Leveraging Strategic Investments and Offtake Agreements to Secure Graphite for the Energy Transition

Context

Securing long-term supply of critical minerals is becoming increasingly important for both resource developers and downstream manufacturers in the energy transition. Smaller mining companies often face financing and market access challenges, while major industrial players seek reliable feedstock to support their growth in the battery materials sector.

One example of how these dynamics play out is the partnership between POSCO International, South Korea’s largest trading company, and Black Rock Mining, an Australian-listed developer of the Mahenge Graphite Project in Tanzania. In September 2024, POSCO agreed to invest US$40 million in equity in Black Rock Mining, coupled with a US$10 million prepayment to Faru Graphite, the Tanzanian joint venture operating entity. The deal secures POSCO’s long-term offtake of high-purity graphite fines from Mahenge’s Module 2, as well as non-exclusive marketing rights for large flake graphite outside China. This builds on a strategic alliance that has been in place since 2018 and positions Mahenge as a key global supplier of natural graphite for lithium-ion battery anodes.

Challenge

Smaller graphite developers often struggle to reach final investment decision due to several barriers:

• Financing hurdles: High capex requirements for mine development create reliance on external funding
• Market access: Limited downstream partnerships and offtake agreements make it harder to secure revenue certainty
• Demand concentration: Global graphite supply is dominated by a few players, with downstream capacity largely concentrated in China
• Commercial risk: Without long-term offtake agreements, smaller firms face difficulty attracting institutional or development finance
• Intellectual Property: IP is a key barrier to entry in the critical minerals sector. Building out from an established participant minimizes competitive risks during the critical business establishment phase

Approach

The POSCO–Black Rock agreement illustrates how combining equity investment with offtake agreements can address financing and market risks:

• Equity injection: Staged equity commitments provide upfront capital to support early project development
• Long-term offtake: Binding supply agreements secure demand over extended periods, with flexibility for future extensions
• Marketing rights: Offtake partners may obtain rights to market certain products in specified regions, creating additional commercial incentives
• Strategic alignment: Investors can use offtake and equity participation to strengthen integration across their value chains and secure reliable feedstock
• Scale: Early agreements help ensure commercial viability and supply chain scale from the outset

Conditions

This agreement was made possible through several enabling factors:

• Regulatory approvals: Supportive permitting processes and timely clearances from relevant authorities
• Partnership track record: Early engagement through MoUs, product testing, and preliminary offtakes helped build confidence and alignment
• Resource scale and strategy: Large, high-quality reserves supported by a phased, cost-efficient development plan
• Investor confidence: Early equity and offtake participation helped reduce perceived risk and improve visibility for future capital raising
• Enabling infrastructure: Investments in power and transport systems contributed to lowering operational costs

Observed Impact

Key outcomes from this type of arrangement include:

• De-risked financing: Equity participation combined with offtake commitments helps reduce financing risk and improve prospects for project delivery
• Supply chain resilience: Long-term agreements support diversification of critical mineral supply and enhance security of feedstock
• Project momentum: Provides early capital and demand certainty, enabling initial production and future scaling
• Economic contribution: Supports job creation, local economic activity, and revenues for national utilities and infrastructure providers

What’s Next for the Southern African Region

Experience from this case highlights approaches other countries in the region could adopt to unlock mineral value chains:

• Offtake-first models: Securing downstream buyers early reduces investment risk and attracts global partners
• Strategic equity partnerships: Aligning capital with offtake rights can support project development and local beneficiation
• Diversified supply chains: Building out projects beyond dominant regions enhances global supply chain resilience
• Marketing support: Leveraging experienced partners for international marketing could improve market access for high-quality African minerals