Black Rock Mining (ASX: BKT) has begun formal negotiations with the Tanzanian government on the ownership structure of its Mahenge graphite project, a key step in progressing finance discussions to start construction.
In a market update, the graphite-focused developer said it is working constructively to complete the government’s shareholding and ownership structure of its 16% free carried interest – a regulatory requirement of all mining developments in Tanzania.
Upon the completion of negotiations, this free carried interest is expected to be held in Black Rock’s Tanzanian operating subsidiary Mahenge Resources.
Black Rock managing director and chief executive officer John de Vries described the start of negotiations as a “very significant” milestone.
“Resolution of the structure and nature our partnership with the Tanzanian government through its negotiating team is a critical step in achieving financing conditions precedent,” he said.
“The Mahenge graphite project will deliver many benefits to our host communities at Mahenge, as well as to the government of Tanzania and its people through the free carried interest,” Mr de Vries added.
Mahenge graphite project
Black Rock’s Mahenge graphite project has a JORC-compliant mineral resource estimate of 212 million tonnes at 7.8% total graphitic carbon content (TGC), and ore reserves of 70Mt at 8.5% TGC that support a 16-year mine life of up to 350,000t per annum of graphite.
According to Black Rock, an enhanced definitive feasibility study completed in July 2019 demonstrated “exceptional” financial metrics including low capital expenditure and technical risk, a high all-in sustaining cost margin of 63.1%, and a 44.8% internal rate of return with a net present value on the project of US$1.16 billion (A$1.65 billion).
Black Rock has had a mining licence on the Mahenge project since February 2019 and has already allocated planned production with up to 255,000tpa of graphite committed to sale by the third year of production, through pricing framework agreements.
The company said it is “currently progressing financing discussions and detailed engineering with a view to commencing construction of the project”.
Black Rock said the impact of COVID-19 on its operations has been limited to capital markets and the ability of company executives to travel to Tanzania and Asia.
Tanzania currently does not have a lockdown strategy in place, although it has limited some public gatherings and is actively monitoring the spread of the virus.
In March, Black Rock released an investor presentation to its own YouTube channel BKT-TV; it was intended for a mining investment conference in Sydney that was postponed in light of the pandemic.
“COVID-19 has offered up a number of challenges to the way in which we as a business interact with you, our shareholders and stakeholders,” Mr de Vries said.
“We have turned this challenge into an opportunity to modify our approach from presenting at meetings and investment conferences, to instead leverage our digital capabilities and present directly to you, wherever you are, using video.”
Mr de Vries also announced cash preservation actions including cutting remuneration for all directors, staff and full-time-equivalent contractors to 25% of nominal rates, effective 1 April. This is further to the 50% reduction in agreed packages adopted last November.
“These are turbulent times. We wish you and your families good health and safety. Know that our team is safe, and we continue to advance our project and prepare for a time when business, industry and financial markets return to normal levels,” Mr de Vries said.