TIDMBRES
RNS Number : 2999N
Blencowe Resources PLC
29 September 2021
Date: 29 September 2021 Blencowe Resources Plc
("Blencowe" or the "Company")
Orom-Cross PEA Shows Potential for Long Life, Highly Profitable
Graphite Project
Results of internal Preliminary Economic Assessment ("PEA")
demonstrate compelling case for the development of a major new
graphite project, paving the way for a Pre-Feasibility Study.
Highlights
Low operating costs and robust financials for mining
operation:
-- Net Present Value (NPV 8 ) of US$317M / IRR 49% over 13-year life of mine from 2025.
-- Average nameplate production of 75,000tpa graphite sold as
concentrate, with ability to extend this after further
drilling.
-- Life of mine C1 operating cost of US$498/t (CIF Mombasa port)
which would make Orom-Cross one of the lower cost graphite projects
worldwide.
-- An initial capital cost of US$80M, inclusive of 15% contingency.
-- Orom-Cross will generate an average US$40M pa in EBITDA over
life of mine at a weighted average price of US$1,050/t for the full
basket of all end-products sold from 2025 onwards.
-- Cumulative post-tax net cash flow of US$351M generated over initial 13 years life of mine.
-- 4-year payback on capital.
Next Steps:
-- Work will now begin on Pre-Feasibility Study (PFS) using an
independent consultant, including an upgraded JORC Standard
Resource statement.
-- Sales and marketing analysis to source potential off-take partners to commence immediately.
Attractive size and scale of deposit with high quality
end-product:
-- Estimated 2-3 billion tonnes flake graphite deposit at
Orom-Cross, with 16.3Mt already drilled to JORC Resource standard,
covering initial life of mine.
-- High grade 97-98% TGC (Total Graphite Content) concentrate
proven, with low impurities, high recoveries and strong mix of
jumbo/large flakes within overall end-product.
Low risk operation:
-- Shallow, free dig open pit mining operation with low strip ratio.
-- Well established, proven plant design and process to deliver high grade concentrates.
-- Key infrastructure (roads, electricity, water) all available at mine site.
-- Stable jurisdiction to develop a long-term mining venture.
-- 21 year mining licence granted in 2019
Cameron Pearce, Executive Chairman commented;
"We are pleased to announce the first full economic evaluation
of the Orom-Cross graphite project based on prudent assumptions.
The current internal PEA underpins our view that we have a robust
Project that we will now advance to the next stage of development.
We are confident that the Project economics can improve further,
notably by extending the life of mine and/or increasing the levels
of production.
The Project has several key attributes that underpin the
decision to move forward with its development including the ability
to upscale production volumes and/or extend the life of mine; high
quality output via purity of end concentrates and a mix of
different flakes sizes which delivers an excellent weighted average
selling price for the entire basket; plus a low operating cost
helped considerably by shallow free-dig mining and processing that
does not require excessive crushing and grinding.
The Project will provide a range of high quality end-products
that will be sold into what is generally forecast by most leading
analysts as a rapidly growing demand for flake graphite ahead,
particularly driven by electric vehicle expansion.
All of these factors combine to deliver a standout PEA result
that we believe confirms Orom-Cross as one of the premium graphite
projects available worldwide, delivered from one of the safest
locations for a long-term mining venture in Africa.
We still have further work ahead to deliver Orom-Cross into
first production but we are making considerable progress. The next
step is the revised and upgraded JORC Standard Resource by end-2021
which will then underpin our Pre-Feasibility Study in 1H 2022,
where we revisit all of these Project inputs within the model to
build further layers of confidence everywhere."
Blencowe Resources (LSE:BRES ) is pleased to announce the
results of its Preliminary Economic Assessment (PEA) for the
Orom-Cross graphite project located in Uganda. This PEA highlights
the potential to deliver a long-life mining operation with strong
financial returns.
The PEA indicates that Orom-Cross production is economic at
forecast graphite prices and it supports Blencowe's view that the
Project is one of the best undeveloped graphite projects
worldwide.
The PEA was compiled and completed internally by Blencowe's
management team using information and data largely provided by
third party experts, including the JORC Standard Resource
statement, metallurgical test studies, processing and plant design,
operating costs (including logistics), product pricing and sales
and marketing forecast information. This PEA is an internal
document which has not been reviewed or approved by a third party
technical firm as that will be done within the Pre-Feasibility
Study, which is the next stage in the development of this
Project.
Cautionary Statement:
The PEA is a preliminary assessment based on lower accuracy
technical and economic assessments (25-35% range), undertaken
internally by Blencowe management to consider the full mining
operation and to determine the financial viability of the Project
prior to the PFS. The PEA is insufficient to support the estimation
of ore reserves or to provide assurance of an economic development
case at this stage, or to provide certainty that the conclusions of
the PEA will be realised. Further work will be undertaken ahead to
build the confidence in this model and provide additional
reassurance in the outcomes.
The information in the PEA and this RNS that relates to
metallurgical testwork and capital costing is based on information
compiled and reviewed by Mr David Pass, who is a member of the
Australian Institute of Mining and Metallurgy. Mr Pass is an
employee of Battery Limits Pty Ltd. Mr Pass has sufficient
experience relevant to the mineralogy and type of deposit under
consideration and the typical beneficiation thereof to qualify as a
Competent Person a defined by the 2012 Edition of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (the JORC Code, 2012 Edition). The information in the
PEA and this RNS that relates to Mine Reserves, capital and
operating costing is based on information compiled and reviewed by
Mr Iain Wearing, who is a member of the Australian Institute of
Mining and Metallurgy. Mr Wearing is an employee of Blencowe. Mr
Wearing has sufficient experience relevant to the mineralogy and
type of deposit under consideration and the typical operation
thereof to qualify as a Competent Person a defined by the 2012
Edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (the JORC Code, 2012
Edition). Both Mr Wearing and Mr Pass consent to the inclusion in
the PEA and this RNS of the matters based on the reviewed
information in the form and context in which it appears.
This RNS includes statements that are, or may be deemed to be,
"forward-looking statements". Such statements appear in a number of
places and include statements regarding the intentions, beliefs or
current expectations of the Company and the Board concerning, among
other things, results of operations, financial condition, capital
resources, prospects, capital appreciation of the shares of the
Company. By their nature, forward-looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Forward-
looking statements are not guarantees of future performances. The
Company's actual performance, results of operations, financial
condition, distributions to Shareholders and the development of its
financing strategies may differ materially from the forward-looking
statements.
Key Performance Indicators (KPIs)
The following KPI's illustrate the graphite mining operation
considered at Orom-Cross:
KPI Result
Life of Mine (LOM) Initial 13 Further years will be added
years following additional resource
drilling
----------- --------------------------------------
Average Annual Production 75,000tpa End-product as concentrate,
split into four separate mesh
sizes for sales
65% sold into battery metals
market
----------- --------------------------------------
Recovery Rate (end-product) 90% Composite product - per metallurgical
test work
----------- --------------------------------------
Capital Cost, including US$80M Plant, all infrastructure, vehicles
15% contingency and camp
----------- --------------------------------------
C1 Cash Operating US$498/t CIF Mombasa (end-products as
Cost concentrate)
----------- --------------------------------------
Weighted Average Selling US$1,050/t Using 2025 forecast pricing
Price - overall for all four end-products
as assumed sold
----------- --------------------------------------
EBITDA US$40M pa Average pre-tax earnings over
life of mine
----------- --------------------------------------
Cumulative Free Cash US$351M Generated over first 13 years
life of mine, after repayment
of all debt
----------- --------------------------------------
Net Present Value US$317M Pre-tax (8%) , inclusive of
Government royalty
----------- --------------------------------------
IRR 49% Pre-tax (8%) , inclusive of
Government royalty
----------- --------------------------------------
Payback period on 4 years Assumes upfront capital raised
capital invested as debt: equity Split 60% :
40% respectively
----------- --------------------------------------
Orom-Cross Graphite Project
Orom-Cross is a substantial graphite project located in northern
Uganda, 100%-owned by Blencowe Resources since April 2020, with a
21-year Mining License awarded in 2019.
Mining & Processing
The Preliminary Economic Assessment conducted by Blencowe
management assumes an open pit, owner-operated mining operation
using existing resources (Indicated and Inferred) as drilled to
JORC Resource Standard, delivering 1.4Mtpa ore on average for
processing through the plant. Strip ratio is 1: 1.1 which is low.
Plant recoveries are considered at 90% based upon the composite
material most likely to be fed into the plant, as derived from
metallurgical test work conducted by graphite expert SGS in
Toronto. Initial life of mine as contemplated within the PEA is
just 13 years (18Mt total throughput into plant) but this will
almost certainly be extended as Blencowe has only drilled a small
percentage of the total graphite available, and further drilling in
subsequent years will provide additional JORC Resources when
considered necessary.
The plant will be located near to the first two major deposits
of graphite to be mined and t he flowsheet consists of a flash and
rougher flotation stage followed by a primary cleaning circuit with
a polishing mill followed by three stages of cleaner flotation. The
intermediate concentrate is classified and then further upgraded in
secondary cleaning circuits with stirred media mills followed by
cleaner flotation.
The plant will feature separate circuits that ultimately deliver
an average of 75,000tpa, made up from four separate end-products,
being jumbo, large, medium and small flakes size concentrates.
The split of mesh sizes / respective tonnages within each of the
four end-products is illustrated below:
End Product Mesh Size Purity % of End Tonnes pa
(Flake size) % TGC Product End Product
1 Super Jumbo/Jumbo +32 98.1% 13.7% 10,275
+48 98.0%
------------------ ---------- ------- --------- -------------
2 X-Large/Large +80 97.7% 22.5% 16,875
------------------ ---------- ------- --------- -------------
3 Medium +100 97.5% 24.7% 18,525
+150 97.0%
------------------ ---------- ------- --------- -------------
4 Small +200 96.9% 39.2% 29,400
+325 96.6%
-325 95.7%
------------------ ---------- ------- --------- -------------
Total 75,000
------------------ ---------- ------- --------- -------------
Manpower and Management
Orom-Cross will be owner-operated and managed by a workforce
comprising of both national and expatriate personnel. Wherever
possible locals will be employed, but the quality and experience of
senior executives will not be compromised as necessary to ensure
that all objectives are delivered.
A work force of 45 will be on-site at any one time, some of whom
will be fly-in, fly-out from international locations.
Logistics
End-product as concentrate will be bagged at site and loaded
into containers for bulk transport by road through Uganda and
Kenya, to Mombasa port, and thereafter shipped to final
destination(s). Orom-Cross benefits from substantial container
freight entering landlocked Uganda and South Sudan by road
transport that currently returns under-utilised (imports exceed
exports) and as such Blencowe may receive more favourable terms on
backfill transport to port.
It is possible that the standard gauge rail line currently under
construction between Mombasa and Kampala (via Nairobi) will be
completed by anticipated 2025 Orom-Cross start-up date, but the PEA
has not considered this rail option; for now only road transport
has been included. Presently this new rail line is around 60%
completed.
When this rail option is completed it may potentially reduce
logistical costs further, which are currently 18% of the total
operating cost for the end-product as delivered to port (CIF
Mombasa).
Sales and Marketing
Sales and marketing are at a preliminary stage within Orom-Cross
development as specific end-product specifications have only
recently been formalised through metallurgical test studies.
Blencowe has identified several experienced sales and marketing
consultants worldwide and has engaged with each to identify the
most likely channels to locate potential offtake partners. Once end
users are identified the Company will engage with each to assess
their interest in Orom-Cross offtake.
Product pricing has been evaluated using advice and reports
generated by industry accepted graphite experts including Benchmark
Minerals Intelligence (BMI) and UBS, taking into consideration
potential premiums that may be achieved for higher grade
concentrates that Orom-Cross can deliver and future pricing as
forecast from 2025 onwards. Graphite pricing is largely opaque so
forecast prices should be considered with some caution and Blencowe
has chosen to adopt a conservative view on what prices may be
achieved, to ensure reliability and credibility.
It is assumed for the PEA that 100% of the end-product that will
produced at Orom-Cross will be sold, although there are no off-take
agreements currently in place with Blencowe that can confirm this.
As the majority of end-product sold from the Project will be in the
category that is required for the battery metals market (for use
within the anode inside lithium-ion batteries), and as most leading
analysts forecast that demand will outstrip supply in this category
by the 2025, the anticipated Orom-Cross start date, it is assumed
within this PEA that all end-product produced will be sold.
Infrastructure
There are existing roads all the way from the Orom-Cross site
through Uganda/Kenya to Mombasa port. The only section that is not
currently a bituminised road is the final 90kms from Kitgum to
Orom. Blencowe is currently in discussions with the relevant
Ugandan Government departments to assist the Orom-Cross development
by upgrading and bituminising this section of road. Currently
hydro-generated electricity comes into Orom village approximately
4kms from the proposed mine site so the Project will connect into
the grid (with other redundancy power options as backup), and
abundant fresh water is freely available in the area.
All key infrastructure is therefore either in place or readily
available which makes a significant difference in cost savings to
forecast capital expenditure to bring Orom-Cross into
production.
Operating Estimate
Blencowe management has built the PEA model based on these above
assumptions, with an expected life of mine operating cost (C1) of
US$498/t (CIF Mombasa port).
Ongoing capital required to maintain the Project has been
included as well as a 5% royalty to Government of Uganda. A further
amount has also been included for community welfare projects as
Blencowe takes its ESG (environmental, social & governance)
responsibilities seriously.
Operating Item US$ / tonne % Total
Mining 103/t 20.7%
------------- --------
Processing 181/t 36.3%
------------- --------
Transport and logistics 92/t 18.5%
------------- --------
Corporate, admin & personnel
(includes ESG) 65/t 13.1%
------------- --------
Sales commissions 10/t 2.0%
------------- --------
Royalties 47/t 9.4%
------------- --------
Total Cost (C1) US$498/t 100%
------------- --------
Capital Expenditure
The design and capital requirement for the plant has been
derived from external technical firm Battery Limits / Mining Metals
Technology Limited, a company with considerable graphite plant
design experience. A suitable contingency has been applied to
ensure adequate provision for a plant that can deliver 1Mtpa
throughput.
Further capital has been considered for all associated
infrastructure required, including the following non-process
infrastructure that will be constructed to support operations:
-- Power sub-station and power distribution
-- Raw water supply and water treatment
-- Accommodation village
-- Airstrip
-- Offices, stores, and workshops
-- Communications
-- Bulk fuel storage
-- Secondary roads (on-site)
A sustaining capital is included within the operating cost to
ensure necessary maintenance and refurbishment of items where
necessary. Capital costs are estimated to an accuracy of
25-35%.
A breakdown of the key capital cost items is shown below:
Capital Item Cost
(us$ Millions)
Processing Plant/tailings 52
----------------
Site construction/EPCM 15
----------------
Vehicles & equipment 2
----------------
Camp & offices 5
----------------
Additional Resource Drilling 2
----------------
Mobilisation/demob & first fill 3
----------------
Community 1
----------------
TOTAL US$80M
----------------
Note: 15% Contingency included in
all items shown above
----------------
Project Economics
Financial analysis on Orom-Cross has been undertaken using a
discount cash flow model with various sensitivities, and an 8%
discount value has been used for this analysis which is consistent
with current resource model forecasting and future anticipated
rates pertaining to cost of capital.
It is assumed within the PEA that all upfront capital is raised
from both equity and debt (35%: 65%).
A project Net Present Value of US$317M highlights the
considerable value within the initial 13-year Orom-Cross Project
and the IRR of 49% illustrates the attractive return on capital
invested. Payback on all capital employed is four years which is
exceptional as the Orom-Cross Project is ultimately expected to run
for a considerable period beyond this initial 13-year life of mine
as considered.
US$40M pa EBITDA is returned on average over life of mine, with
overall cumulative free cash of US$351M returned over the Project
life of mine.
For further information please contact:
Blencowe Resources Plc www.blencoweresourcesplc.com
Sam Quinn Tel: +44 (0)1624 681 250
info@blencoweresourcesplc.com
Investor Relations Tel: +44 (0) 7891 677 441
Sasha Sethi sasha@flowcomms.com
Brandon Hill Capital Limited Tel: +44 (0)20 3463 5000
Jonathan Evans jonathan.evans@brandonhillcapital.com
First Equity Limited Tel: +44(0)20 7330 1833
Jason Robertson jasonrobertson@firstequitylimited.com
Twitter https://twitter.com/BlencoweRes
LinkedIn https://www.linkedin.com/company/72382491/admin/
Background
Orom-Cross is a potential world class graphite project both by
size and end-product quality, with a high component of more
valuable larger flakes within the deposit. A 21-year Mining Licence
for the project was issued by the Ugandan Government in 2019
following extensive historical work on the deposit and Blencowe is
moving into the studies phase shortly as it drives towards first
production.
Orom-Cross presents as a large, shallow open-pitable deposit,
with a maiden JORC Indicated & Inferred Mineral Resource
deposit of 16.3Mt @ 6.0% Total Graphite Content. Development of the
resource is expected to benefit from a low strip ratio and free dig
operations, thereby ensuring lower operating and capital costs.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
MSCSEAEFAEFSELU
(END) Dow Jones Newswires
September 29, 2021 02:00 ET (06:00 GMT)
Blencowe Resources (LSE:BRES)
Historical Stock Chart
From Jun 2024 to Jul 2024
Blencowe Resources (LSE:BRES)
Historical Stock Chart
From Jul 2023 to Jul 2024
