there are opportunities for capital gain. The Company continues to keep its portfolio under review. The Company's strategy with its quoted portfolio is to gain exposure in projects that have the potential to create short to medium term returns for the Company as well as diversify the Company's exposure to a broader range of commodities while being able to enter and exit the position with minimal cost and time.

SUSTAINABLE DEVELOPMENT

The Company is committed to sustainable development and conducting its business ethically. Given that the Company invests in the mining industry, one of its key focuses is on maintaining a high level of health and safety, environmental responsibility, and support for the communities close to its investments.

CORPORATE INFORMATION

Principal Risks and Uncertainties

There are known risks associated with the mineral industry, especially in Africa. The Board regularly reviews the risks to which the Group is exposed and endeavours to minimise them as far as possible.

The following summary, which is not exhaustive, outlines some of the risks and uncertainties currently facing the Group:

·    Through the Mahenge Liandu Graphite Project the Group is very exposed to graphite. Graphite is a relatively new commodity whose market is being driven by demand in renewable energy. The Company believes it is thus vulnerable to changing global energy policies.

·    Obtaining development funding for the project is a significant risk for the company and while some funding is becoming available to graphite developers there has been limited projects that have successfully commenced production over the last few years.

·    The exploration for and development of mineral resources involves technical risks, infrastructure risks and logistical challenges, which even a combination of careful evaluation and knowledge may not eliminate.

·    There can be no assurance that the Group's project will be fully developed in accordance with current plans.

·    Future development work and subsequent financial returns arising may be adversely affected by factors outside the control of the Group.

·    The availability and access to future funding within the global economic environment.

·    The Group operates in multiple national jurisdictions and is therefore vulnerable to changes in government policies which are outside its control. The mining regulation changes in Tanzania are still being evaluated, however they seem to have minimal impact on investment in graphite mining. The Group continues to monitor the implementation of the changes to evaluate and mitigate sovereign risks.

Some of the mitigation strategies the Group applies in its present stage of development include, among others:

·    Proactive management to reducing fixed costs.

·    Rationalisation of all capital expenditures.

·    Maintaining strong relationships with government (employing local staff and partial government ownership), which improves the Group's position as a preferred small mining partner.

·    Engagement with local communities to ensure our activities provide value to the communities where w Alternative and continued funding activities with a number of options to secure future funding to continue as a going concern.

The Directors regularly monitor such risks and will take actions as appropriate to mitigate them.  The Group manages its risks by seeking to ensure that it complies with the terms of its agreements, and through the application of appropriate policies and procedures, and via the recruitment and retention of a team of skilled and experienced professionals.

Provision for impairment

As is explained in accounting policy note 2.12 to the financial statements, at each reporting period, the directors carry out a review of the carrying value of the Company's assets to establish if there is any indication that the value may have become impaired. In the opinion of the directors, the continuing lack of certainty over the availability of the finance that will be needed to develop the Mahenge project together with the fall in the market value of the Company's shares constitute indicators of a possible impairment in the carrying value of the project's exploration and evaluation assets. Whilst the directors remain optimistic that the project will ultimately prove to be capable of profitable development, in light of these indicators of possible impairment, they have decided to make a provision for impairment of the assets and, in the absence of an independent valuation, they have provided in full against the exploration and evaluation costs of £5,377,000. If subsequent reviews indicate that the carrying value should be reinstated in part or in full, this provision will be released accordingly.

Key Performance Indicators

The Group's current key performance indicators ('KPIs') are the performance of its underlying investments, measured in terms of the development of the specific projects they relate to, the increase in capital value since investment and the earnings generated for the Group from the investment. The Directors consider that it is still too early in the investment cycle of any of the investments held, for meaningful KPIs to be given.

Success is also measured through the identification and investment in suitable additional opportunities that fit the Group's investment objectives.

Section 172 Statement

Section 172(1): A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in Section 172(1) (b) the interests of the company's employees,

Company's Comment: While the Company is largely staffed by contractor employees (rather than direct employees of the Company), the directors consider that continuing active work on the Mahenge Liandu Graphite Project to be in the best interest of such staff to utilise their skills and develop their local communities. The board seeks regular feedback from its key stakeholders (including staff and advisers) to ensure that the corporate culture of the Company remains highly ethical in terms of our Company's values and behaviours.

Section 172(1) (c) the need to foster the company's business relationships with suppliers,

customers and others,

Company's Comment: The directors ensure that suppliers are available and meeting commitments and there is good communication with staff as a key requirement for high levels of engagement. This is done by periodic and ad-hoc briefings and discussions.

Reasons to engage shareholders are to meet regulatory requirements and understand shareholder sentiments on the business, its prospects and performance of management.

This is done by regulatory news releases, keeping the investor relations section of the website up to date, annual and half-year reports and presentations and AGM.

Section 172(1) (d) the impact of the company's operations on the community and the environment,

Company's Comment: The Company's activities impact communities in the places where we operate and elsewhere. The Company engages communities with employment / business development arrangements within guidelines. Through preparation and compliance with environmental and social management plans, which include the regulatory requirements for the Company on its Mahenge Liandu Graphite Project, the directors ensure that wherever possible its activities have a positive impact on the community and avoid adverse environmental impacts. The company has a policy of employing Tanzanians where possible in country.

The Company has engaged the services of a local manager in Liandu who provides information to the community about our intended project activities and is responsible for managing local affairs and feedback to the Company as well as monitoring the weather and rainfall on site.

Section 172(1) (e) the desirability of the company maintaining a reputation for high standards of business conduct, and

Company's Comment: The directors consider standards of business conduct in all dealings of the Company. The members of the board have a collective responsibility and obligation to promote the interests of the Company and are collectively responsible for defining standards of business conduct which includes corporate governance arrangements. The board provides strategic leadership for the Company and operates within the scope of our corporate governance framework and sets the strategic goals for the Company.

d Section 172(1) (f) the need to act fairly as between members of the company.

Company's Comment: The board takes feedback from a wide range of shareholders (large and small) and endeavours at every opportunity to pro-actively engage with all shareholders (via regular news reporting-RNS) and engage with any specific shareholders in response to particular queries they may have from time to time. The board considers that its key decisions during the year have impacted equally on all members of the Company.

Board

In March 2024, Nicholas Johansen resigned as a director and Greg Entwhistle was appointed. The Board continues to consider potential replacements for other former Board members with a focus on a potential appointment of a UK based director.

Financial Results

For the year ended 31 December 2023 the Group did not earn any revenues as its business related solely to the making of investments in non-revenue producing resource projects and companies. The Group made a loss after tax of £6.2 million (2022: £0.206 million) for the year ended 31 December 2023, including the impairment provision of £5.4 million referred to above.  Expenditure on the Mahenge Liandu project during the year amounted to £0.114 million (2022: £0.468 million)  At 31 December 2023, the Group had cash of £45,000 (2022: £1,406,000) and no debt finance (2021: nil).  At 27 June 2024 the Group had cash of £125,000 and investments worth £249,000

Outlook

While the market conditions in the junior exploration sector have been difficult over the past year, the Company remains optimistic that the growth in the demand for graphite will continue to increase allowing the development of our flagship project. The Company notes increased investment activity and, in particular, the commencement of production at Walkabout Resources' Tanzanian graphite project. 

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

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Consolidated Statement of Changes in Equity

* Consolidated Statement of Cash Flows

             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 and the Company will continue in operational existence for the foreseeable future.

At 31 December 2023, the Group had cash of £45,000 (2022, £1,046,000) and no debt finance (2022, nil).

In March 2024, the company secured new equity finance of £650,000 of which £150,000 is yet to be received. At 27 June 2024, the Company had cash of £125,000, a possible further £150,000 which the Company hopes to receive from the equity placing and listed investments with a traded value of £249,000. The Directors have prepared a cash flow forecast for the next twelve months which shows that the cash in hand together with expected further receipts from the fundraising and cash that can be realised from listed investments should be sufficient to meet current commitments in respect of exploration expenditure and corporate overheads for a period of at least twelve months, after which further fundraising will be required.  Should the remaining £150,000 not be received then further funds will be required in less than twelve months.  The Company is considering options to JV or sell some of its assets to reduce ongoing expenditure and bring in additional funds to enable it develop the Company's assets as planned.

The Company's ability to continue as a going concern and to achieve its long term strategy of developing its exploration projects is dependent on further fundraising. Against the background of the significant potential of the Company's investment projects and the Company's history of raising funds through the issue of equity, the Directors consider that there is a reasonable expectation that the required capital can be raised. However, there are currently no binding agreements in place. Should the Directors be unable to raise sufficient funds, the Company may be unable to realise its assets and discharge its liabilities in the normal course of business.

These factors indicate the existence of a material uncertainty which may cast significant doubt over the Group's and Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group or Company were unable to continue as a going concern.

*ENDS**