Black Rock opts for simple path to riches in complex battery graphite game Plus, strong copper price boosting Stavely’s story and it’s game-on at Colosseum for Dateline.
4th June 2021
Barry FitzGerald
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There is half a dozen or so good sized graphite stocks on the ASX with ambitions to become a producer of the key anode material in lithium-ion batteries.
The world will need them too, with broad agreement that a supply deficit will emerge around 2023 as the electric vehicle and the storage of renewable energy revolution hits top gear.
Prices for the material are reflecting that, having recently bounced from last year’s drastic lows.
But it has to be said that there are some real-world experiments going on about the best pathway to becoming a graphite producer among the ASX-listed players.
There are some going down the vertically integrated pathway, like the big name in the ASX space, Syrah (SYR), with its Mozambique graphite production/Louisiana anode production model.
Then there are those that that are looking to import graphite and process in Australia and others still that want to go the whole hog and become battery producers.
Good luck to them all. But as mentioned, they are real-world experiments on how best to carve out a niche in the graphite/batteries sector, one that our friends in China control because of its natural advantages at its newer graphite/anode operations.
They are located next to industrial parks where big pharmaceutical plants and steel mills are co-located within easy reach.
There is good reason for that. It is all about ensuring lowest-cost inputs for anodes thanks to the ability to draw on super cheap hydroflouric acid, a by-product available from the pharmaceutical operations, and being able to sell off a recarburiser by-product (currently selling for $US280/t) to the steel mills.
If the Aussie graphite companies think they can beat the Chinese without their projects having similar advantages, all power to them.
But it is possible to take a derisked approach to improve the odds of success, something ASX-listed Black Rock Mining (BKT) is doing at its Mahenge graphite project in Tanzania.
It is pursuing a traditional mining model of build a mine and sell the graphite concentrates, bolstered by the striking of a strategic alliance that provides a downstream pathway to market.
In Black Rock’s case, the alliance is with no less than the South Korean conglomerate POSCO. Apart from many other things, POSCO is a big steel producer and has its eye on capturing 20% of the battery materials market.
It has settled on an alliance with Black Rock and its Mahenge project for graphite with a twist, the twist being that initially at least, Mahenge concentrates would be processed into anode material in China (because of its input advantages, with final conversion into an anode in Korea).
POSCO has just taken up a $US7.5m placement in Black Rock for 15% of the company, with the alliance including other supportive intentions . It is the first time a graphite project has been effectively integrated into a battery supply chain.
And given POSCO is POSCO, it sure is one heck of an endorsement of Black Rock’s planned pathway to production at Mahenge.
Petra Capital initiated on the stock recently, saying Black Rock had an “an enviable set of attributes that set it apart as a graphite developer”.
It said Mahenge has the lowest capital intensity and operating cost of its graphite developer peers globally.
The firm’s price target on Black Rock is 46c a share (fully diluted). That compares with a last sale price of 18c a share.
BKT Price at posting:
18.0¢ Sentiment: Buy Disclosure: Held
