Black Rock Mining (ASX:BKT) has confirmed with results from its pre-feasibility study, the high margin, low capex potential of its 100% owned Mahenge Graphite Mine located in Tanzania.
The study is based on mining and milling 61.1 million tonnes at an average grade of 8.9% total graphitic carbon (TGC) for a life of mine production of 5.1 million tonnes of concentrate.
The operation has a net present value (NPV) of US$624 million and internal rate of return (IRR) of 48.2%.
John de Vrie, interim CEO, commented: “The pre-feasibility study builds on a compelling scoping study and reconfirms the Mahenge Graphite Project’s potential to be a globally significant graphite producer, with industry leading low capex, and sustained high margins.
“The mine metrics are driven by low strip ratios and high grade ore that can be relatively simply converted into large high purity, premium flake concentrates.”
PFS results
A summary of the pre-feasibility study (PFS) results includes:
- Post-tax unlevered project NPV of US$624 million;
- Post-tax unlevered IRR of 48.2%;
- EBITDA in first full year of production US$135 million at 66% margin;
- 32-year life of mine with average grade of 8.9% TGC;
- Ore Reserve declared of 48.3 million tonnes grading 8.7%;
- Pre-production capex estimated at US$90.1 million including a 15% contingency; and
- Total capex estimated at US$159 million including 15% contingency.
Black Rock is now moving towards commencing a definitive feasibility study (DFS).
With a successful DFS and associated financing, construction could commence in 2018 with first production in 2019.
Mahenge
Black Rock owns graphite tenure in the Mahenge region, Tanzania, a country that hosts world‐class graphite mineralisation.
The Mahenge project resource is comprised of three deposits – Ulanzi, Epanko and Cascade and is one of the largest JORC graphite resources globally.
The total resource stands at 203 million tonnes at 7.8% TGC for 15.9 million tonnes of contained graphite.
Discussions are now underway with potential partners for financing, offtake, product development and sales and marketing.
The commencement of construction remains on track for 2018 with initial production in 2019.
Analysis
The PFS results confirm Black Rock now owns 100% of a project valued at many multiples of its current market cap.
Black Rock shares are currently trading at A$0.11 giving it a market cap of A$40 million, which represents a fraction of the PFS valuation of US$624 million (~A$825 million).
This project value will continue to be de-risked by a planned DFS and possible optimisations to the PFS.
The potential future Mahenge mine offers a unique combination of low pre-preproduction capex, sustained bottom quartile operating costs and a premium high purity large flake product.
These qualities are hard to come by all in a single project and will support Black Rock significantly when securing project financing.
The company is now completing negotiations with DFS, and construction partners, and expects to commence work quickly on optimising the PFS and commencing detailed engineering with a view to commencing construction in 2018.
As Black Rock continues to advance through the process from explorer to developer, it will continue to unlock more of the project’s value.