Black Rock Mining Ltd (ASX:BKT) shares rose after signing a non-binding Memorandum of Understanding (MOU) with major Korean industrial group POSCO to form a strategic alliance and development relationship for the Mahenge Graphite Project in Tanzania.
Managing director and CEO John de Vries said: “This represents another significant step forward for Black Rock’s Mahenge Graphite Project, with the alignment of a project partner as large and well respected in the LiB industry as POSCO.“
The first phase of the investment agreement anticipates an initial investment of up to US$10 million by a subscription for shares and/or convertible notes in Black Rock.
These funds will be applied towards carrying out a detailed design of the project, conducting the development of a graphite product, third-party technical due diligence, front-end engineering work and project development, site works and early-stage construction.
Shares closed more than 16% up at 6.3 cents and have been as high as 8.1 cents intra-day.
Black Rock aims to fund a program of engineering works including design, completion of contracts and early site access to establish a construction-ready site by the end of 2020.
If the parties progress to phase two of the investment agreement, POSCO will either subscribe for more shares in Black Rock (or shares in Mahenge Resources Limited), and/or obtain the offtake rights for up to 100% of a sub #100 mesh concentrate (around 40,000 tonnes per annum) from Mahenge Module One.
de Vries said that “the proposed alliance with POSCO de-risks the project through significant financial capacity and geographic diversity”.
He said: “POSCO is looking for the volume of up to 100% of our sub-100 mesh fragment, about 40,000 tonnes of production. So, you can imagine what that does for our capacity to finance the project when we’ve got POSCO behind us taking something like 45% of our volume under a long-term contract with transparent pricing.”
The company’s ability to deliver Mahenge concentrate into POSCO’s existing China-based supply chain also further aligns with Black Rock’s existing relationships with Chinese construction and mining partners, China Seventh Railway Group and Yantai Jinyuan.
de Vries said: “The concentrate will ultimately be processed through POSCO’s supply chain, which is predominantly Chinese based, so it doesn’t change a lot in terms of the economics and the relationship with teams in China.
“It doesn’t impact our ability to access the Chinese banking system.”
The estimated remaining volume from Mahenge’s Module One Plant of around 43,000 tonnes of +100 mesh large flake, plus any uncommitted fines will be made available to Black Rock’s existing portfolio of potential customers under the volume provisions of the existing price and volume framework agreements.
de Vries said: “It wouldn’t be unreasonable to expect that some of the Chinese offtakers would no longer have to find a home for the fines, which was always going to be a difficult part of the market.
“If anything, this simplifies our conversations with our customers in China, which is beneficial in terms of pricing and our capacity to secure financial closure with those customers.”
Upstream focus pays off
Black Rock has always focused on upstream assets and making the best concentrate possible for its customers.
de Vries said: “I don’t want to build batteries, I don’t want to build EVs, I want to actually give [customers] the best raw materials to start with.
“This deal demonstrates that that has been the right strategy as we’re the only people to have potentially secured a strategic investor in this space.
“Ultimately, we are miners, not a downstream processor and we now look forward to advancing the POSCO relationship towards a Final Investment Agreement for development of the world-class Mahenge Graphite Project.”
de Vries said that the focus on the customer, and the customer's customer to produce the best product possible for them is what has set the company apart from its peers.
He said: “It’s understanding value propositions for the customer in a way that shows we understand their business and we actually have an offering that was going to contribute to their business.”