London-listed emerging graphite miner Blencowe Resources has responded to shareholder questions following a capital raise of £1.6-million to fund the completion of a definitive feasibility study (DFS) on the Orom-Cross project, in Uganda.

The company aims to complete the DFS by the second quarter of next year.

Orom-Cross contains between two- and three-billion tonnes of graphite, which is mostly based near surface and one of the largest deposits of graphite globally.

The majority of the material is jumbo or large-flake graphite, which is at the high value end of the market.

More specifically, the resource currently comprises 24.5-million tonnes, grading 6% total carbon based on only 2% of the total deposit drilled to date, which means further drilling conducted in future can incrementally increase the resource size.

Blencowe owns 100% of the project and has a 21-year mining licence in place, as well as all the necessary permits, approvals and community agreements to bring Orom-Cross into production.

The project has already attracted a $5-million grant from the US government through the Development Finance Corporation to assist with the DFS costs.

A combination of debt and equity will fund Orom-Cross project implementation, with the majority being debt financing. 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 under way on this with several interested parties to deliver this strategy.

Moreover, Blencowe says Uganda is a stable jurisdiction with attractive tax incentives and strong government support for long-term mining projects.

Commenting on the market, the company says 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. Orom-Cross will play a key role in fulfilling that demand in future, it states.

The world is transitioning from fossil fuels to renewables which requires lithium-ion, sodium and vanadium redox batteries to store energy, and graphite is a non-replaceable input to all of these. This means that graphite demand is set to soar, with predictions of between two to three times current levels by 2030.

EXPLORATION EFFORTS

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. 

More than 6 000 m of drilling have been completed in two phases with a further programme now under way.

Significant metallurgical testwork 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 t of raw material followed by a sample of 600 t – to become pre-qualified, as well as to provide substantial samples of end products to original-equipment manufacturers (OEMs).

This critical step to obtaining offtake agreements and successful bulk scale testing has allowed the company to now transition to memoranda of understanding and sale agreements.

The prefeasibility study on the project indicates a low-cost, high-margin and long-life mining operation delivering a $482-million net present value over an initial 14-year mine life.

DEPOSIT DIFFERENTIATION

Orom-Cross has some of the lowest projected operating costs in the sector combined with extremely low capital costs for an operational startup. 

When combined, these key factors are a rarity in the graphite market, says Blencowe. 

The project already has all major infrastructure in place including roads, rail, hydroelectric power off the national grid, water and communications, which all lower the capital cost significantly.

“If you overlay the high quality of end products produced this adds yet another layer of differentiation,” Blencowe says.

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.

Moreover, 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 for the company 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 spheronised purified graphite (SPG) producer to build and operate an SPG facility in Uganda within a joint venture (JV), 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 about 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 JV 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.

Another factor underpinning the future success of the company is its partnership with one of the largest and most experienced spherical graphite producers in the world to produce purified graphite within Uganda.

In September this year, 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 through tangible 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,” Blencowe states.

Meanwhile, Blencowe says its 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 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.