Blackstone Minerals Ltd (ASX:BSX, OTCQX:BLSTF, FRA:B9S) has welcomed the outcomes of a pre-feasibility study (PFS) for the proposed downstream Ta Khoa Refinery (TKR) in Northern Vietnam that confirms a technically and economically robust hydrometallurgical refining process.
The PFS considers a refinery that can process up to 400,000 tonnes of nickel concentrate per annum over a 10-year life of operation and will require just under US$500 million in upfront project capital to construct.
Ultimately, Blackstone says the PFS demonstrates that a very low capital intensity is required for the TKR to produce Class I nickel at a scale that would make Blackstone a globally significant producer.
More broadly, the ASX-lister believes the PFS indicates the technical and economic strength of its hydrometallurgical refining process, which will upgrade nickel sulphide concentrate to produce battery-grade nickel: cobalt: manganese (NCM) 811 precursor for the lithium-ion battery industry.
“Compelling” financial outcomes
Blackstone managing director Scott Williamson said the company’s strategy to build a downstream refinery in Vietnam came amid a very supportive environmental, social and governance, macroeconomic and fiscal backdrop.
“The base case PFS financial outcomes are compelling based on an NCM811 precursor price forecast that is conservative compared to current observable market rates.
“The internal rate of return on capital invested is exceptional for the base case, owing to very low capital intensity, a significant premium available when upgrading nickel sulphide concentrates into battery-grade NCM811 precursor and the competitive operating advantages in Vietnam, which include access to low-cost renewable hydropower."
Williamson said: “Blackstone is very pleased by the level of collaboration with the Vietnamese Government to progress the company’s downstream refinery.
“As part of the PFS, Blackstone completed a location study to identify preferred refinery locations, with each of the shortlisted potential refinery locations offering significant corporate tax incentives. The corporate tax incentives offered are a strong signal for the Vietnamese Government support for foreign direct investment and Blackstone’s downstream refinery strategy.
“The base case refinery represents management’s view of the scale of operations that could over time, through exploration success, be supported by the company’s existing nickel sulphide mineralised landholdings.
“Economics have been presented assuming a 10-year life-of operations, aligned with known and desired life-of-mine for third party concentrate feed (3PF) sources that Blackstone aims to secure offtake. Management considers the more likely scenario is that the refinery life will extend beyond 10 years.”
Investors have also recognised the positive outcomes with shares as much as 11% higher this morning to A$0.505 and have risen from A$0.345 at the close on July 14.
Key PFS findings
Blackstone’s downstream refinery PFS considered both a base and spot case when making economic and physical valuations.
The TKR’s base case scenario bears a US$2.01 billion post-tax net present value (NPV) and a 67% internal rate of return (IRR), while the spot case represents US$3.51 post-tax NPV and a 98% IRR.
Looking at the base case economics, the TKR is projected to require US$491 million in upfront project capital, which should be paid back within 1.5 years from first production.
Life of operations revenue is estimated to hit US$14 billion, while operating cash flow is calculated at US$4.5 billion.
Breaking that down, the TKA is expected to generate US$451 million in average operating cash flow every year, with the average annual post-tax cash flow calculated at US$365 million.
The refinery’s life of operations’ all-in cost is estimated at US$11,997 per tonne of NCM811.
This is particularly significant, as the study’s weighted average forecast price for NCM811 sales is calculated at US$16,397 per tonne, while the current Shanghai Metals Market spot price is US$19,559 per tonne.\
Turning to the refinery’s physicals, Blackstone is considering a design that can process up to 400,000 tonnes of nickel concentrate per annum.
The refinery’s 10-year life of operations aligns with the existing Ban Phuc disseminated orebody and the availability of known 3PF concentrate.
Blackstone believes the TKA can achieve 43,500 tonnes of refined nickel output and produce 85,600 tonnes of NCM811 precursor every year.
The ASX-lister is targeting first production in 2024, with a ramp-up to steady-state operations expected in 2026.
Overall, the refinery is projected to churn 3.9 million tonnes of concentrate feed, with an average 11.5% nickel-in-concentrate grade, a 0.3% cobalt-in-concentrate grade and a 1.1% copper-in-concentrate grade.
The TKA is predicted to generate around 4,100 tonnes of copper by-product every year.
Now that it has completed its PFS, Blackstone intends to develop and fund the construction of the TKR via a collaborative partnership-based model.
The company intends to retain a significant interest in the TKR and expects that its portion of funding will be met through a combination of debt, equity, and offtake financing.
Blackstone has commenced funding discussions with multiple potential partners, including NCM consumers and concentrate suppliers to jointly participate in the funding of the proposed refinery.
In addition, the ASX-lister has been approached by a number of financial advisors interested in supporting Blackstone’s funding strategy. The company is immediately progressing approval to commence the next phase of definitive feasibility studies (DFS) and pilot plant testing (in Vietnam) and is currently targeting a final investment decision in 2022.
Along with progressing DFS work for the downstream refinery, Blackstone will turn its attention to developing a PFS for an upstream business unit.
The PFS also paves the way to begin phased construction of a pilot plant in Vietnam, which will produce NCM811 precursor and ensure the product meets consumer specifications.
In the meantime, Blackstone will continue its aggressive drilling campaign over its flagship Ta Khoa Nickel Project in a bid to increase the asset’s mineral resources.
Beyond this, the ASX-lister is on the hunt for offtakers who may be interested in the 3PF concentrate and will work towards its final investment decision.