How Black Rock Mining’s graphite strategy is sliding into place at Mahenge

• Graphite has evaded discussion amid 2025’s critical minerals boom
• Black Rock Mining has quietly put the pieces in place at its Mahenge graphite project in Tanzania, lining up offtake and debt funding for its 89,000tpa first module
• With large flake size, Mahenge has the right attributes to be profitable at any stage of the cycle

For all the commentary on critical minerals in the past fortnight, graphite has fallen by the wayside even as a Chinese supply rush has, like lithium, rare earths and other critical minerals, stunted prices.

The challenges for graphite are two-fold. 1) China is the world’s key processing hub, refining more than 90% of the world’s battery grade material. 2) Synthetic graphite – a by-product of fossil fuels refining – can be scaled up to cover shortages in natural graphite production.

Yet security of supply is a key concern for customers. You can’t make an electric vehicle battery without graphite, the main component of the battery anode, and the concentration of the supply chain in China is a major concern for its competitors in the auto market.

Korea and Japan are particularly exposed. Some 14% of Korea’s GDP is derived from carmaking, where its EV segment is facing infiltration from mass market Chinese interlopers like BYD.

Industrial giant POSCO’s moves upstream are instructive. Its most effusive overtures have been to Black Rock Mining (ASX:BKT), an Australian company aiming to develop the Mahenge project in Tanzania.

POSCO has a 19.9% stake in Black Rock, having doubled down last year on an initial US$7.5m investment by contributing US$40m for the first module of the project in exchange for long-term offtake rights.

Ground was broken on early work for Mahenge earlier this month, as Black Rock looks to get ahead of a future shortage in the battery metal.

“China has been able to supply the battery market and that’s not a problem until the day it is a problem,” Black Rock MD John De Vries said.

“So I think the consumers are going well there’s no apparent shortage of graphite … yet.

“And the reason I use that term “yet” is if you jump on the IEA website and you have a look at their 2017 (EV) forecast, they interestingly forecast 60 million units on the road by 2024.

“They missed the target and it was 68m for a seven-year forecast. Within 4% on a seven-year forecast is as good as a bullseye.

“Now they’re saying that needs to go from 10% of vehicles to 30% of vehicles by 2030. That means from Mahenge’s perspective, you need something like 30-odd milling modules. So there’s this huge pent-up demand.”

Staged development

Mahenge certainly won’t have 30 milling modules. The plan is to start with a single 1Mtpa processing train producing 89,000t of concentrate per annum of 95-97% total graphitic content flake graphite – 59% of it above 80 mesh.

Eventually the project will have four modules producing 347,000tpa at steady state over a 26 year mine life, with a US$1.4bn post tax NPV and 36% IRR.

Owned 84% by BKT and 16% by the Tanzanian Government, the first stage will cost US$231m to develop, including the installation of a power line, with a basket graphite price of US$1709/t against an all in sustaining cost of US$518/t.

Even at current subdued prices, a 97% concentrate would generate a basket price of over US$1000/t, doubling the miner’s cost base.

Giving Black Rock a leg up, 95% of the first stage’s volume is already contracted to offtakers including POSCO and two Chinese counterparties.

It is aiming to get ahead of the concerns of graphite investors, who need to keep the faith in an industry that has, historically, “promised a lot and delivered little”.

“We’re taking volume risk off the table, we’ve taken price risk off-the-table. We’ve done a multitude of studies that have been extensively reviewed by a banking syndicate so technically we know that the project is robust,” De Vries said.

“We’ve also crossed that bridge in terms of all the environmental permits and the various permits we need to get moving. So we think we’ve ticked a lot of the risk boxes that have not been previously ticked by projects in the space.

“The other thing where Mahenge stands out is the composition of its baskets, which is the weighted average price.

“A graphite concentrate is classified by different flake sizes. Bigger flakes are worth more. So we’re in a situation where the very fine material is quite competitive at the moment.

“But we’ve got a basket price there that’s well above the cost of production.”

Equity piece

So the technical work is done, the ground has been broken and the project stacks up.

Debt is lined up too. Three southern African credit lenders including the Development Bank of Southern Africa, Industrial Development Corporation of South Africa and Tanzania’s CRDB Bank have committed a combined US$204m to the construction of the first module.

Another US$50m has been tipped in by POSCO, including the US$40m equity investment in Black Rock and a US$10m prepayment facility.

The tenor of the facilities was earlier this year increased from 7.5 to 8.5 years with the first scheduled repayment only due 4.25 years from final investment decision.

That FID now hinges on equity investment, which De Vries says could come in the form of a strategic project level stake.

“It’s like a home loan, you can’t draw on your bank debt until you can demonstrate to your bankers that you’ve got all the funding you need to do the whole project,” De Vries said.

“So we’ve got to complete the equity side before we can access the debt side.”

“It’s a process we’re working on at the moment. We’ve worked on a number of strategies.

“Obviously looking (like) the most value-accretive approach is to do what we call a partner process. And that’s where we bring people into the holding company and these are the strategic or what I’d call product cycle investors.

“They’re investing for more than just the physical product – they’re in there for security of supply. Recently we’re talking to a number of people to come into that space and there are some other normal financing options that we’re working on.”

It’s a work in progress, and the price signal from the graphite market will play a role, but once FID is made product should roll off the line within two years.

Walk first

Strategically speaking, De Vries thinks the decision to stage the development and walk before Black Rock runs will help it avoid the pitfalls of previous graphite developments.

Case in point was the early days of Syrah Resources (ASX:SYR), which opened the world’s largest standalone graphite mine at Balama in Mozambique in 2017.

Price pressure has played havoc, with the company campaign mining at times to match the market. Syrah’s long-term future is now tied to a downstream anode materials plant in Louisiana, tapping US Government funding lines.

Up 95% YTD and bolstered by the Trump Administration’s America first commodities strategy, Syrah remains a significant player.

But when it comes to operating as a pure play graphite miner, De Vries thinks Black Rock is well positioned to learn the lessons of the past – as they often say “the second mouse gets the cheese”.

The aspect of the project De Vries and his team have been working hard to perfect is to ‘right size’ Black Rock’s entry to the market.

“For want of a better word, you can fly an A380 or you can put four 737s up and the 737s are a much more flexible option,” he said.

“This is learning from those who’ve gone before and scaling the business, doing the technical work to make sure that we fully understand what the metallurgy will do and what the product portfolio coming off that will look like.”

De Vries believes the differentiator for Mahenge is in its value proposition.

“We’ve got a basket that is profitable in a current price environment. We are connected to grid power, that supplies power at a fraction of the cost that you would in Australia or in North America,” he said.

“Straight away, we’re at the bottom of the cost curve because we’ve got grid power, we’re at the top of the revenue curve because we’ve lots of large flake.

“And we’ve done the hard work to de-risk this thing … in terms of offtake, in terms of understanding your product portfolio and that’s reflected in our ability to secure bank debt.

“I actually think it is the best project I’ve come across in my 40 odd years.”

Highlighting the conviction of investors in the project, a recent share purchase plan saw applications for triple the $2m of stock available for existing investors, with BKT upping its issuance to $4m to account for demand. That followed a $10m institutional placement in September.

In terms of the broader significance of Mahenge, it’s not about helping the West shun China. Indeed, Black Rock has key customers in the Middle Kingdom. But it is about providing diversity to protect customers against anything from supply disruptions to long term shifts in exchange rates – supply chain 101, as De Vries says.

“I don’t want to sound alarmist against China. We have key customers inside China, but you just need diversity in your portfolio, it’s as simple as that.”

At Stockhead we tell it like it is. While Black Rock Mining is a Stockhead advertiser, it did not sponsor this article.