Unique UK Listed Graphite Opportunity

In my last blog on Blencowe I discussed a number of potential re-rating events that should un-fold over the course of 2024 and into 2025. Blencowe really are now close to closing out key milestones that should in my opinion see a significant valuation increase in the stock.

As with many junior mining companies (that actually deliver!), Blencowe has been progressing through what many might think is a ‘boring’ period and as a result the share-price has remained fairly subdued.

This is to be expected, especially in what has been a very difficult market, however, all that ‘boring’ stuff is actually critical to achieving the major milestones that should finally start un-locking value, one of which Blencowe has announced this week.

First off-take MOU Signed for 15,000 Tonnes of Large Flake Graphite per annum

As recently discussed in a X Live Spaces between myself and CEO Mike Ralston, Mike fed back on a successful trip to China and indicated that shareholders should start seeing news on off-take deals. This follows extensive test-work being done by the company and potential off-takers (something by the way Blencowe have taken to the next level!)

As promised, the company announced their first off-take MOU this week which is for the larger flake graphite. The initial agreement is that Blencowe will supply Jilin with 15,000 tonnes of large flake graphite per annum for an initial period of three years.

Jilin is a leading vertically integrated graphite producer and is the parent company of the group that completed the 100 tonne bulk sample for Blencowe in 2023 and is currently undertaking the 600t bulk sample processing program which is nearing completion, they obviously like what they have seen and this is a big ‘rubber stamp‘ for Blencowe’s graphite.

Given the deal is an ‘MOU’ it is not yet binding and as such pricing terms have not yet been stated but here is my take on what this particular deal could be worth, the bread and butter!

Larger flake graphite commands a premium price with prices currently around $1,300 per tonne. Therefore the potential value of this MOU deal alone should be worth around $20M revenue pa (15,000 tonnes x $1,300 per tonne)

Remember this is for 15,000 tonnes of large flake graphite, around 65% of Orom Cross’s large flake output when they are producing around 50,000 tonnes of graphite per annum.

Blencowe expect to secure additional off-take agreements for the remainder of the large flake graphite (around 7,500 tonnes) and other flake sizes in the near future.

When will they become Binding?

Binding agreements will be struck once Blencowe have completed the DFS, that is currently forecast to be completed by end of 2024 or early 2025 so not far away!

Financing will also follow the DFS, and as I have already mentioned in previous blogs, Blencowe already have a ‘LOI’ Letter of Intent, from the US DFC (Development Finance Corporation) to co-fund the Orom Cross Project.

Off-take MOU’s with leading Chinese graphite producers and OEM’s are important as they show financiers that the end-market will buy the product and the fact these decisions are based upon an extensive 600 tonne bulk test program will provide even more comfort to potential financiers like the DFC.

The company have signalled that the market can expect more MOU’s to follow soon. The smaller flake size product that is commonly used in battery anodes requires more end user testing than its larger flake counterparts but the good news is the bulk test-work program is nearing completion and Blencowe have already proven that Orom Cross small flake graphite can be processed into 99.95% SPG

In my opinion and as a holder of stock in Blencowe, I think we really are approaching a valuation up-lift sweet-spot given that we are now seeing the fruits of the test-work translating into MOU’s, DFS nearing completion and a US Bank interested in funding the project. As a speculative investor the Risk v Reward profile is rapidly getting better and better and at some point the stock should re-rate reflecting the increasing reduction in risk.

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