BlackEarth’s expandable graphite JV to deliver near-term cash flow

BlackEarth has executed its key expandable graphite joint venture with India’s Metachem Manufacturing Company that could deliver cash flow within a year.

Under the agreement, the partners will set up an expandable graphite plant in India with initial production of between 2,000 tonnes to 2,500 tonnes per annum that will increase to 4,000tpa with plans for further material growth.

BlackEarth Minerals (ASX:BEM) expects production and sales to begin in the middle of 2022, delivering gross revenue of $9m in the first year before ramping up to $17m once production hits 4,000tpa.

This will establish the company as the first ASX-listed commercial producer of expandable graphite, which has a range of uses as a fire retardant material as well as in the automotive, electric vehicle and alternative energy sectors.

An offtake agreement for downstream graphite products is already in place with Austria’s Grafitbergbau Kaisersberg.

“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 of our two companies,” 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 $9m 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.”

Metachem president Jayant Pawar said that partnering with BlackEarth guaranteed the JV with 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,” he added.

Expandable graphite JV and demand

Under the agreement, both partners will split equity and profits for the plant, which has estimated Capex of between US$3m to US$3.5m.

BlackEarth and its sales and marketing partner LuxCarbon will be responsible for sourcing high quality graphite concentrate for the plant.

Once its Maniry processing plant is completed, the company will then provide large and jumbo flake graphite to the JV.

BlackEarth Minerals — Expandable graphite demand and growth. Pic: Benchmark Mineral Intelligence

Demand for expandable graphite is expected to keep increasing with about 35% of the material being processed into fire retardants.

The remaining product is processed into flexible graphite which is the precursor to end products such as graphite foils and papers that provide very lightweight heat dispersion and shielding properties.

Rapid demand growth is also forecast due to the increasing use of high energy density batteries in mobile devices.

This article was developed in collaboration with BlackEarth Minerals, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.