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Black Rock Mining Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Black Rock Mining DFS values Tanzania graphite project at US$895 million

The study predicted a 32-year mine life and featured a 42.8% internal rate of return.
Looking over a report
INVESTMENT OVERVIEW: BKT The Big Picture
Black Rock has released headline figures from its DFS and an executive summary to market today

Black Rock Mining Ltd (ASX:BKT) has published its definitive feasibility study for its Mahenge Graphite Project in Tanzania after reporting a significant offtake agreement earlier this week.

The company said the study demonstrated “major geological and geographical advantages” and low-cost-to-customer advantages.

READ: Black Rock Mining inks offtake agreement to supply large quantities of graphite concentrate to Heilongjiang Bohao

The company’s post-tax, unlevered net present value (NPV) of US$895 million was matched with a post-tax, unlevered internal rate of return (IRR) of 42.80%.

The headline figures from Black Rock's definitive feasibility study.

The headline figures from Black Rock's definitive feasibility study

Black Rock's John de Vries told Proactive Investors the company had well and truly delivered a bankable feasibility study with its definitive feasibility study (DFS).

Mining engineer De Vries told the market this morning: “When setting out to deliver our definitive feasibility study our primary objective was to develop the study to point where it would support a bankability level of due diligence.

“With over 25,000 person hours using consultants and contractors with real graphite mine construction and operations experience, I am very confident we have differentiated ourselves, and delivered that on that outcome.”

READ: Black Rock Mining gets positive feedback for Mahenge graphite from potential customers

Black Rock leader De Vries told Proactive his objective was to build a mine and a team in Tanzania to run the project.

He highlighted the quality skill sets of the company’s board and the quality of the people it had in-country, including Tanzania corporate vice-president Raymond Hekima who has more than 13 years experience with government and corporate sectors.

De Vries reported: “This study is about building a mine. The attention to detail, the level of data support, the effort and the engagement with stakeholders, positions the company to move into financing and construction.

“We have invested in operational readiness to avoid a post-commissioning performance drop-off and to support our Tanzania-centric operating model.”

The project location in Tanzania.

The project location in Tanzania

De Vries told Proactive some of the advantages of the project that stemmed from its geography or geographical location had come as a surprise.

Among these were the low cost of transportation.

The Tanzanian project site is only 70 kilometres by road from the Tanzania Zambia Railway Authority rail network that runs direct to the country’s principal port at Dar es Salaam.

He reported today: “Geographically, we have established the lowest cost logistics solution, by proving the viability, and preference for rail haulage to the port of Dar es Salaam, the largest port in our region.”

The life-of-mine C1 costs free-on-board (FOB) at Dar were US$401 a tonne, while its life-of-mine all-in sustaining costs for Dar were US$473 a tonne and its concentrate basket FOB cost was US$1,301 a tonne.

The company said it had the “lowest cost to customer given access to rail and major East African port from rail.”

READ: Black Rock Mining swells confidence of graphite resources in Tanzania

Black Rock highlighted it had the highest purity flake graphite achieved from conventional flotation circuit processing.

De Vries flagged a number of Mahenge competitive advantages the DFS leveraged.

He reported: “From a geology perspective, we established capacity to deliver the world’s highest grade flotation concentrate of plus-99% letter of indemnity (LOI) Mahenge Ultra Purity-FP.

“Being able to produce the highest grade concentrate available without chemical or thermal refining effectively future-proofs the company as markets increasingly shift towards higher quality concentrates.”

Black Rock also reported the lowest peak capital for annual tonne of product.

READ: Black Rock Mining completes optimisation study

The company’s DFS put the average steady state production rate at 250,000 tonnes a year, while total life-of-mine concentrate production was 6.6 million tonnes.

Mahenge has one of the largest JORC-compliant flake graphite mineral resource estimates in the world, with 211.9 million tonnes grading 7.8% total graphitic carbon (TGC) for 16.6 million tonnes of contained graphite.

Black Rock reported a major offtake deal for the project earlier this week after conducting very large pilot plant operations for its DFS and trialling its concentrate with a large pool of potential customers.

The Australian-listed company inked a three-year deal to supply up to 90,000 tonnes a year of blended graphite concentrate to Heilongjiang Bohao Graphite Company Limited.

Black Rock’s deal fully books and exceeds the concentrate capacity of its first plant in its scaled-up production model.

The DFS figures and executive summary published today re-emphasised the deal effectively underwrote its construction costs.

De Vries said: “We are confident that our approach to market segmentation, and a focus on channel strategy based on credible volumes of real products, will yield results with product offtake.

“We anticipate improvements in our capital cost once Yantai Jinyuan complete a program of metallurgical test work, and have run a small pilot plant as part of their due diligence process, however this has not been factored into the study economics.”

The DFS’ capital expenditure (capex) for phase I production of 83,000 tonnes a year was US$115 million, which includes a 10% contingency.

Capex for phase II, an 83,000 tonnes a year production level, is US$69.5 million, with a 15% contingency.

Phase III capex, also for 83,000 tonnes, is US$84.2 million, also with a 15% contingency.

The Mahenge site layout.

The Mahenge site layout

Next steps

Black Rock will continue to work with Yantai Jinyuan to reduce capex through Chinese procurement processes.

The company expects to hold additional offtake discussions as it seeks to further underwrite its production profile.

Black Rock staffers expect to lodge a mining licence application in-country over the coming weeks, backed by environmental approvals it secured in August 2018.

The company hopes to quickly finalise detailed engineering and begin construction by midway through calendar year 2019 and reach producer status in mid-2020.

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