Blencowe Resources plc (“Blencowe”) listed on the LSE in April 2019 at 4p per share seeking a Reverse Takeover (RTO). The board behind this ultra-clean shell company includes some well-known movers and shakers behind resources stocks that have masterminded the acquisition of a 100% interest in the Orom Cross Jumbo Graphite Project in Uganda (“Orom Cross”). Orom has all the makings of being a large-scale project with scope to produce an impressive amount of the high value jumbo and large graphite flakes that currently sell for more than US$1,400 per tonne.
Orom Cross provides a highly compelling combination of a potentially large scale, shallow low-cost mining operation coupled with a high value product. Risks will be reduced with the publication of a PFS, expected by the year-end following drilling to define a JORC-resource.
The graphite market is estimated to be 500,000t in deficit by 2025 just as Orom Cross gets into full production. Few large-scale projects are expected to come online in the next 5 years with a high proportion of jumbo/large flakes. So these projects are rare, especially in a lower risk location.
Post-RTO Blencowe retained its tight share structure. All board and management shares are escrowed and £2m worth of shares paid to Orom Cross vendors (33m shares/34% total shares) are escrowed for 12 months.
Analysis of the peer group shows the potential. We initiate coverage of Blencowe with a target price of 18.1p and Conviction Buy stance.
Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.
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