TIDMBRES
RNS Number : 3504C
Blencowe Resources PLC
22 February 2022
22 February 2022
Blencowe Resources Plc
("Blencowe" or the "Company")
Blencowe Acquires Nickel Sulphide Project in Uganda
Blencowe Acquires Right to Earn-into Highly Prospective
Akelikongo Nickel Sulphide and Copper Project ("Project") located
near to existing Orom-Cross Project in Northern Uganda
Akelikongo further enhances emerging portfolio of Battery Metals
Minerals
Highlights
-- Acquisition represents a very exciting opportunity for
Blencowe to add a highly prospective nickel sulphide project to its
existing world class Orom-Cross graphite project in Uganda
-- The Project was previously jointly owned by Rio Tinto and ASX
listed Sipa Resources within a JV until May 2020.
-- US$15 million previously spent by JV partners on nickel and copper exploration.
-- 19,000m of diamond, RC and RAB drilling completed.
-- Continuous mineralisation over 800m strike within massive sulphides already established.
-- Further airborne electromagnetic (EM) and downhole EM work
has been planned to further test the identified anomalies as well
as proximal targets.
-- Phase 1 work funded from existing cash resources.
-- Akelikongo is located approximately 100kms from the existing
Orom-Cross graphite project which has potential for significant
operational synergies.
-- Addition of a highly prospective nickel sulphide project into
widely predicted and emerging nickel supply shortfalls is
considered highly advantageous for Blencowe's portfolio.
Strategy to Enhance Battery Metals Portfolio
Blencowe Resources Plc (LSE: BRES) is pleased to announce the
addition of a highly prospective nickel sulphide and copper project
("Akelikongo" or the "Project") to complement its existing
high-grade graphite project in Uganda.
This Project underlines Blencowe's ambition to become a
diversified producer of high-quality source materials for the
battery metals industry into the future, mining these within a safe
jurisdiction from which to successfully develop long term resource
assets.
Nickel is another critical input within the lithium-ion
("Li-ion") battery, being an essential metal within the cathode.
The most common Li-ion batteries are a Nickel Cobalt Aluminium
(NCA) which uses 80% nickel, and the Nickel Manganese Cobalt (NMC)
which uses 33% nickel (however newer formulations of the NMC are
using up to 80% nickel). A single Tesla battery uses approximately
30kgs of battery grade nickel in addition to 50kgs of graphite.
Although both oxide and sulphide ores can be converted into
class 1 nickel for use in batteries, processing of sulphide ores,
as found at Akelikongo, is technologically much easier and cheaper.
Nickel laterites (oxides) are the more dominant ore type in most
recent major nickel discoveries and sulphides are much rarer.
Processing nickel laterite ore into battery grade nickel sulphate
can be achieved using a high-pressure acid leach process ("HPAC")
but the economic feasibility of this remains questionable, as aside
from high operating costs it comes with environmental concerns.
This makes nickel sulphide deposits increasingly more valuable
ahead.
Cameron Pearce, Blencowe's Executive Chairman commented;
"Akelikongo represents a very exciting and low cost entry for
Blencowe to add a highly prospective nickel sulphide project to our
existing advanced graphite project at Orom Cross. Nickel is one of
the most sought after metals at the moment and demand is set to
soar even higher over the next decade.
The structure of the transaction means we are acquiring a nickel
discovery with historic spend of US$15 million for just $1.5
million in deferred share consideration, instead ensuring our cash
is deployed in advancing the asset and unlocking incremental
value.
We believe graphite and nickel have many synergies at a higher
level as both are key Li-ion battery metals and both will be in
significant demand by battery producers for electric vehicles
("EVs") moving forward, hence the opportunity to develop two such
projects in tandem is very appealing. Furthermore, we can see a
number of synergies at the operational level based on the two
projects being located near to one another."
He added "The EV market is continuing its rapid expansion and we
are seeing huge investments being made by substantial companies at
various different levels within the full EV product cycle as they
move to gain lost ground on the market leaders. We have seen
significant prices rise in all battery metals in 2021 and this is
forecast to continue ahead. We are also seeing a philosophical
trend towards less reliance on China as the dominant source of most
EV components, and a paradigm shift where manufacturers are
prepared to offer incentives to move further up the supply chain to
secure critical offtake.
All this bodes well for Blencowe as we continue to position
ourselves ahead as a major supplier of key battery metals".
Akelikongo Project
Akelikongo is considered a highly prospective early-stage nickel
sulphide exploration project located in Northern Uganda, near to
the town of Kitgum which is the regional centre near to where
Blencowe's existing Orom Cross graphite project is located. The two
projects are highly synergistic in terms of their proximity and
operations will be from the current Blencowe office in Kitgum.
Akelikongo has 112 sq km of granted exploration license and the
project comes with considerable data from previous work conducted
by the vendors within their Joint Venture.
A Joint Venture agreement was formed between Sipa Resources
("Sipa" or "Vendor") and Rio Tinto in August 2018 where the latter
company agreed to spend into the project, seeking a material nickel
sulphide deposit. In total nearly 19,000m of regional drilling has
been conducted by the parties over the past five years. The most
prospective of all the work completed to date has been at
Akelikongo, where three lenses at various depths have already been
identified, with EM (electromagnetic) work and drilling both
identifying massive sulphides.
Approximately US$15 million has been spent to date understanding
the geology, geochemistry and the geophysics within the Akelikongo
tenement and the local region, and then drilling the most
prospective areas. This work will help Blencowe to focus its own
efforts into work programmes that it believes will deliver the most
value ahead.
Other nickel targets were identified in the regional programme
around Akelikongo but have yet to be explored in detail. Rio Tinto
exited the JV in 2020 when the price of nickel was $12,000/tonne
versus $24,000/tonne today. Blencowe believes the main target,
Akelikongo, has sufficient exploration potential to become a nickel
project in its own right and it will focus its efforts there to
delineate higher grade and thicker intercepts of nickel and copper
mineralisation going forward.
The regional exploration targets also warrant additional
exploration.
Three nickel mineralised lenses have been identified based on
detailed examination of cross-sections, long-sections, level plans
and visualisation of data in 3-D mineral exploration software. The
mineralised lenses have an average grade of 0.37% Ni and 0.12% Cu
and thicknesses range from several meters to 25 meters.
Shallow intercepts within the massive sulphides include:
-- 41m at 0.5% Ni and 0.1% Cu, from 34m below surface
-- 11m at 0.42% Ni and 0.12% Cu, from 38m
-- 8m at 0.73% Ni and 0.12% Cu (includes 3m at 1.1% Ni), from 33m
-- 22m at 0.36% Ni and 0.13% Cu, from surface
Forward Exploration Program
Blencowe will undertake the following exploration program at
Akelikongo during 2022:
Phase One (1H 2022)
-- Down hole EM ("DHEM") on the holes that have not been read;
-- EM at surface to the northwest of Akelikongo to trace the
mineralisation down-plunge and along strike;
-- Airborne EM over regional targets identified;
Phase Two (2H 2022)
-- Diamond drilling along-strike and down-plunge of the identified mineralisation; and
-- Diamond drilling of targets identified from the DHEM and the EM surveys.
This program above fits neatly into the consideration milestones
that have been set for Blencowe to earn into the project, both in
terms of cost and timings.
Acquisition Structure
The Company will acquire 100% of the Project through an earn-in
("Earn-In") over four separate milestones. The Earn-In will require
the Company to spend a maximum of US$2.75m over 3 years on
exploration on the Project and issue US$1.5m of consideration
shares to the Vendors over four success related milestones in that
period. The Vendors will retain a Net Smelter Royalty ("NSR") of
1.5% on the Project subject to successful completion of all four
milestones.
The Vendor has agreed to a 6-month lock up on the receipt of
each tranche of consideration shares.
Milestone Consideration Cumulative
Earn in
US$250,000 spent on Project over first
six months to earn first 20%. If successful
and Blencowe moves to Stage 2 thereafter,
US$350,000 of consideration shares
1 issued to Vendors. 20%
------------------------------------------------ -----------
2 A further US$500,000 spent on the Project 50%
over the next six months to earn an
additional 30%. If Blencowe moves to
Stage 3 thereafter, additional US$500,000
of consideration shares issued to Vendors.
------------------------------------------------ -----------
3 A further US$1m spent on the Project 80%
over the next 12 months to earn a further
30%. If Blencowe moves to Stage 4 thereafter,
additional US$650,000 of consideration
shares issued to Vendors.
------------------------------------------------ -----------
4 A further US$1m spent on the Project 100%
over next 12 months to earn the remaining
20%.
------------------------------------------------ -----------
The consideration shares will be priced at the time the decision
is made to progress the Earn-In through to the next milestone, with
exploration results meriting further continuation. On that basis,
the Company believes it will mitigate shareholder dilution as any
future issue of consideration shares will reflect the success
achieved from exploration at the Project.
The Directors believe this is the best structure to develop an
exploration project as it mitigates any requirement to commit cash
and/or issue further consideration shares until the exploration
program has proven to be successful at each phase.
Funding
The work program of US$250,000 ( GBP 175,000) for phase one at
Akelikongo will be met from existing cash resources following the
Company's recent GBP2,000,000 capital raise in December 2021. The
Company anticipates that the US$500,000 ( GBP 350,000) work
programme in phase two can be funded from the exercise of
outstanding warrants, given this expenditure is only likely to be
incurred based on exploration success in phase one.
Project Synergies
Blencowe is already committed to developing one significant
battery metals project in Uganda, being the Orom-Cross graphite
project in the north-east of the country. The Company believes that
the demand for source metals/minerals used in the lithium-ion
battery will rise exponentially over the next decade, and we have
already seen signs of this in the past year via increased demand
for lithium, cobalt, nickel, copper and graphite. Forecasts for
each of these metals show massive supply shortfalls emerging ahead
which are anticipated to push prices even higher.
Adding a highly prospective nickel-copper sulphide project into
the Blencowe emerging portfolio is therefore considered very
advantageous and the Earn-In Agreement provides the Company with a
staged approach to develop Akelikongo further; but only to pay
tranches of shares as consideration to the vendor at each
inflection point if and when the project fulfils set targets. The
majority of consideration shares are back-ended and will therefore
only be paid if the project delivers exploration success ahead and
if/when the Company elects to progress through each phase. Blencowe
would ultimately target the creation of a Ugandan production hub
for two of the most critical battery metal products, however the
Company recognises there is still further work required to achieve
this goal.
Developing a second battery metal project in the near-environs
to Orom-Cross also has major synergistic advantages in that the
same in-country management and local relationships can work for
both assets, and being located near to each other it will be
possible to work them in tandem.
Blencowe has also ensured that the commitment to expenditure for
Akelikongo takes into consideration the continued work programmes
already in place for Orom-Cross to deliver its key targets so as
not to compromise on the excellent progress made there to date. The
Pre-Feasibility Study for Orom-Cross is underway and expected to be
completed by mid-year, and the Company expects to release an
updated JORC Resource estimate in the near term.
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
Tavira Securities Tel: +44 (0)20 7100 5100
Jonathan Evans jonathan.evans@tavirasecurities.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 Graphite Project
Orom-Cross is a potential world class graphite project both by
size and end-product quality, with a high component of more
valuable larger coarse 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 through the Feasibility Study phase as it drives
towards first production targeted for 2023.
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.
Akelikongo Nickel Project
Akelikongo is a highly prospective nickel sulphide exploration
project that has previously had considerable work completed by Rio
Tinto and Sipa to establish three mineralised lenses to date. It
represents an opportunity for Blencowe to add further value through
a targeted work programme that will seek to delineate higher grade
and thicker intercepts of nickel.
Nickel sulphide deposits are rare and valuable and the prospect
of further exploration success gives Blencowe suitable incentive to
develop this asset under a structured earn-in agreement, whereby
100% of the asset can ultimately be acquired for US$1.5m, all
payable in shares.
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