Blackstone Minerals Limited [ASX: BSX]
Metals & Mining
An integrated upstream and downstream nickel play
Blackstone Minerals Limited (ASX: BSX) is a Perth-based resources company primarily engaged in exploration activities within Vietnam's prominent nickel sulphide district. BSX owns the Ta Khoa mine, which holds substantial nickel, cobalt, copper and platinum group element (PGE) reserves. The company is strategically positioned to capitalise on the expanding nickel market as the EV revolution drives demand for the base metal. Blackstone’s 2022 Pre-Feasibility Study (PFS) for an integrated upstream and downstream nickel business in Vietnam showed lucrative economics for the project, and the company is now completing a Definitive Feasibility Study (DFS) with an aim to commence production of Nickel-Cobalt-Manganese (NCM) precursor products by 2025.
Ta Khoa Integrated Project offers robust economics
Since acquiring the Ta Khoa Nickel Project (TKNP) and Ta Khoa Refinery Project (collectively referred to as the Tao Khoa Integrated Project) in late 2019, BSX has undertaken substantial exploration activities at TKNP, resulting in an expansion of the resource size and an improved understanding of the deposit's geotechnical and metallurgical characteristics. The PFS unveiled a remarkable 39% jump in the life-of- mine (LOM) output, reaching 1.9mt, and a significant increase in refining capacity to 400k tonnes per annum (ktpa), a notable advancement from the 200ktpa outlined in the scoping study. The PFS showed a lucrative 47% IRR over a 10.3-year mine life.
Elevated demand for nickel and cobalt to fuel Blackstone's growth
The projected increase in nickel demand to 6 million tonnes per annum is largely driven by the scarcity of ESG-compliant battery metals sources and the growing need for high-nickel cathodes. Transparency Market Research predicts substantial growth in the high-nickel cathode market, from US$1.9bn in 2021 to US$10.1bn by 2031, representing a 20.4% CAGR. Furthermore, cobalt's diverse applications position it for increased demand, propelled by the EV revolution. S&P Global forecasts cobalt demand to rise from 45kt in 2021 to 110kt by 2026. These evolving dynamics are reshaping global resource requirements, presenting supply challenges to face the increasing demand and making a strong case for BSX’s activities.
Valuation range of A$0.24–0.44 per share
We have valued BSX at A$0.24 per share in a base-case scenario and A$0.44 per share in a bull-case scenario using an NPV-based comparable valuation methodology. The indicated price range reflects a Price/NAV of 0.34x, indicating a significant valuation upside potential to the current share price. We anticipate that BSX will experience a re-rating with the completion of the DFS and an acceleration in resource growth for the Ta Khoa Nickel mine. Our valuation does not incorporate the potential value- unlocking from non-core assets. Key risks to our investment thesis include funding risk, project execution delays, geological risk, and commodity price risk.