BEM has been on my radar ever since the MOU to supply Urbix (announcement 3 Feb 2021) and the supply and marketing agreement with Luxcarbon (announcement 10 Feb 2021). There are a few people on this forum that know a lot about BEM so Im not here trying to tell anyone to suck eggs. Given this stock seems to bounce pretty high on news I thought i would go back through some announcements and check out why this thing only has a MC of $26m. Of course this is my opinion, but my observations so far are:
- Scoping study done 30 Jan 2019 had a pre tax NPV of $103m. Current MC of $26m means its currently trading at ~25% of NPV. If you look at TLG its at about 35% of NPV meaning BEM have room to grow. However you have to at least acknowledge one is a scoping study and the other is a PFS. A bit more certainty in a PFS compared to scoping study.
- Disappointingly BEM have not had any update to their JORC since 2018. 20.2mt @ 6.51% (indicated + inferred)....it has been a long time between drinks. Deciding to commence an exploration program at Donnelly at the end of 2020 (announcement 23 Nov 2020) was just dumb. That money should have been put towards a drilling campaign at Maniry (which looking back through its quarterlies should have commenced and been completed by now).
- Since 2019 there have been a lot of announcements relating to "test results".
- 4 June 2019 - Test results deliver high value expandable graphite specifications
- 17 July 2019 - Metallurgical tests undertaken by BGRIMM...
- 12 August 2019 - Maniry project produces spherical graphite market specifications
- 3 September 2019 - Maniry meets anode market purification (ANZAPLAN)
- 1 October 2019 - BEM appoints BGRIMM to finalise testing prior to offtake agreements and DFS completion
- 16 October 2019 - Potential chinese offtake partners to conduct test work on Maniry graphite concentrate
- 10 February 2020 - ANZAPLAN completed testing
- 9 March 2020 - BTR agrees to next stage testing
- Apparently on 17 January 2020 BEM were "fast tracking the maniry graphite project in Southern Madagascar" with offtake agreements in discussion. But then on the 3rd of Feb 2021 it was "fast tracking...production" again. However in this announcement that actually had a MOU to back it up.
- Dont forget the offtake MOU with RHI Magnesita. I havnt gotten to the bottom of what happened to that one.
- 26 February 2020 BEM completed stage 1 pilot program with BGRIMM followed by an announcement 19 May 2020 of stage 2 testwork commencing. Not sure what was up with the announcement on the 24 February 2021 saying "stage 2 commencing". According to 19 May 2020 this had already commenced. The announcement today (31 March) regarding stage 2 is significantly delayed. This should have been provided H2 2020. None-the-less, news is news and its better late than never.
- Looking at the quarterly report from 31 July 2020, Razafy drilling program should have been done by H2 2020.
- Unfortunately the 29 January 2021 quarterly report says its still in "planning" stage. For a flagship project, its taken far too long to get this program up and running. This is significant to upgrading the JORC.
Looking at the announcement today (31 March), a couple of things jump out:
1) The yield for P35 jumbo flake is 1.01% where as in the scoping study it was 2.8%. Its a little frustrating that todays announcement is not presented apples with apples to the scoping study. If NPV was sensitive to flake size (and therefore this was a positive announcement) then there should have been an upgrade to the project valuation.
2) Super Jumbo flake is now selling in excess of US $1750/t. Since the scoping study this looks like it has actually decreased. Again, this possibly should have resulted in a change to the project valuation.
Looking back at the scoping study, the grade is not that great...at least comparable to TLG. What BEM need to focus on is drilling and increasing the resource. They have an enormous Exploration Target - 280-350mt! 20mt is only 6%.With a bigger resource you can sacrifice grade. Offtakers want quantity. There is that much future demand for this stuff that you need to be able to ramp up production to something significant....at least 100,000tpa at grade.
According to the 24th of February 2020 announcement, Southern Madagascar is experiencing the effects of significant famine. This has to have a risk to the project. My understanding is that the ESIA is yet to be complete. This will be an important milestone in understanding how the government view this project.
I have come across a company like BEM before. Lots of news, lots of updates, but also lots of delays and missed deadlines. It doesnt mean things wont crystalise, but its important to do thorough DD and make the decision for yourself.
These comments will likely go down like a lead balloon with some of the people here. Good or bad i will keep investigating. These are only my opinions.
(20min delay)
