Blencowe Resources (BRES): BUY Orom-Cross: Differentiated ex-China graphite opportunity

Blencowe Resources is advancing the 100%-owned Orom-Cross flake graphite project in Uganda. The project combines a large, scalable resource base with favourable orebody characteristics and metallurgy, a flake size distribution skewed towards highervalue larger flakes, good infrastructure (eg low-cost hydropower) and strong ESG credentials. Orom-Cross is positioned to benefit from an on-going structural shift in global graphite markets. 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. Against this backdrop, 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. 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. We initiate coverage with a SOTP-based target price of 47.9p (representing 518% upside) and a Buy recommendation.