Strategic investor puts Black Rock in driver’s seat

3 March 2021

When news broke late last year that local graphite explorer Black Rock Mining had done a deal with South Korean steel making giant POSCO Limited, it was hardly surprising to see a healthy bounce in trading activity on the Australian Securities Exchange.

At the time of writing, Black Rock’s share price had increased more than 100 per cent, up from around 8 cents in November to closer to 17 cents.

For the West Perth headquartered junior miner, securing the support of POSCO – which is one of the world’s largest steel making companies with a market cap of around US$19b – this was a major piece of news and it is hardly surprising the market reacted favourably.

According to Black Rock Chief Executive John de Vries, the deal – which was more than six-months in the making and is still subject to some final government regulatory and shareholder approvals – has come at an ideal time as the level of growth and consumer interest in electric vehicles is accelerating fast.

“The term sheet we’ve agreed is for the placement of US$7.5m in shares to acquire an equity interest of 15 per cent,” John said.

“Strategically, not only have we secured a massively well-known global major to our share registry, but we’ve also negotiated an offtake agreement which creates a guaranteed revenue stream.”

Black Rock as earmarked the funds will be used to develop infrastructure and progress its 100 per cent-owned Mahenge project in Tanzania.

“Given the project has a mine life of around 26 years, we’ve taken the long view that with the investment from POSCO and offtake agreement in place, the fundamentals for strong, sustainable growth are there,” John said.

“When you complement this with the growing demand for more EV products, we believe it makes our position in the market extremely desirable.”

Just how fast the consumer market is switching to EVs and other battery applications was highlighted in a recent Bloomberg report. The report showed that the average battery package price that was US$295 in 2016 would reduce to around US$94 by 2024.

“These statistics alone demonstrate the massive contrast, of more than 200 per cent, which goes a long way to helping remove any perceived barrier to entry into the EV world,” John said.

“From our perspective, the natural knock-on effect is that companies like POSCO, which make the batteries, will require more graphite to meet this demand.

“Although traditionally a global steel maker, POSCO is diversifying into new technology products with a clear focus in the lithium-ion battery anode supply chain.

“What we’ve learnt though is that our approach was robust enough to have endured the Covid crisis and is now proving that it will stand up in a post Covid-19 world.

“The commercial outlook we’re now focused on is full steam ahead with progressing the financing process.”