Blencowe Resources (BRES ) has released an update to the commercial model underpinning its definitive feasibility study for the Orom-Cross graphite project in Uganda. 

The updated model incorporates revised assumptions and inputs, including the presence of new high value offtakers, updated pricing and costings, expanded reserves incorporated into the mine plan, and increased confidence in product mix and saleability derived from ongoing testwork and commercial engagement. 

The new DFS shows significant increases both to the net present value of Orom-Cross, and to the expected cashflows. 

The NPV rises by 15%, from US$1.087 billion to US$1.254 billion over the initial 15-year life of mine, while net free cash is up by 120% on the old model, to US$4.466 billion, also over the life of mine. 

The rise is reflective of increased volumes of high grade purified graphite products sold from the planned beneficiation facility, as well as the higher prices the company will likely achieve in Western markets. 

The first phase of production allows for up to 20,000 tonnes per year of 97% total graphitic carbon concentrate, and up to 3,000 tonnes per year of spheronised graphite from in-country beneficiation.  

Phase two allows for up to 70,000 tonnes per year of 97% TGC concentrate, plus up to 10,000 tonne per year SPG from in-country beneficiation.  

Average annual EBITDA is set at US$333 million, also significantly higher than in the previous DFS.

The updates do not involve any increase in capital spend, which remains set at US$45 million for the first phase, and US125 million for the second phase. 

The current thinking is that phase one will be funded primarily by equity, and phase two by debt. Several interested parties have signed non-disclosure agreements in regard to funding phase one.

"This DFS model update reflects tangible progress across Orom-Cross,” said executive chairman Cameron Pearce. 

“NPV10 increases to US$1.254 billion and net free cash rises to US$4.466 billion, while capital spend remains unchanged across both Phase 1 and Phase 2. While IRR has moderated versus the prior model due to updated inputs, the economics remain highly robust and the uplift in NPV and cash generation is the key outcome for project funding and delivery. Just as importantly, the revised model now reflects additional commercial inputs, including new offtake agreements and the inclusion of expandables. We have also submitted into several sizeable graphite tenders and expect greater clarity on outcomes in the next quarter.”

 

View from Vox

 

Demand for non-Chinese graphite products, particularly purified products, continues to build as Western markets seek supply chain resilience. That puts Blencowe and Orom-Cross in pole position, given the ongoing expansion of its inventory, the wide variety of production options its able to offer, and the range of commercial pathways that it’s already been able to identify. The company’s long-term strategy to deliver upgraded purified products remains central to its value proposition, and accounts considerably for its attractiveness both to potential partners and to investors. The shares have just about tripled in value over the past year, and given the progress made to date, it’s not hard to see why. But there should be more to come. The company just needs to get the financing over the line to be able to put Orom-Cross into development. At that point the real underlying value will likely start to show through.