Blencowe has adopted a partnership-based approach that provides exposure to multiple purification technologies

In our view, the strongest projects are those capable of serving multiple end markets. By selling higher value coarse flakes into industrial applications while upgrading lower-value fine flakes into BAM, they diversify revenue streams, reduce dependence on any single end market and maximise value capture across the full flake size distribution. They also reduce downstream capital requirements and improve capital efficiency, as only the lower-value fine fractions require further processing to achieve attractive margins. Blencowe and EcoGraf are examples of developers pursuing this dual-market strategy.

Some developers have sought to manage BAM-related risks through development strategies. Blencowe, for example, has outlined a five-phase development plan designed to reduce technical, commercial, market and financing risks.

Phase 1 (P1) is effectively a commercial-scale validation phase for the concentrator. During P1, downstream production is to occur via toll processing with technical partners. This should enable participation in higher value product markets without the immediate capital investment and execution risks associated with constructing downstream processing infrastructure, while also allowing customer qualification to begin before committing capital to an owned downstream plant.

Blencowe is ultimately targeting in-house production of USPG (uncoated spheronised graphite). This strategy captures a meaningful proportion of downstream value uplift while minimising risk by allowing customers to undertake coating and other final processing steps within their own supply chains or via toll processing. Coating and associated processing are the most capex-intensive downstream steps, while endusers often have exacting requirements and may have their own proprietary coating technologies.

Finally, the phased development strategy also reduces execution and market risk. P1 and P3 provide operational and commercial validation before construction of the first full-scale concentrator and downstream modules, respectively. Subsequent capacity additions are intended to be demand-led, reducing the risk of committing capital ahead of market demand.

Purification technology provides another point of differentiation. Conventional Chinese graphite purification typically relies on hydrofluoric acid (HF), which is highly effective but presents environmental and permitting challenges associated with handling hazardous chemicals and waste streams.

EcoGraf has developed proprietary HF-free purification technology (HFfree®) and intends to deploy multiple downstream facilities located close to end-users, with mid-stream (shaping) operations planned at Ifakara in Tanzania, near the Epanko mine.

Blencowe, meanwhile, has adopted a partnership-based approach that provides exposure to multiple purification technologies. Its agreement with AETC provides access to thermal purification, while Alkeemia’s proprietary HF-based process is designed to reduce the environmental footprint of conventional HF purification while retaining the technical advantages of the established process.

Blencowe Resources June 26 Buy at 7.8p. Price target 47.9p

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