Blackstone Minerals: Integrated Nickel Producer in the Making

• Blackstone Minerals (BSX) has a nickel sulfide project in Vietnam with existing infrastructure from previous owners worth $136 million. They plan to process the nickel concentrate into a downstream product for lithium-ion batteries.
• BSX has partnered with Korean company EcoPro who is a major cathode manufacturer. EcoPro previously invested $6.8 million into BSX at a 62% premium and is focused on a long-term partnership.
• BSX currently has 9 drill rigs turning across 5 ore bodies with the goal of including them in an upcoming pre-feasibility study. Assay lab delays of 70+ days are slowing results.
• The partnership with EcoPro aims to secure premium pricing for the nickel product. Formal agreements around off-take volumes and joint venture details will be worked out around the time of the PFS.
• BSX is focused on fast-tracking to production in 2023 to meet EcoPro's needs. They plan a staged approach to minimize dilution - optimize existing infrastructure first, then build downstream processing in partnership.

About Blackstone Minerals

Blackstone Minerals is a junior nickel developer focused on advancing its flagship Ta Khoa nickel sulfide project in northern Vietnam. The project is located 160km west of Hanoi and comes with existing infrastructure, including an open-pit mine and concentrator that was operated from 2013-2016 by the previous owners. Blackstone aims to restart the existing mine and concentrator in the near term while also developing downstream processing capability to produce nickel sulfate and precursor products for the lithium-ion battery industry.

The company has an offtake and strategic partnership agreement with South Korea's EcoPro Co., the world's second largest cathode manufacturer. EcoPro currently owns a 6.6% stake in Blackstone.

Interview with Scott Williamson, Managing Director of Blackstone Minerals

Drilling Update

Blackstone currently has 9 drill rigs operating at Ta Khoa focused on expanding resources at multiple targets, including Ban Phuc, King Cobra, Ban Chang, Ta Khoa, and King Snake. The aim is to delineate sufficient resources to support an expanded production profile as part of a 2023 restart.

Over 70 days of assay results are still pending due to delays at labs in Perth, but visual inspections of the drill cores have identified extensive massive sulfide mineralization. Once the assay results are in, Blackstone expects to announce a series of maiden resource estimates at its satellite targets in early 2023, leading into a revised PFS in late Q1 2023.

Path to Development

Based on a 2020 scoping study, Ta Khoa could produce 29,000 tonnes of nickel per year over an initial 14 year mine life, generating an NPV of US$665M at consensus long term nickel prices of $8/lb.

However, tighter initial capex is planned with a focus on restarting the existing mine and concentrator in 2023, ramping up high grade massive sulfide production from the Ban Phuc underground. This is expected to require capex of just $75M versus $136M in the scoping study.

The downstream processing facilities would come onstream in parallel, funded in partnership with EcoPro. This would see Blackstone supply concentrate to a 50/50 JV between Blackstone and EcoPro to produce nickel sulfate and NCM precursor products.

Blackstone believes the integrated strategy could achieve premium pricing and enhanced margins closer to $11-12/lb for its nickel units versus LME pricing. An offtake JV agreement with EcoPro is targeted for mid-2023 based on the updated PFS.

Funding & Valuation Upside

With minimal equity needs anticipated for the stage 1 upstream restart, Blackstone aims to minimize dilution for shareholders. The downstream facilities would be majority funded through debt and JV partner contributions.

Based on achieving nameplate capacity, Blackstone believes Ta Khoa could be worth over $1B in NPV terms by 2023. The current market cap is just $120M, pointing to significant potential upside if Blackstone can de-risk its staged growth plans over the coming year.

Conclusion

Blackstone Minerals presents an intriguing investment case as an emerging vertically integrated nickel producer in a strong nickel price environment. With surging demand from the EV battery sector, Class 1 nickel supply is expected to fall into deficit in coming years.

Backing from a major Korean cathode producer in EcoPro provides Blackstone with a ready-made customer and partner to fund downstream growth. If Blackstone can deliver on its plans over the next 12-18 months, Ta Khoa has the potential to become a long-life, low-cost nickel operation well-positioned to capitalize on the global energy transition.