Bluejay Mining | Equity Research 3rd March 2022

Bluejay Mining

ERMA support endorses Dundas and underlines potential strategic importance of Greenland

Bluejay Mining PLC ("JAY") has announced that it has received "official support" for the Dundas Ilmenite Project from the European Raw Materials Alliance ("ERMA"). Co-funded by the EU, the ERMA is a network of public and private sector organisations covering the raw materials supply chain, with a primary role of securing materials to support industrial ecosystems in the EU. Fulfilling ERMA's qualification requirements is a seal of approval on the project and may unlock new marketing channels for the up to 190ktpa of Dundas' ilmenite output which is not currently covered by the Master Distribution Agreement with a major Asian conglomerate signed in Dec'20, as well as potentially easing the financing process. Meanwhile, ilmenite prices remain very solid, presenting an upside risk to our long-term assumptions for Dundas. With the alleviation of global Covid-19 restrictions we anticipate BlueJay will be able to conduct a full field season in 2022 after a two-year hiatus, which should allow Bluejay to significantly advance Dundas towards a final investment decision, as well as the enticing prospect of first activities at Disko-Nuussuaq ("Disko") under the newly-incorporated JV with KoBold Metals ("KoBold").

Fieldwork is expected to resume in 2022; Disko moving into focus with cashed- up partner

With the relaxation of Covid-19 restrictions allowing the first full field season in Greenland since 2019, we expect JAY will be able to accelerate progress at Dundas in 2022. We also note that the Disko JV between JAY and KoBold was incorporated on 1st Feb, with the latter having recently raised US$192.5m in series-B funding. This bodes well for the upcoming field activities, which are currently in the final stages of planning. Under the terms of the JV, KoBold has committed to US$3.4m in expenditure on geological and geophysical studies in 2022, and US$11.4m on drilling or completion of 15 pre-agreed drill holes by the end of 2024. Decades of historical exploration at Disko has shown it to have the hallmarks of a globally-significantnickel-copper-cobalt-PGM magmatic massive sulphide system, analogous to Norilsk-Talnakh nickel district in Siberia, the most valuable single orebody of any type on earth. Two large conductive targets at Disko, identified by Bluejay as "drill-ready", are comparable in footprint to Noril'sk-Talnakh ore bodies. A successful massive sulphide discovery at Disko could therefore be transformative for JAY's investment case, with the JV likely dwarfing Dundas in terms of potential value.

Ukraine conflict underlines the strategic importance of Greenland to RoW Ilmenite prices have remained robust in early 2022 despite the geopolitical shockwaves from Russia's invasion of Ukraine, with spot Chinese import prices up 5% YTD at US$439/t. Indeed, feedstock supply in Europe could be materially impacted by the crisis, as we estimate Group DF's operations in Ukraine account for ~5-6%of global output in terms of contained TiO2 units. However, we believe the potential impact of trade sanctions against Russia on titanium feedstock demand is unlikely to be significant in the global context, with Russia accounting for ~2-3%of the world's TiO2 pigment output and adequate spare capacity ex-Russiato take up any slack. The implications for titanium sponge, a precursor to titanium metal used, amongst other applications, in aircraft engines, could be more profound, with Russiaa notable player in the industry. In our view, the Ukraine crisis underlines the strategic importance of Greenland, both geographically and in terms of raw material security supply for North America and Europe, which should weigh in JAY's favour as evidenced by ERMA's support.

Valuation remains compelling

We model a long-term ilmenite price of US$210/t (FOB), more conservative than the PFS input of US$232/t and current spot at ~US$344/t. On this basis we reach a Dec'22E NPV8% of US$338m 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'22E risked SOTP of US$331m or 26p/sh (+222% from current share price), a slight increase on our previous 24p/sh target as we have rolled our valuation date to Dec'22E from Dec'21E.

GICS Sector

Materials

Ticker

LN:JAY

Market cap 2-Mar-22 (£m)

79

Share price 2-Mar-22 (GBp)

8.1

Target price 31-Dec-22 (GBp)

26

222%

Upside from the current share price to our 26p/sh target

340ktpa

Current Master Distribution Agreement of 440ktpa total planned annual output

GBp

mm

16

60.0

14

50.0

12

10

40.0

8

30.0

6

20.0

4

2

10.0

0

0.0

Nov-20

Nov-21

Mar-20

Jul-20

Mar-21

Jul-21

Mar-22

Trading volume (m, rhs)

BlueJay Mining Ltd

AIM BASIC RES (rebased)

H&P Advisory Limited 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. +44-207-907-8534 Erb@hannam.partners

Ryan Hampton

Research Analyst

  1. +44-207-907-8500 Erh@hannam.partners

Jay Ashfield

Director, Mining Sales

  1. +44-207-907-8500Eja@hannam.partners

H&P Advisory Limited

3rd Floor, 7-10 Chandos Street, London W1G 9DQ

Bluejay Mining | Equity Research

3rd March 2022

ERMA support a positive seal of approval on Dundas, helping to unlock funding

Receiving official support from the ERMA provides another positive endorsement as JAY continues to make progress on key aspects of Dundas, gradually de-risking the project:

  • Electronic nautical charts covering the key seaward approach were published in Jan'22 by the Danish Geodata Agency;
  • The bulk sampling programme was finalised in Dec'21 allowing more final product samples to be sent to end customers for evaluation;
  • A premier European investment bank was conditionally appointed in
    Nov'21 as lead arranger of the project financing, which may include cheap sources of debt from Export Credit Agencies, with ERMA support providing further credibility;
  • Pre-constructionworks are planned at Dundas in 2022 to prepare for development alongside the project finance syndicate.

2

Bluejay Mining | Equity Research 3rd March 2022

Key Charts

Ilmenite price indices

490

440

390

340

290

240

190

140

Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

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)

Price target derivation (GBp per share)

100

50

0

-50

-100

-150

30

2

0

1

2

25

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

20

15

26

10

21

5

8

0

-200

FCF - from mine life extension

FCF - from reserves

Source: Company reports, H&P estimates.

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

Bluejay Mining | Equity Research

3rd March 2022

Bluejay Summary Financials & Valuation Metrics

Source: H&P estimates, Company Reports, CapIQ

Bluejay Mining | Equity Research

3rd March 2022

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Bluejay Mining plc published this content on 03 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 March 2022 13:10:05 UTC.