Research house First Equity has mined the data generated from the preliminary economic assessment (PEA) of Blencowe Resources PLC (LSE:BRES)'s graphite project and puts a valuation on the business orders of magnitude higher than that ascribed to it by the market.
The PEA calculated the net present value of the Orom-Cross graphite property in Uganda to be £240mln. The document also flagged up the low operating costs and the investment required to get Orom up and running - circa £60mln.
First Equity then put the figures through its filter. And even after a conservative discounting process, the estimated value of the putative mine and by extension Blencowe itself is put at £43mln or 27p a share.
To put that in perspective, the share price is currently 4.3p.
“We believe a significant market re-rating awaits Blencowe Resources, as investors begin to appreciate the size and scale of the low-cost project being developed and its importance in feeding the EV [electric vehicle] market with essential battery grade graphite,” analyst Jason Robertson says in his research note.
Blencowe bought the Orom-Cross property in April last year, and it says the early-stage exploration work points to “considerable graphite deposit”.
Estimated to stretch over some 19 kilometres in length with a 2-kilometre width, the potential resource is shallow and contains up to 75% as jumbo-large flake. Usually, the bigger flake the better in graphite mining.
Independent consultants are currently compiling a pre-feasibility (PFS) that should also include an upgraded JORC resource statement. A drill programme is targeting a 20mln tonne resource.
“This may improve the current project net present numbers and help us reduce the development and resource risk parameters in our calculations to thereby improve the price target valuation,” analyst Robertson said.