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Volt Resources works on funding options for Tanzanian Bunyu graphite

It is now exploring the market in Mauritius for its US$40 million development funding.
Man clasps together hands painted in Tanzanian flag colouring
OVERVIEW: VRC The Big Picture
The company's approved Dar es Salaam listing stalled after the regulator sought 'unrealistic' terms for a bonds issue
  • Volt has $1.3 million of funding to support its efforts this financial year
  • The company is exploring funding options for stage I of its Bunyu Graphite Project in Tanzania, Mauritius and further afield
  • US institutional funds have been waiting to take parts in a notes issue that would fund the development
  • Parties are already signed up to receive stage I graphite if the development goes ahead

What does Volt Resources do?

Volt Resources Ltd (ASX:VRC) has set its sights on developing the first stage of its flagship project in Tanzania. It is run by Trevor Matthews, a finance professional with 25 years of resources industry experience and significant experience growing resource projects through to production. Matthews has headed up resource companies for more than 14 years and his achievements include growing one exploration company into a producer with a $2 billion market capitalisation.

What does Volt Resources own?

The key asset is the Bunyu Graphite Project which lies near infrastructure and sealed roads, 140 kilometres from the deepwater port of Mtwara.

Volt has a two-stage vision for the development of the 17.71 square kilometre project.

The first stage, outlined in a July 2018 feasibility study, would involve the processing of 400,000 tonnes of ore through a plant to produce about 23,700 tonnes a year of graphite products.

Aimed at establishing infrastructure and building market position, stage I would be an entree to a much bigger meal in the form of a stage II expansion.

The full mining scenario involves three open pits being developed over seven years with 2.8 million tonnes of mill feed being mined.

Financial analysis of the chosen scenario showed a favourable pre-tax net present value of US$18.6 million and an internal rate of return of 21% over a payback period of 4.4 years.

Total earnings before interest, tax, depreciation and amortisation (EBITDA) would be US$93.6 million over the 7-year stage I project period, for an annual average of US$13.1 million.

Stage I attracts an average free-on-board operating cost of US$664 a tonne and start-up capital costs of US$31.8 million.

The study had followed a large-scale pre-feasibility study (PFS) in December 2016 and a concurrent announcement that Volt had the largest graphite JORC mineral resource in Tanzania and one of the largest in the world.

Bunyu’s upgraded project JORC resource estimate is 461 million tonnes grading 4.9% total graphitic content (TGC).

The maiden JORC ore reserve came in at 127 million tonnes grading 4.4% TGC.

The Bunyu PFS valued the project at a robust pre-tax net present value (NPV) of US$1.31 billion, with an 87% internal rate of return (IRR) and 1.4-years payback based on a 22-year life of mine (LOM) that drew on optimised resources in the measured, indicated and inferred resource categories.

After producing the July feasibility study, Volt received exclusive 10-year mining licences for both stages of the Bunyu project, granted by the Mining Commission of the Ministry of Minerals of Tanzania in October 2018.

The approvals, which come with the option of 10-year renewals, came after Volt grabbed an environmental certificate for its project in September 2018.

Volt had inked two binding offtake agreement for graphite by August 2018, taking the total annual commitment to 10,000 tonnes.

Major Chinese graphite company Qingdao Tiangshengda Graphite committed to taking 9,000 tonnes annually from stage I production over five years with an option for a further five-year term.

US-based graphene company Nano Graphene Inc had committed to a 1,000-tonne production take.

The global expandable graphite market is expected to reach US$300 million by the end of 2025, growing at a compound annual growth rate (CAGR) of 7.5% between 2019 and 2025.

Last year graphite with grades of 94-97% changed hands for between US$850 and US$2,000 a tonne, depending on flake size.

Stage II development will target expected increases in demand for coarse flake graphite in the expandable graphite market and fine flake-size products used in battery anode materials and for other industrial uses.

What is happening on the funding front?

Volt suffered a setback in funding its first-stage development in January when the East African nation’s corporate regulator the Capital Markets and Securities Authority (CMSA) sought what Volt described as “unrealistic commercial terms” for a bonds note funding option the company had sought.

If CMSA’s conditions had been unproblematic, the approval would have seen Volt seek to raise US$40 million by issuing Tanzanian bonds or loan notes and listing these on the Dar es Salaam Stock Exchange (DSE), a listing approved by the DSE in December 2018.

Instead, the funding option stalled, with Volt last saying in late January it would “continue to discuss the note issue with the CMSA in the short term, to ensure an appropriate commercial balance is reached.”

In tandem, the company is now exploring other funding options to attract the $US40 support for stage I.

Among these, is a note issue and listing on the Stock Exchange of Mauritius (SEM) using principally the same Tanzanian note prospectus.

US-based institutional funds would be expected to participate in SEM stage I funding by subscribing to the notes.

The funding would also fuel a definitive feasibility study (DFS) for stage II development of Bunyu.

Volt had $108,000 cash on December 31 and subsequently attracted a six-month $1.3 million funding facility that would not erode shareholder equity during its term.

The company expects $368,000 of net inflows this quarter.

Inflection points

  • Advancement of alternative funding options such as Mauritius or a return to the Tanzanian exchange as a realistic option

  • Raising of sufficient funds for development of stage I and funding of stage II DFS

  • Sustained Tanzanian government support for Bunyu and mining projects more broadly

  • Progress of stage II plans to a robust DFS

  • The projected expansion of graphite markets and associated supply and demand pressures

CEO Trevor Matthews secures funding while holding to vision

“Our immediate priority remains on successfully completing our stage I development funding process to enable the commencement of the stage I development program,” Volt Resources chief executive officer Trevor Matthews told the market in late January.

“The interim bridge funding facility secured in January has provided added flexibility whilst the funding process is finalised.

“We look forward to providing further updates on the development funding process and the commencement of development work throughout this quarter.”

 

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