Blencowe Resources PLC (LSE:BRES) told investors it has received a new strategic investment, with Jangada Mines PLC (AIM:JAN) providing £610,000 of a new £750,000 capital raise to fund delivery of a 100-tonne bulk sample of graphite to China from the Orom-Cross project in Uganda.
The investment comes as a “potential strategic party” seeks to conduct its own testing of the Orom-Cross graphite, announced previously this month, ahead of a possible off-take and/or funding arrangement for the project’s development.
As a result of the investment, Jangada's equity stake in Blencowe increases to 9.5% from 2%, with 15.25mln new shares bought at 4p per share, Meanwhile, the company’s two other major investors RAB Capital and JUB Capital also participated in the fundraising taking up the balance in order to maintain their prior interests of 10% and 8.2% respectively.
"I am delighted to welcome Jangada Mines as a new significant shareholder in the company,” said Cameron Pearce, Blencowe executive chair in a statement. “They share our view of the inherent value of Orom-Cross, which has already returned a NPV of US$482mln from a fraction of our broader resource.
“At a time when raising capital for junior resource companies remains difficult, we are delighted to have secured funding sufficient to provide working capital for a year at the PLC level and also enable us to commence the process to deliver a 100 tonne bulk sample to our potential strategic partner in China.”
Pearce noted that "given the substantial disconnect between our market capitalisation and asset value, the focus of the company is to enter strategic transactions at the asset level for material development, thereby minimising shareholder dilution and capturing a fairer reflection of value."
“The company has previously advised it hopes to execute its first asset-level transaction in the current quarter, which is expected to provide sufficient funds to complete the DFS. This is running in parallel with the ongoing discussions with our potential strategic partner in China," he concluded.
Jangada chair Brian McMaster, meanwhile, noted: “The purchase price of 4p per ordinary share values Blencowe at £7.1mln, or approximately US$8mln, prior to its capital raise. This valuation is some 60 times lower than the Net Present Value valuation of US$482M ascribed to Blencowe's Orom-Cross graphite project by the independent third party PFS released earlier this year."
He added: “I believe the purchase has the potential to be a highly accretive investment for Jangada and its shareholders. The demand for graphite is expected to see a dramatic uptick over the coming years with significant supply deficits forecast from 2025 onwards, as the roll-out of electric vehicles accelerates and a number of the planned 300 battery megafactories come online.
“To date, graphite is yet to witness the price movements of other battery metals such as lithium and nickel, despite being the largest component within the anode of lithium-ion batteries. Accordingly, we see further upside potential to the already very attractive margins at Orom-Cross.”