Blackstone Minerals Ltd (ASX:BSX, OTCQX:BLSTF) has been initiated by investment and wealth manager Shaw and Partners with a buy recommendation and a price target of A$1.90 per share, implying a four-fold upside from the current share price of 46 cents.
The company owns a 90% Interest in the Ta Khoa Nickel-Cu-PGE Project in the Son La Province of Vietnam.
Blackstone has moved to a Definite Feasibility Study and construction of a pilot plant and is aiming for a Final Investment Decision in 2022.
The following is an extract from the initiation report.
Event
We initiate coverage on Blackstone Minerals with a Buy recommendation and A$1.90ps price target. Blackstone is a battery metals company building an integrate upstream and downstream processing business in Vietnam to produce Nickel-Cobalt-Manganese (NCM) battery precursor products for Asia's lithium-Ion battery industry.
The company's key relationships are with globally relevant, tier 1 Korean battery manufacturers (i.e. EcoPro). We assume a Final Investment Decision 2HCY22 and a phased ramp-up of operations, with first production in CY24 and steady state in CY25.
Highlights
- Blackstone owns a 90% Interest in the Ta Khoa Nickel-Cu-PGE Project. The Ta Khoa Project is located 160km west of Hanoi in the Son La Province of Vietnam. The project includes the Ban Phuc nickel mine, which operated from 2013 to 2016 but is now on care and maintenance. Blackstone intends to restart and expand the mining operations at Ta Khoa and is currently completing an Upstream Business Unit Pre-Feasibility Study (PFS).
- Blackstone has leveraged Its ownership of the nickel resources into a partnership with some of South Korea's largest battery metals companies including EcoPro to construct a downstream processing business. Blackstone recently released a Downstream Business Unit PFS for a 400ktpa refinery with an NPV of US$2.01b and an IRR of 67% that will produce 85.6ktpa of NCM811 precursor.
- Our base case model of the Upstream Business Unit has a post-tax NPV of US$193m and an IRR of 25%. Our model assumes;
1. Open cut mine pit requiring a development capital expenditure of US$250m.
2. 11-year life-of-mine at-200kt/yr Ni/Co concentrate production from an ore fed at 6Mtpa and a head grade of 0.5% Ni / 0.01% Co / 0.06% Cu.
3. All-in average life-of-mine sustaining costs of ~US$4.30/lb Ni (2021 Real).
- Our model of the Downstream Business Unit is broadly consistent with the PFS and has an NPV of-US$1,400m, IRR of 52% and development capex of US$490m. Key features include;
1. A 11-year refinery life producing ~88ktpa NCM811 battery precursor product sold at a 120% payability. This is based off the existing mine-life and potential feedstock sourcing agreements but is likely to extend well beyond 10 years.
2. Refinery feed approximately 50/50 from Ta Khoa and third-party sources purchased at a 75% payability.
3. All-in average sustaining costs of ~US$11,000/t NCM811 (2021 Real).
- Key features of the project that make the economics so attractive are the relatively low capital intensity, the premium product, access to low-cost hydropower, tax advantages and low cost labour.
- Blackstone has moved to a Definite Feasibility Study and construction of a pilot plant and is aiming for a Final Investment Decision in 2022.
Recommendation
We initiate coverage on Blackstone Minerals with a Buy recommendation and A$1.90ps price target. We have set our price target at a fully diluted DCF valuation of a ~6Mtpa open pit mine and 400ktpa nickel concentrate refinery. The company is targeting a Final Investment Decision in 2HCY22, following construction of a pilot plant, Definitive Feasibility Studies, and financing.