22 November 2023
While some energy metals have been stealing headlines for their necessity in the batteries used by electric vehicles, graphite hasn’t been generating the same level of buzz and why one explorer has flown under investors’ radar with an independent study revealing the company to be significantly undervalued.
While some energy metals have been stealing headlines for their necessity in the batteries used by electric vehicles, graphite hasn’t been generating the same level of buzz and one explorer has flown under investors’ radar with an independent study revealing the company to be significantly undervalued.
As a key component in Li-ion batteries; there is actually more graphite in Li-ion batteries than lithium. Car manufacturer Nissan, for example, uses 40 kilograms of graphite in every single Nissan Leaf vehicle that it produces. This need for graphite is why Elon Musk has said Li-ion batteries should be call “Nickel-Graphite batteries” to better reflect their core materials.
In January 2018, BlackEarth Minerals (ASX: BEM) listed publicly on the ASX with the intent of commercialising its valuable graphite assets and just 12 months later, the company has remarkably had a Scoping Study completed as part of their fast-track to cash flow strategy.
Doing so, BlackEarth has recently completed its Scoping Study 2-3 times faster than its peers, and yet its market capitalisation is just 7% of the independent study’s net present value of USD $103.3 million. It would appear that something is seriously out of alignment with BlackEarth Minerals’ public perception.
Perhaps more significantly still is that the scoping study has confirmed a mine life of at least 10 years, which has been in line with the company’s long-term messaging about its ambitions, with forecast revenue to be $629 million USD over those 10 years, highlighting the value of their assets. The majority of its current Resources also sit on a granted 40 year mining lease, a highly enviable position to be in.
BlackEarth has never sought to be the largest producer of graphite or chased the largest graphite resource. Rather, by targeting a graphite asset aimed at the right type of graphite for battery anodes and fire retardant materials, they are in the fortunate position of potentially sitting on a very attractive deposit.
It is projected that in the next 10 years that there will be almost one million tonnes of extra high-grade graphite required just for the electric vehicle battery market. In order for this demand to be met, an extra 2.5-3 million tonnes of graphite will have to be mined to meet the demand for this high-grade highly valued material.
Benchmark Mineral Intelligence has noted a significant trend emerging however, stating that “for the first time in a generation, we have begun to see China import significant quantities of natural graphite”. Suzanne Shaw, Senior Analyst at Roskill, is predicting that the demand for graphite to service the battery market will not slow, which will drive both the natural and synthetic graphite markets. For its part, Benchmark Mineral Intelligence has a positive outlook on graphite in 2019, based on growing consumption in industrial markets, and the increasing number of applications for graphite.
In a quantifiable projection, Allied Market Research forecasts that the global graphite market will grow to US$1.8 billion by 2022, from its present level at US$1.3 billion, a growth rate of 5.4% compounding year on year.
The recent independent Scoping Study revealed a significant disparity between their valuation (NPV) of the Project and the market capitalisation of BlackEarth Minerals, a disparity of almost $100 million in fact. This suggests, irrespective of any fair and reasonable pre-production discount that may be applied, a severe undervaluation and underappreciation of the business and the sphere in which it is operating, given the trend in graphite markets.
Something that is not borne out in a valuation are political risk factors, with 90% of the world’s graphite produced in countries with a higher risk profile than BlackEarth Minerals’ flagship Maniry Graphite Project (according to London’s Mining Journal 2018 Mining Investment Risk Index). Given the current global political climate, and the severity of the discrepancy between the independent valuation and the market’s, BEM appears to be an opportunity that is ripe for the taking.
BlackEarth Minerals trades under the ASX code: ‘BEM’
More information on BlackEarth Minerals can be found at their Investor Centre.
*Reach Markets is paid a retainer to assist BEM with private investor management.