Black Rock Mining forms alliance with Korean lithium ion battery player for Mahenge graphite development

Aspiring graphite producer Black Rock Mining (ASX: BKT) has entered into a strategic alliance with Korean anode feedstock maker POSCO for the development of the world-class Mahenge project in Tanzania.

A memorandum of understanding signed by the two companies anticipates an initial investment by POSCO of up to US$10 million (A$14.3 million) by way of a subscription for shares and convertible notes in Black Rock.

The investment will be used to fund a program of engineering works including design, completion of contracts and early access to establish a construction-ready site at Mahenge by year end.

POSCO can also opt for a long-term offtake arrangement for up to 100% of graphite fines (sub #100 mesh), expected to be in the vicinity of 40,000 tonnes per annum at full production rates from the project’s Module One plant.

The mesh will be processed into battery anode feedstock for POSCO’s lithium-ion battery business.

The estimated remaining volume from Mahenge’s Module One plant of up to 43,000t of +100 mesh large flake (plus any uncommitted fines) will be made available to Black Rock’s portfolio of potential customers.

It is expected the POSCO alliance will support continued large flake market development in the high growth fire retardant and foils markets in Europe and the United States.

Step forward

Black Rock managing director John de Vries said the POSCO agreement represents a “significant step forward” for Mahenge.

“This proposed alliance de-risks our project through significant financial capacity and geographic diversity,” he said.

“Ultimately, we are miners, not downstream processors, and we look forward to advancing the POSCO relationship towards a final investment agreement for Mahenge’s development,” Mr de Vries added.

He said the alliance’s ability to deliver Mahenge concentrate into POSCO’s China-based supply chain will support Black Rock’s existing relationships with construction and mining partners China Seventh Railway Group and Yantai Jinyuan.

Key benefits

The POSCO alliance will hold key benefits for Black Rock, including greater overall financial certainty for Mahenge’s development and access to early works funding.

“POSCO has global scale and significant financial strength, and [this alliance] will significantly reduce our project’s offtake credit risk, which is a prerequisite to securing future debt financing,” Mr de Vries said.

“It also reaffirms the clarity of our business model, which is to be first and foremost a miner and concentrate producer, and not a competitor against our customers in downstream processing,” he added.

Resource estimate

Mahenge has a JORC-compliant mineral resource estimate of 212 million tonnes at 7.8% total graphite content and ore reserves of 70Mt at 8.5% TGC.

The reserves are sufficient to support a mine life of up to 350 kilotonnes per annum of graphite, for a reserve life of 16 years.

An updated definitive feasibility study released in mid-2019 demonstrated “exceptional financial metrics” for the project including low peak capital expenditure of $165.75 million for Phase One, a 44.8% internal rate of return and a $1.65 billion net present value.

In May 2019, Black Rock announced it had locked in a series of pricing framework agreements with up to 255ktpa of graphite committed for sale by year three of Mahenge’s production.

At midday, shares in Black Rock Mining were up 20.37% to $0.065.