Date: 19 November
2024
Blencowe Resources
Plc
("Blencowe" or the
"Company")
The Orom-Cross Graphite
Project - Asset, Development Strategy and Value
Responses to Shareholder Questions
Following Recent Funding
Blencowe Resources Plc (LSE: BRES), the London
listed graphite company advancing the 100% owned Orom-Cross
Graphite Project in Uganda ('Orom-Cross' or the 'Project'), is
pleased to provide a Questions and Answers ("Q&A") session.
This follows the recent £1.6 million capital raise to fund
the completion of the Project's Definitive Feasibility Study
('DFS'), in which senior management invested £500,000.
Why is
Orom-Cross considered a standout project?
Orom-Cross with an estimated 2-3 billion tonnes
of graphite, of which most is near surface, is one of the largest
deposits globally. Importantly, 75% of the in-situ material
is jumbo or large flake placing it at the high value end of the
market. The JORC Standard Resource/Reserve is currently
24.5Mt at 6.0% Total Carbon ('TC') based on only approximately 2%
of the total deposit drilled to date, which means further drilling
can be conducted at any future point to continue to increment the
resource size.
Blencowe owns 100% of the Project and has a
21-year mining license in hand as well as all the necessary
permits, approvals and community agreements to bring Orom-Cross
into production. The Project has already attracted a US$5 million
grant from the US Government via the Development Finance
Corporation ("DFC") to assist with the DFS costs. Uganda is a
stable jurisdiction with attractive tax incentives and strong
Government support for a long term mining projects.
Graphite demand is forecast to accelerate over
the next decade in response to its non-replaceable role within
lithium-ion batteries that are used to store renewable energy, and
Orom-Cross will play a key role in fulfilling that demand
ahead.
What work has
Blencowe done over the past five years to highlight the quality of
the Orom-Cross Project?
Blencowe has invested substantial funds to date
in the development of Orom-Cross and has conducted multiple
geological exploration programmes, technical evaluation and
economic studies, which all consistently highlight the quality of
the Project. Over 6,000 metres of drilling has been completed
in two phases with a further programme now underway.
Significant metallurgical test work has
confirmed the very high quality of the end products, both as
concentrates and as more purified graphite. Over the past 15
months Blencowe has conducted bulk sample testing of all products
within commercial scale facilities in China (first using 100 tonnes
raw material from Orom-Cross and then 600 tonnes), to become
pre-qualified and to provide substantial samples of end products to
OEMs. This is a critical step to obtaining offtake agreements
and successful bulk scale testing has allowed the Company to now
transition to MOUs and Sale Agreements.
A Scoping Study and Pre-Feasibility Study
("PFS") have both been completed with the PFS indicating a low
cost, high margin, long life mining operation delivering a US$482
million NPV over an initial 14 years' life of mine. A DFS is
now being completed with the financial matrix expected to improve
further when finalised in Q2 2025.
How does
Orom-Cross differentiate from other graphite
peers?
Orom-Cross has some of the lowest projected
operating costs in the sector combined with extremely low capital
costs for an operational start-up. When combined these key
factors are a rarity in the graphite market. The Project
already has all major infrastructure in place including roads,
rail, (hydro-electric) power off the national grid, water and
communications, which together lower the capital cost
significantly. If you overlay the high quality of end products
produced this adds yet another layer of differentiation.
The world is transitioning from fossil fuels to
renewables which requires lithium-Ion, sodium and vanadium redox
batteries to store energy produced, and graphite is a
non-replaceable input to all of these. This means that
graphite demand is set to soar with predictions between 2-3 times
current levels by 2030.
Very few graphite projects have all the key
factors highlighted above and missing any one of low operating
costs, low capital costs or high purity of end products can be a
showstopper. As a result, most peer projects will be unable
to transition into sustainable, cost-efficient and profitable
production. Orom-Cross has all these
essential requirements and can become one of only a select few
graphite producers worldwide with the ability to supply graphite
into this accelerated demand.
What is
different about Blencowe's strategy that sets it apart from other
graphite companies?
Blencowe does not believe that selling
graphite concentrate-only
is sufficient to provide the returns necessary to fund a project
into production and/or deliver long term commercial success. There
is a need to include value-adding products such as downstream
processing where graphite is further purified, and where returns
can be maximised.
Blencowe has successfully formed an alliance
with a world-leading spheronised, purified graphite ("SPG")
producer to build and operate an SPG facility in Uganda within a
Joint Venture, to deliver upgraded 99.95% SPG. As one of the
first operations of this kind in the world outside of China, this
proposed facility already has huge interest from OEMs who want to
de-risk their purchase of purified graphite solely coming from
China. This SPG facility will become an offtaker for life for
approximately half of Orom-Cross's output as concentrate and will
be located near to the mine, thus substantially reducing the
transport cost of moving lower value concentrate all the way to the
end user as previously anticipated.
On top of requiring an experienced partner to
succeed, this SPG facility requires abundant low cost power as it
is highly energy intensive, and Uganda provides that; hence another
advantage to locate this facility in-country.
Furthermore, Blencowe will benefit from half of
the profits within the SPG facility as a Joint Venture partner,
providing dramatically improved returns for investors.
This strategy sets Blencowe apart as it will
deliver higher value products and greater returns, and it provides
differentiation from other graphite peers who would struggle to
replicate this elsewhere.
What key
relationships does Blencowe have that sets apart Orom-Cross from
other market participants?
Blencowe received a US$5 million technical
assistance grant from the US Government in September 2023 via its
private sector funding arm, the Development Finance Corporation
("DFC"), to assist with the DFS costs. Blencowe is the first
pre-production graphite company in the world to receive such
support and the credibility DFC provides through its participation
is enormous.
Looking ahead DFC has first rights to provide
the debt funding for Orom-Cross project implementation and Blencowe
is confident that DFC will become its cornerstone funding partner
for production. Recently DFC announced they were providing a
+US$150 million funding facility for Syrah Resources (graphite peer
located in Mozambique) which underlines DFC's ongoing commitment to
support the graphite sector.
In September Blencowe was awarded full
accreditation by the Minerals Security Partnership, an influential,
high level, quasi-Government body that seeks to overcome dependence
on China for all critical minerals via tangible MSP support
programmes. This is a rare and very prestigious award and it
highlights the value of Orom-Cross and its potential role in the
global energy transition ahead.
As noted in the previous question, Blencowe has
created an alliance with one of the largest and most experienced
SPG producers in the world to produce purified graphite within
Uganda. Yet another example of a unique relationship that
underpins the Project's investment thesis.
What is the
funding status of the DFS and how does Blencowe see Orom-Cross
being funded into production?
The DFS strategy has been optimised to
incorporate two important value-adding components, being downstream
processing to further purify graphite beyond concentrate and a
drill programme to increase the current 24.5Mt at 6.0% TC JORC
Standard Resource, to provide important geotechnical information
for mine designs and further infill to add to current
Reserves. These value-adding components are included in the
DFS to maximise the potential value of the Project.
To date the Company has raised ~£5m (including
the most recent £1.6m) for DFS work, on top of the US$5m
(£4m) grant received from the US
Government via their private sector lending arm, the Development
Finance Corporation. At this point US$1.5 million of the DFC
grant funds remain undrawn but will be accessed as DFS work
completes. The latest capital raise included £500,000 from
senior management which is a significant commitment, as was
the £1.2 million in fees taken as shares
by key project partners including the Orom-Cross drillers.
Additionally, the Company is in advanced discussions with selected
strategic investors who have expressed interest in providing
capital to secure exposure to the Project. The Company is
seeking to complete the DFS as soon as possible and move thereafter
to decision to mine.
A combination of debt and equity will fund
Orom-Cross project implementation, with majority as debt. It
is envisaged that once the DFS is completed the DFC will
cornerstone a funding solution via debt and one or more other
financial institutions will combine to deliver the remaining debt
and equity. Discussions are already underway on this with
several interested parties to deliver this strategy.
The unique factors within the Orom-Cross
project as noted in this Q&A, together with the differentiated
strategy and the tier one relationships, will all contribute
towards delivering this funding solution.
For further information please
contact:
Twitter https://twitter.com/BlencoweRes
LinkedIn https://www.linkedin.com/company/72382491/admin/
Background
Orom-Cross Graphite
Project
Orom-Cross is a potential world class graphite
project both by size and end-product quality, with a high component
of more valuable larger coarse flakes within the
deposit.
A 21-year Mining Licence for the project was
issued by the Ugandan Government in 2019 following extensive
historical work on the deposit. Blencowe completed a
successful Pre-Feasibility Study on the Project in July 2022 and is
now within the Definitive Feasibility Study phase as it drives
towards first production.
Orom-Cross presents as a large, shallow
open-pitable deposit, with an initial JORC Indicated & Inferred
Mineral Resource of 24.5Mt @ 6.0% TGC (Total Graphite Content).
This Resource has been defined from only ~2% of the total tenement
area which presents considerable upside potential ahead.
Development of the resource is expected to benefit from a low strip
ratio and free dig operations together with abundant inexpensive
hydro-electric power off the national grid, thereby ensuring low
operating costs. With all major infrastructure available at
or near to site the capital costs will also be relatively low in
comparison to most graphite peers.
In 3Q 2024 Blencowe introduced a Joint Venture
concept with experienced downstream graphite processing partners to
ultimately produce upgraded 99.95% SPG in Uganda. This
strategy has several key advantages plus substantial cost savings
which will assist deliver a world class project once DFS is
completed.