By Dr. Michael Green
Since Blencowe’s return to the market following a reverse takeover (RTO), there has been no shortage of good news. Late last month, investors learnt that a new high-grade graphite zone had been identified at the Orom-Cross Graphite Project in Northern Uganda and now the first diamond drill hole in this zone has returned visible high-grade graphite.
The identification of this new high-grade graphite zone had been outlined following a review and remodelling of geophysical survey programme data acquired earlier this year, as well as historical pitting and drill results. Very handily, this highly prospective zone lies just 250m from the current exploration camp and close to the planned site for the processing plant.
This first hole returned visible high-grade graphite over 28m of a 30m deep drill hole, with weathering extending to the base of the hole. Based on prior samples taken in this area, it is expected that grades could probably be up to twice as much as the 6-8% average Orom-Cross grade. Additionally, subsequent logging by company geologists has identified zones of large to jumbo flakes in the core.
Samples from the core are being sent for analysis in Tanzania and the board is looking forward to receiving the assay results. Given the initial success, it is little surprise that another 9-15 holes will be drilled to delineate this lode once the current drill programme has been completed. It looks as though this additional high-grade zone could add materially to the overall project with scope to potentially really push up the NPV if mined in the early years.
The story so far is that Blencowe listed on the LSE in April 2019 at 4p per share seeking a Reverse Takeover (RTO). The board looking after this ultra-clean shell company includes some well-known movers and shakers behind resources stocks that have gone onto mastermind the acquisition of a 100% interest in this cracking large flake graphite project. We believe that Blencowe might be all set to play a big role in supply flake graphite for energy storage – which is probably one of the biggest trends of the 21st century.
Orom-Cross has all the makings of being a world-class graphite project which comes with a Mining Licence. Not only is it a large-scale project but also comes with scope to produce an impressive amount of the high value jumbo and large graphite flakes that currently sell for more than US$1,400 per tonne.
This project will help fulfil the long-term demand for high quality flake graphite. The graphite market is estimated to be 500,000t in deficit by 2025 which is just as Orom-Cross plans to get into full production. Few large-scale projects are expected to come online in the next five years with a high proportion of jumbo/large flakes. The end result is that these projects are rare, especially in a lower risk location.
The vendors of Orom-Cross had been working hard to get the project into production as well as funding the environmental studies which paved the way to being granted the 21-year Mining Licence which has removed a lot of potential risk. The vendors had begun work on a number of the elements that go into the Pre-Feasibility Study (PFS) especially concerning infrastructure, power and logistics. This means that Blencowe can complete this detailed analysis and planning, which will provide some savings both in terms of time and financial resources.
On its return to the market after the RTO Blencowe had a low market capitalisation, a low-cost project and an expected steady flow of news. Already the drilling of 59 holes has begun to be followed by assay results with further metallurgical test taking place in parallel where the goal is to be able to demonstrate optimal end product that can be delivered to market. The plan is to have delineated a maiden JORC-compliant resource by the middle of 2020 which will go into the PFS which is planned to be completed before the end of 2020.
In small cap stocks, the quality of the management is as important, perhaps more important, than the project. Well in this department the company scores highly. Blencowe is led by a proven management team that knows how to keep the share structure tight. Post-RTO the company has been able retain its tight share structure. All board and management shares are escrowed plus £2 million worth of shares paid to Orom-Cross vendors have been escrowed for 12 months. Now doesn’t that all sound like a refreshing change.
We initiated coverage on Blencowe with a Conviction Buy stance in early May 2020, just after the stock returned to the market following the RTO, with a target price of 18.1p
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