Unique UK Listed Graphite Opportunity

In my last blog on Blencowe, I discussed their plans for an in-country SPG facility, explaining what an SPG facility actually is and why it would be transformational for Blencowe, significantly increasing sales margins and securing ‘life of mine’ off-take for the Orom-Cross project in Uganda. It’s well worth a read if you don’t know what an SPG facility is and just how significant it would be for the Blencowe investment thesis.

China dominates the production of Spherical Purified Graphite “SPG” with few companies globally able to compete. The likes of Syrah are looking at developing an SPG facility in the US but it’s early days and requires expertise not easy to come by.

This is why Blencowe’s news last week of an MOU signed with two prominant SPG partners is hugely significant, not just for Blencowe and investors, but for the West and Other regions looking to navigate away from China’s dominance and especially as mentioned in my last blog the growing geo-political tensions whereby China are now limiting the export of graphite and that being compounded by the US imposing 25% tariffs on Chinese natural and synthetic anodes.

The race is on for a non-chinese anode supply chain and Blencowe are planning just that.

Before I briefly cover the details of the MOU, it’s also worth noting, Blencowe put out some other DFS news which seemed to skip right by the market but is sterling progress towards completion of the DFS.

Metallurgical Testing Completion & SPG Production

Blencowe have now completed the 600 tonne commercial scale test-work programme. I’ve not seen any other pre-qualification test-work done at this scale and it confirms Orom-Cross can deliver commercial scale graphite concentrate, furthermore Blencowe have produced a large volume of battery-coated SPG from Orom-Cross which has now been shipped to potential tier-1 off-takers.

Water Borefield Completion

Critical for mining is sourcing water, Blencowe have now completed the water-supply borefield and not only that, the company have ensured a sustainable water supply for the local school and clinic as part of their social commitment.

ESG

As I’ve mentioned before, critical to securing off-take is ESG compliance and the company have received successful certification of Environmental and Social Governance (“ESG”), policies and procedures.

MOU to Pioneer in-country SPG Facility

Blencowe over the last couple of years have been working closely with and nurturing relationships with some of the top Chinese players in the graphite space. This lead to last weeks announcement of MOU’s signed with two leading graphite companies.

You may think an MOU doesn’t mean much by itself, but companies such as those that Blencowe plan to partner with don’t enter into them unless there is clear intent and benefit to them

The MOU’s are with a Singaporean graphite sales and marketing specialist Triessence Limited (“Triessence”) and a leading Asian SPG and Anode material producer (“SPG Partner”), the latter who cannot be currently named due to NDA.

With Blencowe striking such relationships, the support form the US DFC in terms of funding and the fantastic relationship Blencowe have with the Ugandan Government, the development of an in-country SPG Facility looks more likely than ever and it would be one of very few SPG facilities outside of China meeting that objective of a non-Chinese anode supply chain.

It’s quite remarkable that the market has not jumped on this story yet given the relationships Blencowe have, the continuous de-risking they have done such as the huge test-work programme that has proven-up their product and the fact that the US DFC (Development Finance Corporation have already provided an LOI (Letter of Intent) to significantly part-fund the Capex for Orom-Cross.

I’m sure if you wound the market back 5 years ago. the consistent news and delivery from the company would see them trading at closer to £50M Market Cap (over 5x that today), given a number of peers are trading multiples of Blencowe’s valuation just as a planned concentrate producer.

Graphite is a challenging space, I make no bones about it, but the Orom-Cross project stacks up in its own right as a graphite concentrate producing mine. Blencowe Management however are seizing a bigger opportunity to go one-step further that should see them with a combined vertically integrated graphite offering that will allow them to tap into the much higher margins that can be gained from SPG production, not to mention create a life of mine off-take facility a few hundred kilometres away from the mine removing the cost of shipping concentrate around the globe.

The market will ‘get this’ soon and value will out in my opinion. Until then I’ll continue decipher the news flow in my blogs and watch with great interest as the DFS is completed, they secure binding off-take agreements and project funding all of which should lead to a consistent re-rate in the run up to production in a couple of years!

You can find out more on Blencowe’s Orom-Cross Graphite project in my original research note or by visiting their website.