SPG – Why are Blencowe going a step further?

Blencowe are developing their flag-ship Orom-Cross graphite project in Uganda. The project is globally significant and Blencowe have proven through a 600 tonne bulk test programme that they can produce commercial scale high quality graphite concentrate.

This in itself, is a robust project with the PFS showing some great economics such as US$482M NPV, 49% IRR with initial project Capex of just US$62M

Whilst a graphite concentrate mining operation is highly lucrative, especially given Blencowe have a good portion of the larger flake sizes which themselves command premium pricing, the real money to be made is in turning the smaller flakes into the 99.95% uncoated SPG product that is used in lithium-ion batteries, fuel cells and other conductive additives.

In fact, turning the smaller flakes into the uncoated SPG end product would increase its value from c.$600 to $2,500/tonne. This would, in return, offer significantly higher margins.

So what is SPG and how is it produced?

Graphite SPG otherwise know as Spherical Purified Graphite is a refined form of natural flake graphite that is processed to create spherical particles. These particles have several advantageous properties, making them highly sought after, especially in specific industrial applications.

The natural flake graphite concentrate (such as that Blencowe will produce) goes through a three step process to eventually become SPG, Micronization, Spheronization and finally Purification.

The graphite concentrate itself has to exhibit the correct properties to make the above process successful and hence why Blencowe have been putting so much effort in to the testing process.

Producing SPG is highly complex and only a limited number of companies in the world have the expertise and experience to produce this high premium end product. The market is pretty much dominated by China, but thankfully, Blencowe have been working with ‘one of the best’, Qingdao Taida Carbon Co Ltd.

These are the guys that initially did the test-work on a smaller Blencowe graphite sample and successfully produced 99.95% SPG. The product you need for battery anodes.

Now Blencowe have the larger concentrate sample, the same company will now produce a commercial scale sample of SPG. Once the OEM testing is completed by end of the June quarter Orom-Cross will effectively be end product qualified and have the ability to move to off-take agreements for all end products used in batteries. They have already secured their first MOU for larger flake products Blencowe Pens first off-take deal for first 15,000t/pa of large flake graphite

Developing an ‘In-Country’ SPG Facility

As i said earlier, China dominate SPG production worldwide and it requires a high level of expertise. Blencowe having developed some solid relationships with graphite companies such as Jilin and Taida, are planning to include said companies in their in-country SPG strategy which will be beneficial to both.

An in-country SPG operation would deliver other significant benefits:

Blencowe for example, can feed their SPG processing facility directly from Orom-Cross locally avoiding having to ship concentrate around the world. Shipping concentrate around the world increases carbon footprint and ultimately end cost for the SPG product. It would be a major advantage to do all mining and processing in Uganda (vertically integrated) and just export the 99.95% SPG product.

Additionally, mining natural flake graphite and up-scaling this into SPG also has a much lower carbon footprint than the ‘dirty’ production of synthetic graphite.

There are Geo-political issues to consider also, China announced towards the end of last year it would be limiting exports of certain critical minerals such as graphite. In tandem with this, the US have just recently announced 25% tariffs on Chinese natural and synthetic graphite anodes.

You can read more about this in the FT article below, essentially the US are pushing for a non-Chinese supply chain for graphite anodes, a crucial component in electric vehicle batteries. It’s probably no co-incidence therefore that the US DFC have partnered with Blencowe by way of a funding grant for the DFS and LOI for Project Funding!

Lastly and as also mentioned earlier the margins for Blencowe producing an SPG product will be significantly higher than that for graphite concentrate alone and should be transformational for the overall Blencowe project economics!

Summary

Investing in Graphite may seem complex and it is indeed hard to find stand-out opportunities. There are many emerging projects but what differentiates Blencowe from the pack and is something I have now mentioned many times is the end-product pre-qualification testing they have been doing, essentially proving their Orom-Cross graphite at commercial scale.

This is critical to securing binding off-takes and Blencowe are rapidly moving towards that milestone.

Blencowe have also developed key (critical) relationships with both the US and Chinese that I believe will see Orom-Cross and Blencowe become a major name in the graphite space.

The vertical integration (SPG Production) Blencowe are looking at, if they can pull it off, would be the icing on the cake

Still Capped at Just £10m, how long will it be before the market jumps on this opportunity given they are now close to completion of the DFS, signing off-takes for all end product and have a major US finance corporation offering financial support for the project?

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