By Dr. Michael Green
Blencowe Resources looks incredibly well-placed to play a major role in the supply of flake graphite for energy storage, which looks like being one of the biggest trends of the 21st century. The company must have come to a lot of investors’ attention as the price surged on its recent return to the market following a successful RTO, which saw Blencowe acquire the Orom Cross Jumbo Graphite Project in Uganda.
By way of an introduction, Orom Cross has all the makings of being a large-scale project 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. We believe that Orom Cross provides a highly compelling combination of a potentially large scale, shallow low-cost mining operation, coupled with a high value product. Risks will be reduced with the publication of a Pre-feasibility Study (PFS), which is expected by the year-end following drilling to define a JORC-resource.
Reassuringly, progress does look like it is going to continue to be swift and that Blencowe’s plans are not going to be blown off course by COVID-19. This morning there was news that company has recommenced key metallurgical test work to gain a full understanding about the quality of the end-product that they can deliver and what the process route will look like. This important test work actually began in South Africa at the beginning of 2020 but was placed on hold for six weeks from late-March due to a nationwide lockdown in the country introduced by the government to help combat the spread of this dreadful infection. With these restrictions being partially lifted, the labs can now recommence processing Blencowe’s samples.
Blencowe believes that Orom Cross has the potential to deliver a high-grade graphite concentrate, which would prove desirable to potential off-takers and the broader market. It looks as though the company could be blessed with excellent timing, as Orom Cross is planned to be getting into full production just as the graphite market is estimated to be 500,000t in deficit. Blencowe’s party is unlikely to be spoilt by competitors as few large-scale projects are expected to come online in the next 5 years with a high proportion of Jumbo/Large flakes; so, these projects are rare, especially in a lower risk location.
Back to those metallurgical tests, the test work program began in H2 2019 with Metzana Minerals in South Africa undertaking Phase 1 work which confirmed Total Graphite Content (TGC) of at least 94%. Metzana also completed a successful investigation into recoveries, impurities and retention of flake size within the concentrate. Phase 2 seeks to confirm the liberation pathway for increased recoveries and that an even higher grade of 95-97% TGC is possible in the concentrate is possible. In addition to such a high grade, test work aims to prove that this can be achieved with low impurities, approximate 80% recovery, whilst all the while being able to maintain that a majority of Jumbo/XL/Large flakes are contained within the concentrate.
All of this test work will come together to confirm the process flow diagram for plant design as part of the forthcoming Feasibility Study as well as providing bulk concentrate which will allow Blencowe to start discussions with potential off-take partners. It looks as though that could all happen within three months, as so far, the test results look like they have been fairly impressive.
At the time, Cameron Pearce, Executive Chairman, was keen to point out that “…..This next phase of work is designed to take the product to the next level by targeting a higher grade 95-97% TCG as well as increased recoveries. If successful it will significantly increase the desirability and value of the Orom-Cross product. Understanding both the end product and the process flow to deliver this, is a significant step forward in terms of value creation. We are confident we can achieve our stated objectives and thus deliver a quality product that will be higher up the price curve as well as in greater demand. I look forward to providing further updates in due course.”
We believe the Orom Cross Jumbo Graphite Project is well-placed to help fulfill the long-term demand for high quality flake graphite. There seems to be plenty of support from the Ugandan government, which looks very keen to develop the country’s mining sector and the recent award of a 21-year Mining Licence served to really de-risk the project. Numerous anomalies indicated across the licence area have been discovered and proven by a trenching program and the more the company explores the larger the project seems to become.
Align Research recently initiated coverage on Blencowe following the RTO with a Conviction Buy stance and an 18.1p target price.
DISCLOSURE & RISK WARNING
Blencowe Resources is a research client of Align Research. Align Research and a director of Align Research own shares in Blencowe Resources. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
This is a marketing communication and cannot be considered independent research nor is it subject to any prohibition on dealing ahead of its dissemination. Nothing in this report should be construed as advice, an offer, or the solicitation of an offer to buy or sell securities by us. As we have no knowledge of your individual situation and circumstances the investment(s) covered may not be suitable for you. You should not make any investment decision without consulting a fully qualified financial advisor.
Your capital is at risk by investing in securities and the income from them may fluctuate. Past performance is not necessarily a guide to future performance and forecasts are not a reliable indicator of future results. The marketability of some of the companies we cover is limited and you may have difficulty buying or selling in volume. Additionally, given the smaller capitalisation bias of our coverage, the companies we cover should be considered as high risk
This financial promotion has been approved by Align Research Limited