Black Rock has done the hard work ensure Mahenge’s success
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Special Report: Demand for graphite is set to more than double over the next decade, driven by the increased demand for batteries for electric vehicles and stationary storage.
Market forecaster Roskill predicts graphite demand from battery makers will grow by around 25 per cent per cent each year through to 2028 alone.
So what ASX-listed stocks are poised to capitalise on the demand?
Black Rock Mining’s (ASX:BKT) Mahenge project – on track to deliver first concentrate in 2020 — could produce “industry-leading” graphite of up to 99 per cent concentrate.
What’s more is that it’s in it for the long haul. It’s expected the project could produce that quality of graphite for 31 years.
Black Rock chief executive John de Vries says that the fundamental factor to consider about the EV phenomenon is that the quantities of graphite required can be enormous.
“The EV space requires very large orebodies that are scalable to meet that growing demand. If you are going to have a giga battery factory, you need a giga mine. The bit most people miss, is that if you want say, five giga factories, you need an even larger mine, because you can’t tolerate different battery chemistries across your plants,” he says.
“China graphite mines, at the moment, tend to be small orebodies that are not scalable.
“They are also old, tired and quite low grade — which comes with a significant environment cost when refining.”
New producer Syrah Resources has one of the world best orebodies at its mammoth Balama project in Mozambique, but the rush to get into production has caused ongoing problems for the miner.
John de Vries says he wants to ensure Black Rock’s recently completed Definitive Feasibility Study and pilot plant delivers the sort of outcome the sector desperately needs. “The difference is taking our time to do it right and produce a bulletproof DFS.”
Why is a definitive feasibility study important?
Miners typically undertake up to three different studies when examining whether or not a project can be mined economically.
These are – from least to most comprehensive — scoping, preliminary feasibility (PFS), and definitive feasibility (DFS). The latter is sometimes called a bankable feasibility (BFS).
So, what’s the difference between a PFS and a DFS?
Imagine you’re in the market for a new home, Mr de Vries says.
“You look at some show homes and see one with a few features that you like – what you have done there is the equivalent of a Scoping Study,” he says.
“To tie all these features together, you go to an architect, who does the architectural impression. That’s the PFS.
“Then you take these plans to a builder, who may say ‘That’s going to cost you a lot more and take longer’ and helps you find a solution. This is the DFS. Obviously, taking that study to a bank and getting a loan transforms it to a BFS.”
According to Mr de Vries, it’s when companies decide to “build off the architect’s plans” that they run into trouble.
He says Black Rock is doing two key things differently to avoid this problem – building an experienced team capable of helping it transition into a producer and generating enough test data to prove the product’s marketability as early as possible.
In fact, the company’s 90 tonne pilot plant has already put 8 tonnes of product in the hands of potential customers.
“We went out and engaged these customers and asked, ‘What type of graphite product do you want and what quantities are required to suit your needs?’
“It’s surprising how many businesses don’t ever ask their customers what they want.”
Pilot plant strategy
The strategy of operating a pilot plant 10 times larger than any other in the industry at the study stage has paid off handsomely.
Black Rock has just secured the largest offtake of any graphite developer, with cornerstone customer Heilongjiang Bohao Graphite Company – one of China’s biggest vertically integrated graphite processors. A key distinction here is that Heilongjiang Bohao Graphite Company has a demand for graphite today.
“A large pilot plant with 8,000kg of product, supported by strategic product placement allows us to identify and deliver to profitable customers today,” Mr de Vries says. “While the EV thematic will undoubtably drive the future of our mine(s) the Field of Dreams is a fairly risky approach to mine development”
This approach means Black Rock’s just-released DFS study is detailed enough to pass bankable feasibility, Mr de Vries says.
“One of the first questions that arises during financing discussions is ‘What is the quality of the technical work, and do you have offtake? Does it support a banking due diligence? Basically, the same sort of questions you get asked for the home loan, do you have a job, and can you pay for the loan?’
“For us, the answer is yes, it does.”
Black Rock has an ace up its sleeve with Chairman Richard Crookes, who has worked at Macquarie Bank for 12 years, and then at EMR Capital for six years.
As de Vries describes it: “He’s financed several mines in Africa in his career and with the economics of our project is very confident of financing another mine.”