Blencowe make progress on securing funding for DFS with potential project funding option in the mix

Blencowe announced last week that its wholly owned Orom-Cross graphite project in Uganda has passed the key project screening test with the US’s Development Finance Corporation that should allow for a binding funding agreement for 50% of the DFS cost.

Blencowe are rapidly progressing the development of their 100% owned Orom-Cross graphite project in Uganda with first production targeted for 2025, just as the graphite deficit is expected to bite driven by the huge increase in demand from but not limited to the EV battery sector.

The company last year delivered a number of key de-risking milestones including a formal JORC Resource of 24.5m tonnes @ 6% TGC (just 2% of overall est. resource) and delivery of a robust PFS which exhibited strong economics including a US$482M NPV, 49% IRR at a US$62M Capex.

The company already hold a 21 year mining lease with full environmental and other approvals in place.

You can read my full research note on Blencowe here

Achieving Project Finance

There aren’t many junior mining companies with potentially world-class projects in terms of quality and scale. Blencowe’s Orom-Cross graphite project is emerging as one, and one of the key hurdles any junior will face is project financing.

To attain said financing requires a number of pre-requisites, a strong experienced management team and a quality Definitive Feasibility Study (“DFS”). You need both to a) provide confidence that a project can be delivered and b) to show that the project stands-up commercially.

Any junior can put together a DFS, the quality of the DFS however is what will ‘make or break’ achieving funding.

This is where Blencowe stands-out, the DFS is already effectively underway and they have demonstrated a clear approach and commitment to getting this key step right. One of the most important aspects then is demonstrating you have the end product that off-takers want and that it meets the quality expected.

This is precisely why Blencowe have initiated a large-scale metallurgical test programme with key Chinese and US partners following award of a landmark export licence permit issued by the Ugandan Government. You can read about this in my last blog Blencowe initiate final metallurgical test work programme following award of export license

Strategic Funding Partner for Orom-Cross

Rather unexpectedly but welcomely, Blencowe announced last week that it hade made a significant step forward in securing DFS and possibly ultimate project finance from the US DFC (Development Finance Corporation), America’s leading development finance institution that partners with the private sector to provide finance solutions for project development in markets deemed as critical.

As we know, graphite falls into this category and the likes of the US are looking for alternatives to reduce reliance upon the ever dominant Chinese.

The announcement is in fact a bit unexpected as I myself had presumed like many that this would be ultimately a solely Chinese lead partnership, however I have touched upon potential US interest in Blencowe in previous blogs given they need to secure reliable sources for critical minerals such as graphite.

The key news is that Orom-Cross has passed the DFC’s key project screening test which pathes the way to securing an initial technical assistance grant to the tune of $4.5m. The company have reported that both the company and the DFC will be looking to move too a formal binding agreement and the grant itself will fund 50% of DFS costs.

Why would the DFC do this? Well as explained, the DFC was set-up to secure critical minerals for the US and as part of the funding deal the DFC would attain right of first refusal to debt fund the project implementation.

This is a powerful message as one could infer that upon a binding agreement and successful DFS, Blencowe would secure project finance via the DFC (I should imagine on the basis that the US would secure all off-take).

Let’s not forget though that at this stage the Chinese are still in the picture so it could be interesting to see how this plays out.

Either way this is a major step-forward for the company and shareholders with plenty of news to come!

You can read the full RNS here

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Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.


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