- Additional production take or offtake agreements may come from the pilot plant testing concluded earlier this month
- Financing progression is an important milestone for the company's goal to start construction this year and become a producer next year
What does Black Rock do?
Black Rock Mining Ltd (ASX:BKT) specialises in exploration and development in Tanzania. It is run by John de Vries, a mining engineer who has more than 30 years' experience leading multi-disciplinary teams in the mining and support industries. De Vries’ focus is on building shareholder value through delivering a mine that builds and supports the Tanzanian community.
What does Black Rock own?
The key asset is the wholly-owned and licensed Mahenge Graphite Project in Tanzania, which is 400 kilometres southwest of the country’s principal port at Dar es Salaam.
Mahenge is only 70 kilometres by road from a Tanzania Zambia Railway Authority rail network that runs direct to the port.
Black Rock revealed last month it had raised $3 million with an oversubscribed placement to high-quality investors to finance final engineering activities at the mining project to make it construction-ready.
At the time, the company was preparing for a second graphite pilot plant test in China.
The concluded pilot plant testing, reported on two weeks ago, validated the company's graphite flow sheet from its definitive feasibility study (DFS).
Black Rock’s company’s Mahenge project has one of the largest JORC-compliant flake-graphite mineral resource estimates in the world, with 212 million tonnes grading 7.8% total graphitic carbon (TGC).
Its ore reserve of 70 million tonnes grading 8.5% TGC could support a 25-year mine life where 250,000 tonnes of graphite are mined each year.
The ore reserve is the second largest contained graphite reserve of any listed company while its resource is number four.
Black Rock published a bankable definitive feasibility study (DFS) for the project in October 2018 and modelled a 32-year mine valued at US$895 million (now A$1.3 billion) using an after-tax unlevered net present value (NPV10) calculated at a 10% discount.
The study’s corresponding internal rate of return (IRR) was 42.8% while Black Rock’s all-in sustaining cost (AISC) margin was 63.6%.
The DFS put average annual steady-state production rate at 250,000 tonnes of concentrate grading 98.5%, while total life-of-mine concentrate production was 6.6 million tonnes at 98.5%.
Black Rock has the option of producing ultra purity flake of 99% from the project, given the pilot plant and laboratory successes.
Capital expenditure (capex) needed for phase I production of 83,000 tonnes a year was US$115 million, taking into account a 10% contingency.
Capex for phase II, to add another 83,000 tonnes a year of production, was US$69.5 million with a 15% contingency.
Phase III capex for another of 83,000 tonnes a year was US$84.2 million with a 15% contingency.
The company’s life-of-mine C1 costs free-on-board (FOB) at the port were US$401 a tonne, while its life-of-mine all-in sustaining costs at port were US$473 a tonne and its concentrate basket FOB cost was US$1,301 a tonne.
Who will buy Black Rock’s products?
At the time of its DFS, the company had already inked a three-year 90,000-tonne-a-year blended Mahenge graphite concentrate supply deal with Heilongjiang province Bohao Graphite Co. Ltd.
The three-year agreement committed Black Rock to supplying 30,000 tonnes of blended graphite concentrate in year 1 to Bohao Graphite, 50,000 tonnes in year 2, and up to 90,000 tonnes in year 3.
West Perth-based Black Rock’s deal fully booked and exceeded the concentrate capacity of the first plant in its scaled-up production model.
Later that month Black Rock signed an agreement with China-based Qingdao Fujin Graphite Company Limited to supply 15,000 tonnes per year for up to three years.
Qingdao Fujin focuses heavily on the small to mid-size battery market and produces anode product for customers across Asia and China.
The three-year Taihe deal effectively booked up 205,000 tonnes, or 82%, of the project’s planned production of 249,000 tonnes.
Black Rock’s production take agreements require all three plant modules modelled in the DFS to be built.
What is Black Rock’s focus?
Black Rock is advancing both final engineering works and financing efforts for building the Mahenge project.
The company has previously outlined its hope to start construction in 2019 and become a producer in 2020.
It aims to target multiple graphite end-users for its future products, including expanded graphite markets and the electric vehicle battery market.
Black Rock has been working with engineering, procurement and construction (EPC) partner Yantai Jinyuan Mining Machinery on DFS optimisation work to reduce capex through Chinese procurement processes, with the partner running a 20-tonne demonstration plant with a commercial-sized spheronisation circuit.
Yantai Jinyuan processed 18.5 million dry tonnes of ore through the dedicated pilot plant facility, with preliminary performance showing recovery, grade and flake size was consistent with recent laboratory and DFS results.
Testing is ongoing, with the works to also support market price discovery by producing large plus-100 mesh concentrate and sub-100-mesh flake to be processed as a battery anode precursor.
The processing in dedicated facilities will target establishing spheronising plant performance metrics and providing more material for independent battery performance testing.
Results from these Chinese procurement works may be available next month.
The Australian company previously tipped it expected the plant was likely to lead to EPC formation, US$20 million of vendor support and up to US$20 million of additional vendor-sponsored external support.
Potential investors, existing production take parties and extra potential offtakers from China, Korea and Japan had planned to visit the plant in March 2019.
Last month, Black Rock highlighted a TGC grading had again been achieved with a 93% recovery of oxide ore from Mahenge during a FEED (front end engineering design) process being undertaken at laboratory scale in China by Yantai Jinyuan.
Concentrate previously produced at a 90-tonne Canadian pilot plant by SGS Lakeshore Laboratories from Mahenge’s Ultra Purity-FP Flake Graphite had a minimum purity of 99.0% LOI (loss-on-ignition) during testing and a good reception from potential customers.
Black Rock added to the $1.3 million cash it had on December 31 with its $3 million capital raising from institutional and sophisticated investors in March 2019.
It flagged $1.3 million of expenses for the March quarter of 2019 and is expected to file its latest quarterly report by the end of April 2019.
DFS optimisation and Chinese procurement works
Additional production take or offtake agreements
A fourth module for concentrate production to build on the three modelled in the three-phase DFS
Financing progression as the company aims to successively build the project
CEO & executive director John de Vries notes mining licence achievement
“Our second round of substantial pilot plant test works is the best way to attract finance by further de-risking the project,” CEO & executive director John de Vries told the market two weeks ago.
“The demonstration of our capacity to produce our premium branded product through a simple and repeatable process without the need for chemical intervention establishes Mahenge as one of the world’s leading premium flake graphite concentrates
“The pilot plant will deliver improvements on our DFS flow sheet by incorporating the experience and IP of Yantai Jinyuan and once all the plant data is fully processed, we will be able to proceed with contract establishment with Yantai Jinyuan for supply of plant and engineering services.”
Speaking to Proactive Investors last month, De Vries said: “Mahenge produces a particularly large high-grade flake and that's in real demand in the industry at the moment.”