ASX-listed Tanzanian graphite developer Black Rock Mining and its strategic alliance and development partner, POSCO, are now underway with negotiating a binding investment agreement for the development of the Mahenge graphite project.
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This follows the completion ofall external due diligence activities with POSCO under its strategic alliance and development memorandum of understanding.
Black Rock announced in June 2020, that it had entered into a strategic alliance & development memorandum of understanding with Korean industrial group, POSCO, for the development of the Mahenge graphite project in Tanzania. Both companies were to complete due diligence activities with the objective of entering into a binding investment agreement.
Due diligence completion
POSCO undertook product due diligence by conducting independent performance testing of Mahenge graphite, including spheronizing concentrate to POSCO battery specifications. Anode for battery cell performance testing was prepared from the spheronized graphite, including coating using POSCO’s proprietary intellectual property.
Extended battery performance testing has been completed, confirming anode made from Mahenge graphite meets POSCO reference standards and is suitable for lithium-ion battery anode feedstock.
POSCO has completed external technical, legal and commercial due diligence and will proceed with an internal investment review to determine the scope and nature of any potential support for the development and operation of the Mahenge graphite project.
Binding investment agreement
The parties have now entered into a negotiation period to agree commercial terms to form a binding investment agreement. Under the contemplated agreement it is anticipated that POSCO will make an initial equity investment in Black Rock and elect to take up a long-term offtake agreement for up to 100% of fines (sub #100 mesh). The binding investment agreement will allow for POSCO’s initial equity investment to be constructed on a share price standstill formula based on Black Rock’s share price leading up to the close of trading on the ASX on 20 November 2020 (being the end date of the due diligence period).
“Black Rock Mining is pleased with the official completion of POSCO’s external due diligence and the manner in which our partnership with such a significant global corporation as POSCO is progressing. This outcome advances a clear pathway for the development of the Mahenge graphite project,” says Black Rock Mining MD and CEO John de Vries.
Mahenge project at a glance
The Mahenge graphite project has a JORC-compliant mineral resource estimate of 212 Mt at 7.8% TGC. It also has ore reserves of 70 Mt at 8.5% TGC. The ore reserves support a mine life of up to 350 000 tpa of graphite for a reserve life of 16 years.
Since the release of the mineral resource estimate, the company confirms that it is not aware of any new information or data that materially affects the mineral resources estimate.
In October 2018, the company released a definitive feasibility study (DFS) for the project, which was based on strong customer demand. This was enhanced in July 2019, and demonstrates exceptional financial metrics including:
• Low Capex: Lowest peak capital expenditure of US$116 million for phase one;
• High Margin: AISC margin of 63.1%;
• Low Technical Risk: Substantial pilot plant operations run of 110 t; and
• Superior Economics: IRR of 44.8% with NPV10 of US$1.16bn (A$1.65 billion)
In February 2019, the company announced receipt of its mining licence for the DFS project. In May 2019, the company announced it had substantially allocated planned production with up to 255 000 tpa of graphite committed to sale by year three of production, through pricing framework agreements, which the company is progressing into binding offtake commitments.