CRA.L Regulatory News (CRA)

Cradle Arc plc / EPIC: CRA.L / Market: AIM / Sector: Mining

29 August 2018

Cradle Arc plc

("Cradle Arc" or the "Company")

Operational Update, Revised H2 2018 Production Guidance and

Proposed Board Changes

Cradle Arc (AIM: CRA), the African focused base and precious metals exploration and production company, announces an update in respect of operations at its 60 per cent. owned Mowana Copper Mine in Botswana ("Mowana" or the "Mine"), together with revised production guidance for the remainder of 2018 and certain proposed Board changes.

Open Pit Mining Activities

The ramp-up of activities at the Mine continues. In July 2018, drilling operations were adversely impacted for approximately three weeks due to breakdowns and the under-performance of a drilling contractor. The latter was addressed by the appointment of an additional drilling contractor as announced on 1 August 2018. The third mining unit was introduced on schedule, however, mechanical issues have resulted in lower than expected machine availabilities, thus further impacting ore volumes delivered to the processing plant. In August 2018, normal drilling operations resumed and development through to the transitional ores has progressed on plan, which has seen grades increase. Mining is currently occurring at the 940RL level, where mining operations are beginning to access the high supergene ores, which are anticipated to deliver improved recoveries. Much of the waste stripping required to access sustainable ore volumes has now been completed, allowing confidence in ore delivery for the rest of the year.

Processing Operations

The lower volume of available ores being delivered to the processing plant, alongside the previously reported sporadic interruptions to processing due to plant outages, resulted in 45,224 tonnes of ore being milled in July 2018, leading to a lower than forecast 292 tonnes of contained copper being produced for the month. In mid-August 2018, further intermittent breakdowns have been experienced, including a technical failure in one of the main Programmable Logic Controllers within the milling circuit, which resulted in further considerable periods of processing downtime.

The recoveries of copper achieved so far reflect the fact that predominantly transitional ores have been mined and the abovementioned plant breakdowns, with an overall average of approximately 51 per cent. for both Q2 and Q3 2018 to date. Recoveries of up to 76 per cent. are still expected to be obtainable from the high supergene ores currently being accessed at the 940RL level, with recoveries of copper ultimately expected to reach a level of 85 per cent. by the end of the year, as more sulphide dominant areas are accessed.

As a consequence of the further breakdowns experienced in August 2018 and the inherent inefficiencies of such sporadic stoppages at the processing plant, the total contained copper production for August 2018 is expected to be broadly in-line with the output achieved for July 2018 and therefore significantly below the Company's original expectations, such that the project is not currently breaking even in terms of operational cash flow at the current run rate.

In light of the abovementioned operational difficulties experienced in July and August 2018, the Company's revised guidance for expected total contained copper production in H2 2018 is 4,000 tonnes, with approximately 1,000 tonnes expected to be produced in Q3 2018 and approximately 3,000 tonnes in Q4 2018. The anticipated significant uplift in Q4 versus Q3 is due primarily to the change in ore types from transitional to supergene expected to be mined during that quarter.

Dense Media Separation (DMS) Financing Update and Planned Processing Plant Upgrades

The Company is currently in advanced negotiations in respect of obtaining the financing required for its planned DMS upgrades. The envisaged financing package includes an initial tranche of funding which is to be utilised to improve and rehabilitate the current processing facilities and procure an inventory of certain key spare parts, which should then serve to mitigate the occurrences of further processing plant breakdowns and interruptions during the critical ramp-up phase and which are a pre-requisite to the installation of the planned DMS upgrades. A further announcement(s) will be made as and when appropriate.

Additional Information

The ramp-up of mining operations at Mowana re-commenced in mid-April 2018, further to the Company's Accelerated Development Plan and the raising of US$10 million of secured debt funding, with two mining units working full time throughout Q2 2018 and the third mining unit brought on-line for the start of the third quarter. Whilst the Company has regrettably experienced some operational setbacks during Q3 2018 to date, the Company will now focus on developing sufficient space in the mining pits to allow the fourth mining unit to commence operations during Q4 2018, thereby enabling ramp-up to full steady state production.

Recoveries of copper achieved for the mined blocks average approximately 51 per cent. for Q2 2018 and Q3 2018 to date, reflecting the fact that predominantly transitional ores have been mined. Further to the Accelerated Development Plan, mixed transitional ores with oxide dominant tenor are targeted to achieve an average of approximately 50 per cent. recoveries, whilst supergene dominant ores are targeted to achieve recoveries of up to approximately 76 per cent. As mining progresses through the mixed oxide / supergene / sulphide phases of the ore-body in accordance with the Company's mine plan, recoveries are projected to continue to improve as more sulphide dominant blocks are accessed, with recoveries ultimately expected to reach a level of approximately 85 per cent. by the end of Q4 2018.

Pursuant to the Accelerated Development Plan, approximately 550 tonnes of contained copper was ultimately produced in Q2 2018. In H2 2018, production is now expected to be in the order of 4,000 tonnes of contained copper. In line with the upward trend in mining rates and expected recoveries, production will be positively weighted towards Q4 2018, during which the Company currently expects to reach the full nameplate processing rate of 1.2 million tonnes of ore per annum at Mowana.

Proposed Board Changes

The Company has experienced a challenging period over the past two months and remains committed to delivering its Accelerated Development Plan. To assist in this regard, the Company plans to make certain changes to the Board via the proposed appointment of Roy Pitchford, as the Company's Non-Executive Chairman, and Michael Golding, as an additional Non-Executive Director, subject to the Company's nominated adviser finalising its customary directorate appointment regulatory due diligence process. Toby Howell, Cradle Arc's current Chairman, has advised the Company of his intention to resign from his position to pursue his other business interests at the appropriate time.

Roy Pitchford has in excess of 25 years' senior management and executive experience in Southern Africa in the mining industry. During his career in the resource development arena he has held the position of Chief Executive Officer or Managing Director for Vast Resources Plc, Central African Gold PLC, African Minerals Limited, Cluff Resources Zimbabwe Limited, Delta Gold Zimbabwe (Pvt) Limited, African Platinum plc and Zimbabwe Platinum Mines Ltd. Roy is a Zimbabwean citizen who was educated in Bulawayo, and where he qualified as a Chartered Accountant. He is a past President of The Chamber of Mines of Zimbabwe.

Michael Golding has over 20 years' of corporate and project finance experience during which time he has advised on in excess of 50 transactions in the mining industry. He was previously the South African head of Corporate Finance for Billiton Plc, following which he acted as a director at HSBC Investment Services Africa Limited, Actis Plc and Imara Holdings Ltd. He currently acts as Non-Executive Chairman to CCP 12J Fund Limited and has run a boutique corporate and project advisory business for over 10 years. Michael is a member of the South African Institute of Chartered Accountants, and holds the degree of Master of Business Leadership from the University of South Africa.

A further announcement(s) will be made in due course following completion of the Due Diligence process.

Kevin van Wouw, CEO of Cradle Arc, commented:

"We are very happy to be securing the considerable mining experience of both Roy and Michael, in their respective future roles as Non-Executive Chairman and Non-Executive Director. The depth and range of experience brought into the company will bring new understanding of the challenges being experienced as Cradle Arc matures into an established copper producer."

**ENDS**

For further information on the Company, please visit www.cradlearc.com or contact:

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

About Cradle Arc

AIM-quoted Cradle Arc plc is the 60 per cent. owner of the Mowana copper mine in Botswana, a fully operational open pit mine and processing facility located in the north-east of the country, approximately 120km northwest of Francistown.

The Company recently released a maiden open pit ore reserve estimate (Proved and Probable) of 31.8Mt at 1.17% Cu for 370,800 tonnes contained copper metal, based on a Dense Media Separation (DMS) mine plan.