Volt to make $126m from Tanzanian graphite play

ASX listed flake graphite company Volt Resources will churn out an EBITDA of just over $17.5m per annum from the small-scale, Stage 1 development of its Bunyu graphite project in southern Tanzania.

Stage 1 is based on a mining and processing plant throughput of 400,000 tonnes of ore annually, to produce an average of 23,700 tonnes of premium graphite product, positioning the company as a recognizable player in the global flake graphite market.

Feasibility results for the Stage 1 development at Bunyu show a pre-tax NPV of around $25m on the back of a 21% IRR.  

The project will initially operate three open pits over 7 years, providing a total EBITDA of some $126m for the period with a payback of 4.4 years.

Start up CAPEX costs are estimated at just $43m.

Volt is seeking to raise USD$40m to underwrite Stage 1 via the issue of Tanzanian listed bonds.

The company is looking to lodge a prospectus with Tanzanian regulators, the Dar es Salaam Stock Exchange and the Capital Markets and Securities Authority in the east African nation.

Volt is presently endeavouring to finalise the prospectus and once the content and other matters are agreed, it will issue the document to qualified institutional buyers and sophisticated investors in East Africa.

The company says it can produce the first ore from Bunyu within 12 months of the capital raising being completed.

It will then look to establish infrastructure and a market position to support the development of a significantly larger Stage 2 expansion project that will see it produce 170,000 tonnes of graphite product a year over a 22 year mine life. 

The Stage 1 works incorporate a significant amount of infrastructure, utilities and mine development that would benefit and potentially fast-track a future decision to expand into the proposed Stage 2 development.

The company is also completing off-take agreements with Chinese partners for most of the Stage 1 annual flake graphite production. The key plant construction contract and a number of other work packages will also be entered into in readiness for the proposed commencement of construction.

Once the necessary funding is obtained, Volt will proceed with the Front-end engineering and design for Stage 1 and place orders for long lead-time components.

Volt is also planning to get straight into a DFS for the Stage 2 expansion.

CEO, Trevor Matthews said: “The Stage 1 Feasibility Study is another important step forward in Volt’s plan to become one of the top three global producers of natural flake graphite.”

“The company has been implementing a two stage development strategy following the completion of a large scale PFS in December 2016. Concurrent with the PFS completion, Volt announced the largest graphite JORC mineral resource in Tanzania and one of the largest in the world.”

“Stage 1 is focussed on the development of a nominal 20,000 to 25,000tpa graphite mine and processing facility in Tanzania with planned exports of graphite products into the USA, China and other markets.”

“The proposed Stage 2 development is an expansion of Stage 1 production based on the market demand for Bunyu’s graphite products and leveraging the large scale graphite mineral resource and Bunyu’s close proximity to critical infrastructure.”

Volt has delineated a significant mineral resource of 461 million tonnes grading 4.9% total graphitic carbon at its Bunyu project, which is the largest in Tanzania.

The JORC-compliant ore reserve is estimated at 127 million tonnes grading 4.4% TGC.

The company has reported an outstanding flake distribution of up to 81.3% in the sought-after Super Jumbo, Jumbo and Large flake categories for the Bunyu graphite project.

Volt has achieved excellent purity of product without the use of chemicals by simply crushing and then floating the ore component off.

Success of the Stage 1 development project will be perceived positively by the broader market and a reasonable predictor of a Stage 2 expansion of the project, particularly if the prices for the company’s premium graphite product remains strong.