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AIM-listed mining company Armadale has entered into a formal sale agreement with African Royalty Company for the sale of the Mpokoto gold project in the Democratic Republic of Congo.

This stage has been reached after Arrow Mining and African Royalty completed due diligence and formal terms were finalised and agreed.

This agreement now crystallises the value of the Mpokoto project with a company capable of obtaining the funding to bring the mine into production.

The transaction allows Armadale to focus on advancing its primary value driver, the high-grade Mahenge Liandu graphite project in Tanzania, whilst ensuring the company retains exposure to the development upside of the Mpokoto project.

Sale terms

Arrow Mining will take over the operations on the Mpokoto project and is obliged to pay Armadale a 1.5% royalty on gold sales achieved once in production.

The Mpokoto project has a feasibility study based on a 720 000 tpa operation over 4.5 year producing an average of 24 900 ozpa with a substantial sulphide resource that could further extend the mine life.

Sale of the Mpokoto project under the heads of agreement was conditional upon entry into a formal sale agreement, due diligence and other standard conditions for regulatory approvals and these have now been satisfied.

Funds from the Mpokoto project royalty will be used to support development of the high grade Mahenge Liandu graphite project, and Armadale will consider other investment opportunities in line with its existing investing policy.

The net assets relating to Mpokoto in the 30.06.18 balance sheet (Interim results) were £194,000.

Armadale had previously entered into a joint venture agreement with Kisenge Mining for the project. Kisenge Mining had withdrawn from the joint venture agreement which allowed the formal agreement to proceed.

Nick Johansen, Director of Armadale says,

“The Board of Armadale is confident that African Royalty and its related parties, who have significant experience of operating in the DRC, represents the best opportunity for Armadale to crystallise the value of the Mpokoto project and begin receiving returns through the agreed royalty payments on gold sales.”