For the fiscal year that ended on September 30, 2022, London-listed Blencowe Resources reported a comprehensive loss of £1.1 million that was attributable to the group’s equity holders.
With no income in the year, the group says it continues to monitor the loss before tax to ensure its continued viability and ability to continue to develop the Orom-Cross graphite project in northern Uganda, which it owns through its 100% subsidiary, Blencowe Resources Uganda.
The group paid no distributions or dividends during the period.
CEO Mike Ralston comments in a statement that the past 12 months have been “one of the most challenging ever in terms of macro-market forces, particularly relating to our London listing, with Brexit fallout, the Ukraine invasion, rising inflation and subsequent interest raises to counter these, and a choppy political landscape with no less than two UK Prime Ministers in Number 10 during the reporting period, all to deal with”.
“This is before we manage our own internal project,” he adds.
Despite the challenging conditions alluded to, Ralston highlights the continued advancement of Orom-Cross, with the company on track to deliver “a unique and special mining operation ahead”.
Blencowe completed a second diamond drill programme in 2021 which resulted in a Joint Ore Reserves Committee mineral resource upgrade in the first half of 2022 up to 24.5-million tonnes of graphite at a 6% in situ average grade.
“Further excellent metallurgical test work by SGS in Canada resulted in proving Orom-Cross can upgrade to a very pure concentrate around 96% 97% LOI from the composite mix of the two deposits (Northern Syncline and Camp Lode) and equally importantly with high recoveries and low impurities.
“These will assist greatly in taking the end product through final testing ahead to the 99.95% spherical purified graphite (SPG) product that is used in the production of lithium-ion batteries, which is by far the largest demand accelerator for graphite use ahead,” Ralston outlines.
He says that proving that Orom-Cross can deliver a high grade end-product is key to getting prequalification for sales and ultimately delivering binding offtake agreements within the definitive feasibility study (DFS) this year.
“These test results also proved that our end-product retains a high percentage of coarse (large) flakes that sell for significantly more than the smaller flakes, and which will help us deliver a higher weighted average selling price for the full basket of end products,” Ralston avers.
He says the DFS was initially going to include a pilot plant at site, which could start up graphite operations on a smaller scale and provide product for end-user screening, to ultimately become pre-qualified for more substantial sales contracts later on.
However, Blencowe more recently uncovered sources who had successfully bulk sample tested other graphite projects in existing pilot plant facilities in China, with resultant binding contracts once fully completed.
“As China currently represents around 95% of the end market for graphite sales, it is believed that pre-qualification into China is sensible, and as such Blencowe has decided to trial a bulk sample of 100 t Orom-Cross raw material through this same facility.
“This will form a key part of the DFS programme in 2023 and will be followed by SPG testing, and ultimately original equipment manufacturers testing,” Ralston explains.
He notes that these are the necessary steps to provide the basis for full sales contracts and that work is already under way to deliver these bulk samples to start the process.
It is also expected that Blencowe will lock in an engineering, procurement and construction contractor within the DFS process, and all study work will be managed and ultimately peer reviewed using a graphite technical specialist engineering firm based in Perth, Australia
The other key aspect of the DFS is project funding and Blencowe has been working through various options to secure an effective and efficient funding solution for both the DFS and the full project implementation, Ralston mentions.
He adds that an initial environmental, social and governance review was conducted in 2022 using an international firm, and that sustainability will play a big role in the future development of Orom-Cross.
“All the work delivered over this year has transformed Orom-Cross from an early stage exploration project to an advanced pre-production powerhouse. In the wider context this is important as the global shift away from fossil fuels towards renewable energy provides a huge opportunity ahead for Orom-Cross, and Blencowe wants to position this exceptional project at the forefront of its peers in all aspects.
“As demand for lithium-ion batteries accelerates over the next decade and hundreds of gigafactories that will manufacture these batteries open their doors and begin demanding huge volumes of input materials, the forecast demand for flake graphite is anticipated to grow exponentially,” he points out.
At this stage in its development, the group is focusing on financing and continued development of Orom-Cross.
The group incurred £1.4-million of capitalised exploration costs, of which £1.02-million related to Orom-Cross, which was required to carry out the initial drilling costs and testing of the mineral, and £404 533 relating to the Akelikongo project.
In 2022, the group raised funds of £2.63-million net of issue costs from the equity markets.
At period end, Blencowe had a cash balance of £346 994.
As of October 2022, the group has been able to raise £750 000, which it says will support its financial position in the short term.
Blencowe is likely to remain cash flow negative for some time and, although the directors express confidence in the future revenue earning potential of the group from its interests in Orom-Cross, there can be no certainty that it will achieve or sustain profitability or positive cash flow from its operating activities.
With regard to future capital expenditure on Orom-Cross, the company may need to raise additional capital beyond the working capital period to fund additional exploration work for the future development.
The group has been approached by potential strategic partners who may eventually provide an offtake, funding or development scenario for Orom-Cross. If this is not successful, the board may consider stopping the project until further cash can be generated.
The principal decisions taken by the board during the year relate to the ongoing research and development of Orom-Cross, which since its acquisition in 2020 is still at an early stage of project development.
Blencowe has outlined a work programme for the future strategy of the project.