Broker Cavendish has set a 47.9p target for Blencowe Resources (BRES ), as the company continues to advance the Orom-Cross graphite project in Uganda.
The current price is 7.75p.
“Orom-Cross is positioned to benefit from an on-going structural shift in global graphite markets,” Cavendish director of research Yuen Low wrote in an extensive and wide-ranging note.
“Western OEMs and governments are intensifying efforts to reduce reliance on China for critical minerals and we understand they are prepared to pay premium prices for reliable long-term supply of high-quality ex-China graphite as a result.”
Blencowe, argues Cavendish, is perfectly placed within these emerging new dynamics.
“A well-thought-out strategy is in place of three interlocking pillars that is designed to minimise capital requirements and execution risks while progressively unlocking value,” the broker continued.
“This comprises: i) a phased, demand-led expansion strategy; ii) the upgrading of low value small-flake material into higher-value battery-targeted products; and iii) conversion of larger-flake concentrates into valuable high-purity products. In our view, Blencowe is well differentiated versus peers that remain heavily exposed to commoditised small-flake concentrate markets. Natural graphite is transitioning from a bulk industrial commodity into a structurally differentiated critical mineral where value is increasingly determined by jurisdiction, product specification and downstream capability. Against this backdrop, projects capable of delivering scalable, ex-China graphite supply with credible downstream optionality are becoming increasingly advantaged. Orom-Cross sits within this subset of developments, combining favourable geology, infrastructure access and a staged development pathway that is explicitly designed to progressively move up the value chain in line with market demand rather than speculative expansion. In our view, this positions Blencowe as more than a conventional graphite developer: it is a potential integrated ex-China supply platform aligned with the structural direction of the global graphite market.”
So, what does it all add up to?
“We initiate coverage with a sum-of-the-parts-based target price of 47.9p, representing 518% upside, and a buy recommendation,” says Cavendish.
View from Vox
A highly encouraging piece of research from Yuen Low, one of the wise old heads of mining analysis. The upside on offer is clearly significant and being recognised within the industry. Blencowe’s shares have more than doubled in value over the past 12 months as the company has made substantial progress with Orom-Cross both in terms of drilling and the overall economics. On the strength of the Cavendish analysis, though, it looks like those recent gains may be just the start of a comprehensive and meaningful re-rating. Upside of more than 500% isn’t available everywhere, especially not from a project that’s so advanced.