Black Rock Mining secures US$40m POSCO investment for Mahenge graphite offtake

Graphite developer Black Rock Mining (ASX: BKT) will receive a US$40 million equity investment from South Korean steel conglomerate POSCO International in exchange for long-term offtake rights from Module 2 of the world-class Mahenge graphite project.

The investment will be in the form of a binding subscription agreement, which remains subject to certain conditions including approvals from the Foreign Investment Review Board, the Fair Competition Commission of Tanzania and Black Rock shareholders.

Proceeds will be used to fund the development of Mahenge Module 1, from which POSCO has already secured an offtake contract for total fines graphite production.

Marketing agreement

In return for the investment, Black Rock subsidiary and Mahenge owner Faru Graphite Corporation will grant POSCO future offtake rights for 100% of planned fines graphite production from Mahenge Module 2 once it is built.

Faru will also execute a marketing agreement giving POSCO the non-exclusive right to market large flake graphite produced by Faru for buyers outside of China.

POSCO will be paid a commission for all sales and may also acquire small flake graphite on commercial terms if it wishes to trade that product.

The marketing agreement can be terminated by either party in the event that POSCO’s voting power in Black Rock falls below 10%.

Strategic alliance

POSCO’s latest investment builds on a strategic alliance with Black Rock formed in mid-2020 that included an initial equity investment of US$7.5m and was followed by an offtake agreement for 32% of total fines from Module 1 of Mahenge plus a US$10m prepayment facility.

Soon after, POSCO signed an agreement for 6,000 tonnes per annum (7% of total volume) of large flake graphite from Module 1, increasing its offtake interest to almost 40%.

Black Rock chief executive officer John de Vries said the POSCO deal would provide a new source of natural graphite into a highly dependent global market driven by clean energy demand.

“We are extremely pleased to be deepening our relationship with POSCO and we believe today’s announcement represents a strong endorsement of the promising future of the Mahenge graphite project,” he said.

“POSCO’s binding offtake agreement for the fines from Mahenge Module 2 represents a major de-risking milestone for us [and] provides increased confidence for all of our stakeholders, as well as improved visibility on funding and our pathway to production.”

Flake graphite resource

Black Rock’s Mahenge project is one of the world’s largest JORC-compliant flake graphite resources, with 212 million tonnes grading 7.8% total graphite content (TGC) and a reserve of 70Mt at 8.5% TGC.

The project is spread across 324 square kilometres in Tanzania’s Ulanga district and is based on open-pit mining of the Ulanzi and Cascade deposits.

Black Rock released a definitive feasibility study (DFS) for Mahenge in 2018, which considered a four-stage construction schedule to deliver up to 340,000tpa of 98.5% graphite concentrate over 26 years.

In 2019, it published an enhanced DFS with updated capital and operating expenditure estimates to a bankable level of confidence.