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Blackstone Resources

Bloomberg   BLS SW
Batteries (et syst. de)  /  Suisse  Web Site   |   Investors Relation
Banking on big-bang battery technology initiatives
Activités et tendances

Blackstone Resources AG is a Switzerland-incorporated next-gen battery technology company, which is poised to undertake mass production of 3D-printed solid-state lithium-ion batteries, though its roots lie in mining, i.e. exploration and development of (battery) metals for the global markets. Established in 1995, the company has over the years – through various acquisitions and strategic stake purchases – carved out a diversified commodity portfolio, which comprises gold, silver, manganese, lithium, cobalt, molybdenum, nickel, iron ore and rare earth metals. The group has a presence across the supply chain, with operations ranging from mining to refining and trading.

With the electric vehicle (EV) revolution and clean energy demand gathering momentum, Blackstone has made a major foray in research and development (R&D) and eventually production of batteries, thereby leveraging its (under-development) mining exposure to key materials like manganese, cobalt, nickel and lithium. Fortunately, after the COVID-19 outbreak, the emphasis on EVs and green energy has been further catalysed by material stimuli and, simultaneously, Blackstone has achieved progress on the battery R&D front.

A global footprint

Battery (R&D) foray …

With Blackstone’s mining and trading ventures slowly nearing fruition (discussed below) – also impacted by COVID-19 disruption, the group is implementing a €200m investment project, with the ultimate objective of undertaking battery manufacturing. For this purpose, in 2019, Blackstone Research GmbH was established in Saxony (Germany), where research and manufacturing has already begun. Moreover, research cooperation agreements have been inked in with institutes and universities, such as the Swiss Federal Laboratories for Materials Science and Technology, Bern University of Applied Sciences and Frauenhofer Institute in Germany. Over the years, there are plans to expand the manufacturing footprint to the US, Brazil, France, China, India and Indonesia.

… promises various USPs

Aggressive plans

Despite being a late entrant in the battery space, which is dominated by Asian companies and Tesla, Blackstone’s patented 3D-printing process to manufacture (more-efficient) solid-state batteries, if proven to be successful and scaleable, could be a game-changer. Management claims that its 3D-printing process can result in sizeable capex and opex savings. The group plans to embark its debut battery journey on a cautionary note, with the initial aim of targeting the relatively-smaller markets and, after successful adoption, there should be a mass roll-out for automobile markets. Interestingly, Blackstone has already signed / is (in advanced stages of) discussing battery purchase agreements with diversified clientele in motorcycle, bus, forklift, telecom and marine businesses.

Given the growing focus on EVs and clean-tech, massive funds are being invested for battery R&D and manufacturing by various companies and governments. In fact, there are numerous smaller firms (like Blackstone), besides the legacy battery and automobile giants, which are trying to make a mark. While names of bigwigs like Quantumscape and Toyota often come up as key players in the next-gen solid-state battery (tech) space, it’s worth noting that this innovation won’t be an easy nut to crack – with large scale deliveries still to be tested / a couple of years away. And, to Blackstone’s credit, given its smaller size and, hence, better agility, and patented multilayer printing process, it may have the flexibility to adapt to rapidly changing markets. Remember, since the second half of 2020, the group reported various milestones in the battery (R&D) division, including: 1/ progress on 3D printing for next generation battery cells; 2/ CHF30m equity commitment from GEM Global; 3/ Innosuisse (Swiss Innovation Agency) approving a grant application – providing 50% funding for a CHF1.3m project; 4/ EU grant for battery project; 5/ CHF20m convertible loan facility to mass produce next-gen batteries;and 6/ successfully printed and tested the working solid-state battery cell, thereby resulting in the completion of R&D for the 3D screen-printing process and paving the way for the mass production of solid-state batteries.

Still growing list of achievements

After its market rediscovery of a promising battery tech firm in 2020, Blackstone Resources continues to achieve newer milestones. Below is a summary of the key events/breakthroughs over the past couple of months:

1/ in May 2021, ownership of lithium concession assets increased by 900 hectares (to 8,900 hectares);
2/ in June 2021, unveiled plans to list Blackstone Technology GmbH (fully-owned subsidiary) in the US, and leadership team was beefed up with the appointment of a CTO;
3/ in July 2021, announced plans for a ten-fold increase in lithium-ion battery capacity to 500MWh by 2022; signed / discussed letter of intent worth combined value of €184m with diverse clientele; appointed a CFO; received permit to begin production of 3D-printed lithium-ion battery cells and, simultaneously, applied for funding from Sächsische Aufbaubank;
4/ in August 2021, signed a supply cooperation agreement with IBU-tec advanced materials AG for the key cathode material, i.e. lithium iron phosphate, and secured €40m of debt for expansion of battery manufacturing;
5/ in September 2021, appointed a CMO and decided to commission a new development laboratory for battery cell research at its Döbeln facility; and
6/ in October 2021, 3D-printed battery cells’ manufacturing passed critical tests.

As a result, Blackstone presented its first lithium-ion battery – entirely produced in Germay – at a press conference on 9 December 2021.

Critical advantages

Asian dominance in the battery space

As markets have over the years become open to alternate energy-powered vehicles, the Asian firms, besides of course Tesla, capitalised on the opportunity and, hence, today, they collectively account for most global battery manufacturing (capacities). This has also been a function of them executing various long-term supply agreements for key battery metals. Such a dominance hasn’t been comforting for the developed world, especially in the context of escalating trade frictions.

While Europe has been a front-runner in implementing stricter (economic) regulations to combat the effect(s) of climate change, it has clearly lagged behind with respect to its know-how of energy storage technology. Such a scenario opened a big window of opportunity for players like Blackstone. Remember, in December 2019, the European Commission approved €3.2bn of funding support for R&D across the battery value chain. This, along with Germany’s own efforts to help create a local battery giant, is likely to ensure that adequate funding/grants are made available to home-grown companies to combat the Asian dependency threat.

But Europe is making-up for lost ground

Considering the strategic importance of localised battery-making, Europe has expedited its investments and/or JVs with industry pioneers. As a result, various new capacities have already been built or are being planned/constructed (illustrated in the above chart). Moreover, new opportunities are being identified, including Panasonic, Equinor and Norsk Hydro, in November 2020, inking in an agreement to evaluate the prospect of establishing a pan-European battery venture. Even on the next-gen innovation front, the likes of Volkswagen, in June 2020, increased its investment in US-based QuantumScape for the joint development of solid-state batteries. However, even after these (mega-)investments, Blackstone’s management expects Europe to witness 100GWH of supply shortage by 2025. Hence, in the next couple of years, more action in this space is still highly likely. This is good news, particularly on the following two counts.

1# large scale EV roll-out is in top gear

2# Europe’s hunger for EVs is gathering momentum

Given that Europe had always been a big market for diesel-powered SUVs, its participation in the EV revolution, even after the VW Dieselgate scandal, had been slow – with China leading from the front. However, this trend changed in 2019 as Europe suddenly emerged as the biggest driver for global EV markets (evident in the below chart). While China was impacted by the withdrawal of state subsidies – though a temporary bottleneck, Europe’s growth was broad-based – with almost every country posting double-digit growth. And now, with stricter emission norms and the EU’s COVID-19 stimulus further reinforcing greener ambitions, Europe should continue doing well. Remember, despite COVID-19, Europe’s 2020 sales for BEVs + PHEVs were up 137% vs. 12% and 4% growth in China and US, respectively. In H1 21, Europe sustained its exceptional momentum (+157%), while both the US and China were back on track – up 166% and 197%, respectively.

Metal diversity – for now, pushed to the backburner

Blackstone, like any other mining major, owns a number of assets in different parts of the world. The group holds 25 exploration licences in Norway via its 100%-owned subsidiary ‘BS Norway Limited’, giving it access to gold, manganese and rare earth metals. While the Norwegian asset is still a couple of months away from hitting production stage, the immediate-term focus is on the gold ore processing mill – akin to a safe-haven asset, given the macro downturn hedge – in Peru (whose S&P credit rating stands at BBB+ with a negative outlook), which is strategically located 230km north of Lima, where the mill purchases ore from 400 licenced miners located within a 100km radius. Production at is guided to begin soon, which should be an opportune start – given the prevalent gold market tailwinds. In H1 19, the group increased its stake in South America Invest Limited (SAI), the operator of the Peruvian gold mill, from 20% to 51% via a stake purchase from Adriatica (details in ‘Worth Knowing’).

Moreover, through its investment in SAI, the group also holds the permit for a manganese deposit in Colombia. After a slow start, this Colombian asset is gradually guided to reach impressive nameplate production capacity of >0.5mt by 2022. By then, sustained recovery of global steel markets and the faster up-tick of EVs and, hence, batteries, should result in healthier manganese demand (and prices).

While Blackstone had long held a controlling stake (70%) in the Mongolian molybdenum deposit, in H1 19, it sold this stake to Adriatica – though it secured a 3% royalty on revenue and offtake rights (details in ‘Worth Knowing’ section). Similarly, in H1 20, the group sold its rare earth metal interest in the Norwegian assets, but it retained a buy-back option and right to a 2% royalty until 2030.

Apart from the above assets, Blackstone holds a minority stake (1%) in First Cobalt (Canada), the largest cobalt exploration company in North America, which has secured $5m in refinery expansion financing from Glencore. Moreover, in May 2019, the group acquired a Chilean company, giving Blackstone the rights to explore and exploit lithium mining projects via an agreement with a national partner over 8,900 hectares and 6,428 hectares, respectively of concessions in Chile.

Interestingly, the firm’s ownership of various green transition metal assets could be a big long-term advantage, especially when the development of greenfield assets is proving to be a daunting task. As a case in point, Rio Tinto’s ambitious Serbian lithium investment has now been shelved after various protests (citing environmental concerns) forced the Serbian government to cancel the miner’s licences. Hence, the expectation of strong long-term demand growth being fuelled by greenfield investments warrants caution and ownership of assets – even if small – by the likes of Blackstone could result in massive value unlocking in the coming decades.

Overall, Blackstone has a host of mining projects in varying stages of implementation, which is a big operational risk. Fortunately, management’s efforts to set up a trading (joint) venture (in Indonesia focused on nickel and iron ore), with the objective of leveraging its well-spread network of connections, should help bring the much-needed business stability via reduced vulnerability to commodity prices. Material trading exposure is precisely the reason why the likes of Glencore have to date managed to dodge bouts of acute market pressure.

However, COVID-19 seems to have hit the progress on the mining/smelting/trading side of the business and, hence, for now, most of the group’s resources (time + money) are being funnelled towards the battery division – where the market fundamentals have instead solidified post the COVID-19 outbreak.

Fortunately, in late 2021, Blackstone managed to execute a stake sale in a subsidiary of its precious metal division – which is guided to result in CHF50m of proceeds in 2022.

Patient wait for diversity

As Blackstone’s assets/businesses are not expected to start delivering immediately, the market’s patience may continue to be tested, especially in the case of any development/operational issues/difficulties. However, once all divisions inch closer to their potential, the group should attain a better overall balance.

Source: AV estimates

Diverse business drivers

1/ Increasing global consciousness towards combating climate change should result in sustained healthy demand for (clean) energy storage (materials);
2/ Countercyclical business cushion via precious metals, which are in high demand in macro-economic downturns, due to their strong safe-haven characteristics;
3/ Heavy global infrastructure development/refurbishment needs should translate into demand growth for even the conventional base metals; and
4/ Both developed and developing markets should emerge as key long-term consumers.

Competitive front

Given Blackstone’s unique-positioning, i.e. focus on battery tech plus presence across the mining value chain, there are no clear comparable firms.

On the battery side, while the likes of Panasonic, CATL and LG Chem seem like apt comparables, a pivotal difference is their focus on mass production of lithium-ion batteries (an old technology), while the likes of Blackstone are focused on pioneering the (next-gen) solid-state technology. Hence, Blackstone is better compared with (Bill Gates- and VW-backed) Quantumscape (>$15bn mkt cap) – which is investing heavily in solid-state technology. Both these firms are targeting similar energy cost (per kWh) efficiencies, but Quantumscape plans large scale production by 2027/28 while Blackstone is targeting a kick-start by as early as 2021/22. If Blackstone is successful in its ramp-up plans, this could trigger another re-rating and also make the firm an apt acquisition target for EV (battery) majors. Whereas, for mining, while the initiation of operations across assets is still awaited, the peers are relatively straightforward – comprising the likes of Franco Nevada, China Molybdenum and Albemarle.

COVID-19 implications

The pandemic has been a mixed bag for Blackstone Resources. While it has unleashed various operational difficulties/uncertainties for the mining/smelting/trading businesses, the reverse has been true for battery technology. In fact, COVID-19 became a major catalyst for pushing EV/clean-tech stories, which aptly is also reflected in the euphoric dash for Tesla’s shares. With many countries coming up with even stricter plans to phase out fossil-powered vehicles, there should be a bigger emphasis on evolving battery technology (targeting lower costs and improved energy density) – thereby pushing the investment case for battery research (and manufacturing) firms like Blackstone. Hence, despite the near-term business / macro uncertainties – resulting in the delayed kickstart at mining/smelting operations, the long-term attractiveness of Blackstone remains unchanged.

Potentiel 1 472 %
Cours (CHF) 0,76
Capi (MCHF) 32,5
Chiffre d'affaires par division
Chgt 21E/20 Chgt 22E/21E
  Secteur 12/20A 12/21E 12/22E 12/23E MCHF % du total MCHF % du total
Chiffre d’affaires 0,01 1,59 80,5 329 2 100 % 79 100 %
Norway Métaux diversifiés 0,00 0,00 0,00 0,96 0 0 % 0 0 %
Peru Métaux diversifiés 0,00 0,00 5,25 30,6 0 0 % 5 7 %
Battery Batteries (et syst. de) 0,00 0,00 8,16 182 0 0 % 8 10 %
Trading Métaux diversifiés 0,00 1,59 28,3 51,7 2 101 % 27 34 %
Columbia Métaux diversifiés 0,00 0,00 38,8 63,4 0 0 % 39 49 %
Other 0,01 0,00 0,00 0,00 0 -1 % 0 0 %
Principales expositions
  Revenus Coûts Fonds propres
Devises "émergentes" 0,0 % 50,0 % 50,0 %
Dollar 80,0 % 20,0 % 0,0 %
Risque climatique à long term 30,0 % 30,0 % 40,0 %
Géographie du chiffre d'affaires
Changements d’analyse : 25/01/2022, Changements de prévisions : 25/01/2022.