Why Posco’s $40 million bet on Tanzanian graphite may be the future of battery materials in Africa

South Korea’s renowned steel manufacturer, Posco, has committed to a substantial investment of $40 million in Black Rock Mining Limited, a pivotal player in the Tanzanian graphite sector. This investment represents a significant escalation in Posco’s interest in the development of the Mahenge Graphite Project, particularly the first phase known as Mahenge Module 1, which is vital to the project’s overall success.

Funding in Two Phases

The anticipated funding will be executed in two separate phases. The initial phase will see Posco invest $9 million to acquire 155.3 million shares, priced at 5.8 cents per share—a 10 per cent premium over the average price calculated over the preceding ten-day trading period. This initial investment will increase Posco’s stake in Black Rock Mining from 10.1 per cent to 19.99 per cent. The subsequent tranche will finalise the outstanding $40 million contribution at the same price offered to other investors involved in the final equity raising, thus solidifying Posco’s stake in the company.

Long-Term Offtake Rights for Posco

A recent statement, as reported by The Citizen, clarifies that the investments will facilitate the advancement of Mahenge Module 1. In exchange for this financial commitment, Faru Graphite Corporation Limited, an 84 per cent subsidiary of Black Rock, intends to grant Posco long-term offtake rights for the fine graphite produced from the future Mahenge Module 2 once it becomes operational.

Regulatory Approvals Needed

However, this investment is contingent upon receiving necessary regulatory approvals from the Fair Competition Commission of Tanzania, the Foreign Investment Review Board (FIRB), and Black Rock’s shareholders. Furthermore, confirmation that all requisite funding for Mahenge Module 1 is secured is also necessary.

Black Rock CEO Welcomes the Deal

Chief Executive Officer of Black Rock Mining, John de Vries, articulated his enthusiasm regarding the deepening partnership with Posco, characterising the investment and offtake agreement as a robust endorsement of the Mahenge Graphite Project’s promising future. He noted, “Posco’s commitment is a major milestone for the company, de-risking our funding strategy and instilling confidence among our stakeholders.”

Posco’s Expansion into Battery Materials

Posco Holdings Inc. holds a market capitalisation exceeding $22 billion, and has dynamically expanded its operations into the battery materials sector through Posco Future M Co., Ltd, a prominent producer of anodes and cathodes on a global scale. The raw material procurement for this broad portfolio is managed by Posco International Corporation, a crucial trading arm of Posco Holdings.

Black Rock’s Strategic Position

Listed on the Australian Securities Exchange, Black Rock Mining currently possesses an 84 per cent interest in the Mahenge Graphite Project, which has already achieved significant operational milestones, including receiving the obligatory environmental approvals, mining licenses, and a resettlement action plan.

Strengthening a Strategic Alliance

Posco’s prior investments have included a $7.5 million equity infusion and a $10 million prepayment facility, indicating a strong ongoing collaboration. This latest investment was approved in September 2024, further solidifying the strategic alliance initially formed in June 2020, and demonstrating Posco’s unwavering support for the Mahenge initiative.