Black Rock Mining’s Mahenge Project in Tanzania hosts a long life graphite resource and is one of the largest JORC-compliant natural flake graphite resources in the world, with a mineral resource estimate of 212 million tonnes (Mt) at 7.8% total graphitic carbon (TGC) content and a reserve of 70 Mt at 8.5% TGC. The ASX-listed company started down the road to production back in 2016 with a scoping study and metallurgical testing at Mahenge, which delivered world first graphite purity results above 99%. A pre-feasibility study was published in the following year before a 2018 pilot plant run on graphite concentrate from Mahenge replicated the firm’s previous TGC purity results on a larger scale.
The company then released its definitive feasibility study (DFS) in October 2018 which envisaged a three module production schedule generating unlevered NPV10 (post-tax and post free carried interest) of US$895 million and 42.80% IRR from a forecast capex on module one of $115 million.
The pilot plant results and DFS helped Black Rock secure its first offtake customers by the end of the year, and at the start of 2019 the company was handed two mining licences by the Tanzanian government for the development of the project. Most recently, Black Rock completed an additional pilot plant run in China and published an enhanced definitive feasibility study (eDFS).
The eDFS was completed in response to increased product demand and feedback from customers for a more aggressive production schedule. The study incorporates a fourth 85,000 tonne production module taking total steady state production up to 340-350,000 tonnes per year (tpy).
The addition of a fourth production module has no material change to the forecast capex for the first three phases. However, it will lift the overall revenues with a revised project NPV10 of US$1.16 billion, an increase of 30% over the original three module DFS.
Altering the approach
The eDFS also necessitates a slight alteration to Black Rock’s phased development strategy, which is now called ‘crawl, walk, run, sprint’. Under this strategy, each module will come online annually after the first module, rather than every two years as stated in the original DFS.
Black Rock’s managing director and CEO John de Vries explains how the foundations of the eDFS were laid by the success of the pilot plant runs in Canada and China, which demonstrated to customers the quality of Mahenge graphite.
“When we distributed samples from the pilot plant to customers, two things happened: They fell over themselves because they hadn’t seen natural flake graphite anywhere near as good as this previously. Secondly, nobody quite believed that we produced it by flotation.
“We wanted to show further transparency in the Chinese market, with regards to our product. So, we shipped a second 18 tonnes sample to run through a pilot plant in China, which turned into a real game-changer. Once we got through that, customers began to sign up to our pricing framework.
“We then went and did the eDFS, asking the questions how big can we go and how quickly can we get there? We found we could get four modules into the known orebody, with the additional mill feed to be sourced from the development of a third pit at the Epanko deposit.”
At this point, it’s important to note that Black Rock has only included 5 km of the 60 km strike at Mahenge in the resource, and the company is confident that further exploration will result in the discovery of more graphite.
“There’s no shortage of graphite and importantly the stuff is particularly unique because of its purity and the flake size. That was the context behind the enhanced DFS,” says de Vries.
The focus of the eDFS also evolved into discussions with financiers about a de-risked start-up and commissioning plan, specifically in relation to power supply and the decoupling of the project development schedule from the 220 kV high voltage lateral from Ifakara to Mahenge.
The power line is currently being developed by state-owned utility Tanesco and it should be available for the second module, but Black Rock concluded that a decoupled power supply schedule via short-term on-site generation would allow it to control all elements of the project start-up.
Offtake pricing agreements
After successfully demonstrating the quality of its product in the pilot plant operations in China, Black Rock announced it had agreed a binding pricing framework with four of its five offtake partners, two of which were new agreements made in May.
The new commitments were signed with Qingdao Yujinxi New Energy Materials and Yantai Jinyuan Mining Machinery Co for three years to supply up to a combined 50,000 tonnes, taking the total amount of committed volumes to 255,000 tonnes per annum.
Re-confirming the premium quality of Mahenge concentrate to the heavily contested Chinese graphite market was fundamental to tying in pricing frameworks with offtake partners, according to de Vries.
“The sub-100 market refers to graphite flakes with a mesh size of -100. In China, it’s a very contested market space and not a place you want to be if you can help it. Being able to demonstrate we’re well above the 100-mesh point, and able to deliver higher spec material of +98% TGC, was fundamental to securing a relationship with certain customers.”
In terms of project financing, Black Rock is taking a blended approach through the consideration of several different avenues, including project level equity, conventional African-domiciled debt financing, convertible/hybrid structures and offtake-related financing proposals.
The company recently appointed Australia-based advisor Ironstone Capital to accelerate progress on financing for the Mahenge Project. Ironstone has been brought in to consolidate existing pathways and establish new ones with relevant banks and other sources of debt and finance.
Ironstone also possesses valuable experience in the Chinese market, which will be particularly useful for Black Rock with China set to remain a dominant force in the global graphite space.
“Ultimately, whatever you do in graphite, it’s going to revolve around China in some shape or form. Most of our hardware and procurement is coming out of China and we’ve got offtake supply agreements with Chinese firms, so it makes sense to try and align the finance process with China as well.”
Black Rock is also working with a boutique consultancy outfit called Oriental Link, which has a presence in Hong Kong, Australia, Singapore and China. Black Rock is benefitting from the firm’s significant experience in the Chinese graphite market.
Large-scale spheronising trial
In August, Black Rock delivered outstanding results from a large scale spheronising and purification trial using 400 kg of concentrate from the preceding pilot plant run in China, with the trial demonstrating a yield to final product of 48% and 53% and a final purity of 99.98% TGC.
Crucially, these results significantly exceed Chinese industry benchmark yields of 35-45% for battery anode materials and demonstrate to Black Rock’s customers that its product can be integrated into existing facilities.
“Everybody in the graphite sector has reported spheronising results in some shape or form. What we’ve done this time round, rather than dealing with a cupful, we’ve done it with a bathtub full. In this case about four bathtubs full.
“When you test concentrate in a controlled lab environment, you should deliver good results. But in an industrial context, variables are harder to control. The reality is that we got very near to the results we attained in the lab in an industrial context.
“This trial has given us good direction as to whether the product will perform on a large scale, and it absolutely punched the lights out in terms of yield. When we refined it, it punched the lights out again in terms of chemistry,” says a delighted de Vries.
Closing in on construction
Having routinely ticked off a long list of milestones over the last three years, Black Rock claims it will be construction ready for the first phase of the Mahenge Project once it finalises financing negotiations.
Project financing and the subsequent development schedule is now dependant on confirmation of the Tanzanian Government’s 16% free carried interest in the project. Black Rock will be sitting down with the government imminently to discuss the terms and conditions associated with their investment.
After a turbulent few years in the Tanzanian mining industry, de Vries believes the situation is becoming clearer for investors in the sector, particularly as Barrick Gold and Acacia Mining have resolved how they will work together to arrive at a consensus with the government, after a long-running dispute.
The firm’s boss also sees Black Rock as being well-positioned in the race to supply the burgeoning battery tech and electric vehicle (EV) markets, but in an unorthodox way.
“At Mahenge, 60% of our material is large flake graphite, so we are not waiting for the EV revolution and the electrification of transport as a condition precedent to us having a business model. 60% of our material gets sold in the large flake market, which is fundamentally uncontested.
“That means that we can spend a bit more time and effort in securing our rightful place in that sub-100 mesh area for the EV market. That’s incredibly well supported by having the highest grade natural flake graphite available on the planet.”