Bluejay Mining | Equity Research 7th December 2021

Bluejay Mining

Key Dundas development work ticking along with catalysts on the horizon

Bluejay Mining PLC ("JAY") has announced the completion of bulk sample pilot plant processing and further, final samples being sent for incremental customer evaluation. We view this as an important step for both validating the process flow sheet and ultimately securing offtake agreements for the remaining expected output. JAY has agreed a Master Distribution Agreement with a major Asian conglomerate for up to 340ktpa of Dundas' anticipated 440ktpa annual output. We see future technical studies and securing financing (with a global investment bank conditionally appointed as lead arranger) as key catalysts alongside drill-bit success at JV projects. Appointment of Peter Davis as Project Manager for Dundas should accelerate this progress with his decorated CV in delivering feasibility studies and mineral sands experience.

Bulk sample derisks the project technically and could secure remaining offtake The bulk sample has been successfully processed following restart earlier this year after the plant was placed on care and maintenance in March 2020 following the outbreak of COVID-19.The produced material exceeded expected specifications for commercial production, which could translate into a more saleable product. The final bulk parcels of output from the pilot plant are being distributed, in cooperation with the JAY's distribution partner, a large, long- established Asian international industrial and trading conglomerate. The material will undergo further magnetic separation, facilitated by JAY's distribution partner to be sampled by key-endcustomers identified by them. This could consolidate and potentially extend the existing distribution agreement (up to 340ktpa) to cover the entire expected annual output of Dundas ilmenite concentrate (~440ktpa). These steps have derisked the project technically, with the flow sheet validated (and the product specifications even exceeded), and potentially financially should the offtake agreement be extended to cover Dundas' entire output. This in turn should aid project financing discussions also in progress.

Important pieces coming together alongside pre-production works in 2022 Elsewhere JAY has made solid progress on other key aspects of the Dundas Ilmenite Project. A premier European investment bank has been conditionally appointed as lead arranger of the project financing and formation of the lending syndicate, which may include cheap sources of debt from Export Credit Agencies as well as commercial banks and industrial entities. Peter Davis has also been appointed as Project Manager for Dundas. Mr Davis' 45 years of experience, including in minerals sands and titanium dioxide pigment operations with a mining engineering background, should provide a strong platform for JAY to accomplish necessary steps to unlock development. As part of this push, pre-constructionworks will commence at Dundas in 2022 to prepare for development alongside the project finance syndicate.

Valuation - GBp24/sh target price offers 164% upside

We model a long-term ilmenite price of US$210/t (FOB) which is more conservative than the PFS input of US$232/t and current spot at ~US$360/t. The titanium market still has compelling long-term dynamics and has remained tight despite increases in supply from mines in China and concentrate products from Mozambique. On this basis we reach an NPV8% of US$305m for Dundas, to which we apply a 0.8x multiple. We then add a further US$60m for JAY's earlier-stage exploration assets, including a conservative US$30m for Disko. Adjusting for working capital and G&A, we derive a total Dec'21E risked SOTP of US$307m (24p/sh).

GICS Sector

Materials

Ticker

LN:JAY

Market cap 6-Dec-21 (£m)

91

Share price 6-Dec-21 (GBp)

9.1

Target price 31-Dec-21 (GBp)

24

164%

Upside from the current share price to our 24p/sh target

340ktpa

Current Master Distribution Agreement of 440ktpa total planned annual output

GBp

mm

20

60

18

50

16

14

40

12

10

30

8

20

6

4

10

2

0

0

Dec-19

Apr-20

Aug-20

Dec-20

Apr-21

Aug-21

Trading volume (m, rhs)

BlueJay Mining Ltd

AIM BASIC RES (rebased)

H&P Advisory Ltd is Corporate Broker to BlueJay Mining Plc. The cost of producing this material has been covered by Bluejay Mining Plc as part of a contractual engagement with H&P; this report should therefore be considered an "acceptable minor non- monetary benefit" under the MiFID II Directive.

Roger Bell

Director, Mining Research

  1. +44-207-907-8534E rb@hannam.partners

Jay Ashfield

Director, Mining Sales

  1. +44-207-907-8500
    E ja@hannam.partners

H&P Advisory Ltd

2 Park Street, Mayfair

London W1K 2HX

Bluejay Mining | Equity Research 7th December 2021

Key Charts

Ilmenite price indices

440

390

340

290

240

190

140

Oct-21

Jul-21

Apr-21

Jan-21

Oct-20

Jul-20

Apr-20

Jan-20

Oct-19

Jul-19

Apr-19

Jan-19

Oct-18

Jul-18

Apr-18

Jan-18

China Domestic Ilmenite Spot

China Ilmenite Conc 50% TiO2 in Ports

China Ilmenite Conc 55-58% TiO2 Aus CIF

China Ilmenite Conc 52% TiO2 Mozambique

Source: Bloomberg

Ore excavated vs Grade

10

10%

9

9%

---> to 2048E

8

8%

7

7%

6

6%

5

5%

4

4%

3

3%

2

2%

1

1%

0

0%

Ore excavated - assumed LoM extension (Mt, lhs)

Ore excavated - PFS Reserves (Mt, lhs)

Ilmenite grade (%, rhs)

Source: Company reports, H&P estimates.

Ilmenite tonnage shipped and recovery rate

500

90%

450

85%

400

350

80%

300

250

75%

200

70%

150

100

65%

50

0

60%

Ilmenite shipped

Ilmenite recovery (%)

Source: Company reports, H&P estimates.

Unit cost of finished product vs RoM ilmenite grade

170

10%

160

9%

150

140

8%

130

7%

120

110

6%

100

5%

90

80

4%

2024E

2025E

2026E

2027E

2028E

2029E

2030E

2031E

2032E

2033E

2034E

2035E

2036E

2037E

Unit cost/tonne of finished product ($/t, nominal)

Ilmenite grade (%, rhs)

Source: Company reports, H&P estimates.

Dundas FCF (US$m)

100

50

0

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

-50

-100

-150

FCF - from reserves

FCF - from mine life extension

Source: Company reports, H&P estimates.

Price target derivation (GBp per share)

30

-0

25

2

1

2

1

20

15

10

19

24

5

9

0

Source: H&P estimates, *PT rounded to nearest 1p.

2

Bluejay Mining | Equity Research

7th December 2021

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Bluejay Mining plc published this content on 07 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 December 2021 16:01:04 UTC.