Black Rock Mining says it has signed an agreement with China Railway Seventh Group Co Ltd (CRSG) that could see the major Chinese infrastructure contractor help build the Mahenge graphite project in Tanzania.
The project is envisaged as a graphite development that would gradually ramp up to its ultimate 340,000 t/y capacity through the addition of four production modules. In order to reach the start-up module one rate of 85,000 t/y, the company forecasted an initial capital requirement of $116 million. First production is targeted in 2020 or 2021 depending on financing.
This is not Black Rock’s first Chinese agreement for Mahenge. In September 2018, it signed a strategic cooperation agreement with Yantai Jinyuan Mining Machinery Ltd, part of the larger Yantai Jinyuan Group, that committed both parties to work together with a view to Yantai supplying process plant machinery and related infrastructure for Mahenge.
Black Rock says CRSG is part of a large contractor group with significant operations and experience in Africa. CRSG’s parent company, China Railway Group, is a state-owned enterprise and among the largest construction businesses globally.
The non-binding cooperation framework agreement (CFA) outlines the key terms under which Black Rock and CSRG plan to progress to execution of a binding engineering, procurement and construction (EPC) contract for the module one process plant and non-process infrastructure at Mahenge. It provides for a coordinated EPC approach between CRSG and Yantai, Black Rock’s existing strategic build partner.
It also provides for the development of a conventional EPC arrangement containing customary performance warranties and typical risk allocation structures (guarantees, bonding) required by project financiers, Black Rock said.
Key agreed terms include a staged approach to the development of a final EPC contact price and a deferred, performance-based payment structure. This deferred payment structure results in over 30% of the total EPC contract value being payable only after completion of final plant performance tests to requisite levels, it said.
Black Rock Managing Director and CEO, John de Vries, said: “This framework agreement is a big step forward for Black Rock and our Mahenge graphite project. To have Black Rock aligned with a project execution partner as large, established, Africa-proven and financially robust as China Railway Seventh is materially significant. Our discussions have been highly collaborative to this point, as reflected directly in the specific framework agreement terms.
“In short, the agreement delivers us greater certainty on our project execution. It has been deliberately structured to deliver a final EPC contract that maximises both partner alignment and appeal to potential project financiers.”
According to de Vries, CRSG and Yantai have also agreed to provide assistance in relation to Mahenge project financing, including any related financing based on Chinese content.
He concluded: “We now look forward to advancing rapidly with CRSG and Yantai towards a final EPC contract for development of the world-class Mahenge graphite project.”
Black Rock and CRSG/Yantai are now targeting the execution of a binding term sheet by March 31, 2020.