One point to note is that the investor is already committed to and approved the investment. The prospectus is to satisfy a requirement due to the size of the capital being issued, and not as part of the investors due diligence.
The main question is whether we will find out who the investor is and whether it might be significant enough to show what direction they are heading in with offtakes etc.
The £2.5m additional equity for the strategic investor we are waiting for the prospectus for could be a similar thing with a potential offtake partner buying in?
"Posco acquired a 15% stake in Black Rock in 2021."
Pic - its in the sep presentation (although says 500tn) as part of stage 2 of the enlarged DFS.
https://blencoweresourcesplc.com/wp-content/uploads/2023/09/Blencowe-Presentation-Sept-2023.pdf
Sounds to me the point of the video is a last chance warning to get before things start moving.
First milestone about to complete
Product with OEMs for testing
Institutional money expected to come in
Talks continue with DFC on funding
Presentation suggests 50% concentrate sold to market and 50% processed to SPG 99.95%+ in Uganda. Perhaps concentrate initially focused on china and SPG sale focussed on US
Also on that point - in order for the EV industry to grow they need infrastructure in EV charging, reduced costs and barriers to entry for car owners, government incentives/policies - lots of market players working together . With one or two projects only ,graphite can't supply the growth in the EV market. It needs everything working towards EV growth. It's almost waiting for everyone to catch up and then it will take off when all the supply chains and infrastructure is there. This is why Blencowe are targeting production for 2025 to time it perfectly
Of course Blencowe are not the only graphite play - per their own presentation they say that the market requires 100 new projects according to Benchmark Minerals Intelligence (BMI)
Not many of those projects will be US Gov funded and have super premium graphite grades.
https://blencoweresourcesplc.com/wp-content/uploads/2023/09/Blencowe-Presentation-Sept-2023.pdf
It will likely take a decade for anything to compete with current batteries at the rate of growth expected. And that will only gain market share it wont fully replace them.
Short - yes it talks about alternate materials for batteries. There is always going to be drives to improve batteries and use alternate materials. I am sure when the Tesla Roadster went into mass production in 2008 there was talk that lithium would be superseded by now. And one of the main reasons they are looking at alternatives is because they know there will be a shortage of graphite.
We now see today pretty much all vehicle manufacturers have an electric vehicle offering. Some are just getting to the stage where they are releasing their first e vehicles. Jeep for example. The market is still very much in its infancy. Along the drive to increase electric vehicles different OEMs will be at different stages in the evolution of batteries if and when things move forward. Nobody is currently model a graphite market that matures in the next 10 years. All models expect exponential growth through 2035.
The paper i posted was to highlight the OEMs and how they committed to tie up long term supply of lithium via offtakes, some with upfront payments, equity investments and loan offerings. There was a discussion at the time regarding offtakes and how blencowe may close any funding gaps. BRES are in a strong negotiation position so if there is competition from OEMs BRES can dictate their terms and with the increasing urgency for OEMs to tie up supply, there could be some very attractive deals in the making, Graphite may well follow the Lithium pattern and with around 10 times more graphite in a lithium ion batter, Blencowe will be in position A.
Pre decision to mine.....
but we have US Gov to fund it, highest quality graphite, trade friendly location with local government engaged and on board, low cost low capex mine with a clear strategy on green sustainable mining and one of the largest resource projects around and planning on delivering an upgraded NPV of around $1bn. Add in the expected supply and demand shortfall and barriers to entry for other projects.
It's highly unlikely they will say, nah lets not bother.
Blencowe is unaffected by this.
Uganda is a member of the World Trade Organisation
Graphite is tariff free for members if the WTO.
There are no special sanctions under AGOA and therefore nothing can be taken away.
Check out page 7 on the attached. This is for lithium. Graphite spouted as Lithium 2.0. and around 10 times more graphite required in a Lithium ion battery than lithium. Look at the OEMs involved and the deals and remember Graphite is about to go on the same journey as lithium.
BRES are currently working with OEMs.
These OEMs are big players with big budgets and a big problem on their hands that they need to secure supply chain of graphite. Attached shows different funding models of OEMs securing their supply chain.
BRES have a first class asset producing a first class project and low cost margin with relative low capex requirement, with US Government onboard as a funding partner.
This is being position beautifully and we should not worry about short term or long term funding requirements.
The race is on for OEMs to secure graphite and they will have to pay. Lack of projects and barriers to entry and expected graphite price increase because of it means they need to act now. It is in all stakeholders interest that BRES have the funds required to get this project up and running. By scrapping the pliot plant and testing in China they save millions and equity dilution. By securing DFC partnership they have saved significant dilution. We are looking at a tier one project that we are retaining significant if not 100% ownership of.
https://worldmaterialsforum.com/files/Presentations2023/WMF2023-Opening-Frank-Bekaert-McKinsey.pdf
How about the most recent RNS announcement 10 October that says:
"I would like to emphasise once again that the Grant Agreement with DFC does not require Blencowe to match funds input by them"
"This first US$1 million received is of significance firstly because it is completely undilutive funding for Blencowe and its shareholders"
"We are already well advanced in our achievement of the next milestone which would access and release another US$1 million payment from DFC."
So shortly they would have received $2m of the $5m grant.
If you look at the presentation with the stages of the DFS, the more costly items will be further down the line when it comes to more drilling etc. Stage one is all about pre-qualification, enhancing the project plan to increase project plant size and tonnage. This will lead to offtakes and funding in order to deliver an updated DFS and enhanced NPV. So the $2m should get them far enough down the line to add value before moving forward with the more costly parts of stage 2 and 3 of the new enhanced DFS.
https://blencoweresourcesplc.com/wp-content/uploads/2023/09/Blencowe-Presentation-Sept-2023.pdf
Looking at other companies that have received funding from the DFC, we could see a situation where they make a conditional unbinding loan offer in the near term to complete after closure of the DFS and further DD. Following the same pattern with the Technical Assistant Grant. News on this may be closer than many thing. Particularly as they have been in Washington meeting with the DFC this week.
Slide 7 on their corporate presentation almost suggests it's a done deal, preserving all project equity. Conservative broker target set at 73p for full project ownership, base on the $492 NPV - they are looking to at least double that.
https://blencoweresourcesplc.com/wp-content/uploads/2023/09/Blencowe-Presentation-Sept-2023.pdf
Perfect timing releasing this today when i think someone said Mike travelling to the US to see DFC this week.
Another milestone smashed by Blencowe. Proving a high quality product that will be in high demand.
Seems the delay was well worth it with 2 test programmes on 2 continents with 2 techniques. My guess is they have 2 techniques to choose from to plug into the DFS plan and ultimately the SPG process plant. So looks like Chicago thermal processing is the front runner to take the IP into the in country processing plant. They van now move forward with the plan as well as move forward with OEM testing and offtakes
Regarding some comments on BRES supplying China as well as the US and other markets....
I think the answer here is that the larger the offtake agreements that BRES can secure the larger the project that they can move forward with quicker. It's in the plan in the presentation. The initial plan was 50k tn per annum rising to 100k tns. They are now looking at starting at 100k tns ad rising to 150k tns. In the early stages US demand may not enable this to happen at this scale so quick. With China offtakes it can happen. So it is actually in the interest of the US that BRES get offtakes for the higher amount so that the financials of the project are improved and it derisks the project and cuts production and capital costs. Offtake agreements with upfront payments may fund additional drilling increasing mine life or enabling even greater capacity.
So BRES are in a great position that the year Africa based, with US investment and interest for supply take up, especially once able to supply uncoated SPG direct to market, and also the ability to sell into the mature Chinese market and benefiting from expert partnership/consultancy in that market. You couldn't ask to be positioned better.
"So the DFC, supporting US businesses, is going to sit back and allow BRES to ship graphite product back to China, when US EV manufacturers can't access Chinese graphite exports from December 1st?"
This will be a different beast to TGR in the business plan, the way its funded and the quality of the project and product. US Gov funding and Chinese interest is validation of that.
It doesn't need 12 months for the DFS to complete to add value. It will complete in stages.
The new DFS is 3 stages. Stage one is effectively the old DFS but with the combined stage 1 and 2 production plan doubling production to 100k initially which is well under way and will complete within the next 3-6 months.
Value adding milestones along the way:
99.95% uncoated SPG confirmation
Offtake agreements (This will happen in stage 1 as this is needed to enable project expansion to stage 2)
Funding agreements. (DFC already lined up - Mike mentioned in the latest interview that this is being worked on and news of this may well come sooner than may think)
Move to double NPV with updated commercials
Includes plan to process to SPG on site, therefore significantly increased selling price.
Recovery and grades already improve from latest NPV
Further drilling increasing mine life
Chance to build some momentum now.
SPG results will confirm 99.95% battery grade. Should be due any day. Major value added milestone confirming commercial opportunity,
2nd $1m to follow.
Offtakes and full project funding due. The main value added points.
Larger project plan with NPV >2 times the PFS.
DFS and decision to mine in 2024. Don't get caught out thinking you have a year to get in. As SPG results and OEM testing comes to an end, offtake partners will want to get their business done early. This will drive the enlarged scale of the project which will make it more attractive to funding partners. Funding partner will be secured in order to move forward with the larger plan. Offtake upfront payments or other funding may provide cash for further drilling and improved resource and mine life.
Lot's of milestones already achieved not priced in and lots of milestones to be achieved in the next 12 months. Now is the perfect time to get in, it's much clearer to see the direction now and it has been heavily derisked.
The resolve research coverage is highly conservative.
At 12% it is using the highest derisked discount factor.
After assuming 20% equity dillution there is a further 65% derisking haircut.
So assuming only around 20% valuation of the discounted npv.
The project plan is moving on more ambitiously than the .$482m PEA plan.
Npv will grow because recoveries and grade are improved
There is nothing factored in here for SPG processing, effectively taking their output from a $700 product to a higher margin $2500 product. This will also reduce costs.
Combining stage one and 2 saves on capex and increases early stage revenues. Will improve npv.
Further drilling can increase mine life.
In summary, your getting a good deal at around 5p based on a conservative target that the company will be delivering upgrades to regularly over the coming months.
People are worrying about how they may fund another few million, but that few million will add probably another $500m+ to the npv, so however they fund it, it will be a good deal!