BlackEarth Minerals NL (ASX:BEM) has strengthened its partnership with India-based company Metachem Manufacturing Company Pvt Ltd by executing a joint venture (JV) agreement to develop an expandable graphite plant in India.
Metachem is a leading producer of expandable graphite and other downstream products, with 20 years of production experience and sales in Europe, Asia and the US.
The two companies plan to secure a large market share of all imports of expandable graphite into Europe, with expansion plans being initiated to capture a greater share of the world market.
Developing this plant will position BlackEarth as the first producer of commercial levels of expandable graphite listed on the ASX.
"Exciting development"
The expandable graphite market is expected to grow in demand as a fire-retardant material while also generating further downstream use in the automotive, electric vehicle and alternative energy sectors, similarly in a state of rapid growth.
“The signing of this JV is an exciting development in the growth of our company. To form this JV with a world leader of expandable graphite production is a wonderful outcome and this event follows many months of discussions between the executive teams our two companies,” BlackEarth managing director Tom Revy said.
“Now that we have signed off on this JV, we will shortly move to our preferred site in India and also conclude the recruitment of senior executives in India to manage the planning, construction and development phase.
“Having an offtake partner prepared to buy all initial production has also given us confidence to move forward with plant expansion plans so that we can increase production and sales over the medium term, whilst minimising operational risk.
“With first year sales projected to be almost A$9 million for the JV, we expect to start receiving a steady and strong cash flow during 2022 which will also contribute to the planned development of our Maniry site in Madagascar; consistent with our initial fast-track to cash flow strategy.”
The signing of an offtake agreement with Grafitbergbau back in June has secured short-term production for the plant, having pre-sold 2,500 tonnes per annum of expandable graphite worth about US$7.5 million.
Strong JV outlook
The estimated revenue of the JV constitutes A$9 million in the first year, ramping up to approximately A$17 million as the partnership fully develops. Plant development plans have begun, with implementation expected in the next three months and production and sales projected to begin in mid-2022.
“We are delighted to have signed this agreement with the team at BlackEarth. Our business has operated successfully for a number of decades and we believe the marketing and industry experience of the BlackEarth team will enable our JV to significantly grow our market share in a number of key markets,” Metachem president, Jayant Pawar said.
“Additionally, partnering with BlackEarth also guarantees the JV a reliable, world class supply of graphite concentrate in the short term and on an ongoing, long term basis.
“The Indian manufacturing world is rapidly growing with interest from businesses globally. We are excited about the prospect for our JV as we grow this business to become a world leader of the supply of downstream graphite products over the decades to come.”
Metachem is an Indian based private company that has been in operations since the 1980s. The company has a number of divisions and is a producer of expandable graphite with graphite concentrate sourced from India and also Madagascar.
The company also produces a range of downstream graphite processed products that are supplied to the Indian domestic market.
Metachem management and technical staff are experienced in the production of a range of graphite downstream products and their industry knowledge and market share is well recognised within India and Internationally.
This plan for a joint venture compliments the existing strong and productive bilateral relationship that exists between Australia and India.
Highly prospective market
Apart from its fire retardant uses, expandable graphite is an important pre-cursor for the manufacture of flexible graphite foils and papers which provide very light weight heat dispersion and shielding properties.
The low density expanded graphite is rolled and compressed into thin flexible sheets which provide high heat, corrosion and compression resistance. Graphite foils are incorporated in many mobile electrical devices to safely disperse heat away from the battery source.
Joint venture agreement
BlackEarth and Metachem have signed an operational JV agreement, to commence plant construction and the production of expandable graphite with planning commenced on site selection, executive recruitment and scheduling for other logistics and development matters.
Key elements of the JV:
- BlackEarth is to source, in conjunction with sales and marketing partner LuxCarbon, high quality graphite concentrate for treatment for the new expandable graphite plant;
- Following completion of its own plant, BlackEarth will provide large and jumbo flake graphite to the JV;
- Each JV partner proposes a 50/50 equity and profit share arrangement with capital expenditure estimated to be US$3-3.5 million in total;
- BlackEarth and LuxCarbon to provide end user and product technical advice to the Metachem operational team;
- BlackEarth will manage sales, marketing and the growth of sales worldwide;
- Estimated initial production to be 2,000-2,500 tonnes per annum growing to 4,000 tonnes, with plans to materially grow production;
- BlackEarth estimates Gross JV Revenue of A$9.0 million per annum in the first year, growing to approximately A$17 million upon production ramp up to 4,000 tonnes per annum;
- Production sites have been identified and appropriate economic, social and environmental conditions have initially been assessed as highly favourable. A decision on a preferred site within the Indian Special Economic Zone (SEZ) will be concluded in the short term; and,
- Company name and branding are being prepared with a detailed announcement due in the short term.