Volt Resources' 70% acquisition of European graphite group will put it ahead of peers as a producer

Volt Resources Ltd (ASX:VRC) (FRA:R8L) has signed binding share purchase agreements (SPAs) to acquire a 70% interest in the Ukraine-based Zavalievsky group of companies (ZG) for a total of US$7.7 million, payable in two instalments of US$3.8 million. Completion of the acquisition will position Volt well ahead of most of its peer graphite companies by transforming it into a graphite producer without the usual greenfield financing and development risk.  Shares today have been up to 30% higher to A$0.026 and have risen from A$0.008 since the market close on December 21, 2020. Volt also intends to continue to progress the exploration and development of its wholly-owned Bunyu Graphite Project in Tanzania and its gold projects in Guinea, West Africa.  "Significant step forward" Volt managing director Trevor Matthews said: “The signing of the binding share purchase agreements is a significant step forward for Volt in its ambition to be a graphite producer. “The acquisition of a controlling interest in ZG Group positions Volt years ahead of its peer graphite companies and without the usual development risks associated with a greenfield project. “As previously stated by Volt’s chairman Asimwe Kabunga, this is a rare opportunity to acquire an existing graphite business located in Europe at a fraction of the development cost of a new project. “Following Volt’s recently announced membership of the European Battery Alliance (EBA) providing access to business development opportunities and a business investment platform, the ZG Group acquisition has the potential to make Volt a key participant in the supply of graphite and battery anode materials into the growing European market with excellent access to other markets in the USA and Middle East.” Share purchase agreement The SPAs were signed with existing shareholders of the ZG Group to acquire a 70% interest in each of the companies comprising the group, namely: Zavalievsky Graphite LLC - processing plant buildings, processing plant, mining equipment, power sub-station and distribution; Stone Found LLC – crushed granite operations and plant; and Graphite Invest LLC – holds a 70% interest in PJC Zavalievsky Graphite Kombinat – mine, land, main administration office building - and a 79% interest in the 636 hectares of freehold land on which the Zavalievsky mine, processing plant and other related buildings and facilities are located. The first instalment of US$3.8 million is due on completion of the transaction, with the second instalment due six months thereafter. Completion of the transaction remains subject to the satisfactory completion of Volt’s due diligence by May 14, 2021, or such later date as the parties may agree. To date, the company has not identified anything from the due diligence inquiries that would prevent the transaction from completing. During this period, Volt intends to finalise its arrangements to fund the first instalment, which may be equity, debt or a combination of the two. Advantages of purchase The Zavalievsky Graphite business in the Ukraine is in close proximity to key markets with developments in lithium-ion battery (LIB) facilities planned to service the European-based car makers and renewable energy sector. It also plans to produce battery anode material using existing graphite production to become a fully integrated supplier to LIB cell makers based in Europe and has the potential to considerably increase its large flake production. It produces a high-value 'green' purified 99.5% total graphitic content (TGC) product and has a long-life multi-decade producing mine that has further exploration upside. Volt expects to be able to leverage off ZG's existing customer base and graphite product supply chains in developing its existing Bunyu Graphite Project in Tanzania. Its experienced workforce can help with training, commissioning and ramp-up for the Bunyu development which could materially assist the ability to finance the Bunyu project development; There is potential to generate material cashflow, making Volt internally funded for corporate costs and working capital into the future. The acquisition will also give Volt a 79% interest in 636 hectares of freehold land which comes with the mine, processing plant and other buildings and facilities. Battery anode materials ZG Group has plans to install a processing plant and equipment to commence the production of spheronised purified graphite (SPG) for the European LIB anode market within the next 12 months. The Zavalievsky mine’s strategic location has already attracted interest from LIB cell manufacturers and major carmakers. European Battery Alliance Volt Resources has also joined the European Battery Alliance, a platform for key stakeholders throughout the entire European battery value chain. Matthews said: “As Volt progresses with the acquisition of the Zavalievsky graphite business to become a producer of graphite products in Europe, there is a great opportunity to build relationships and obtain access to capital to support the expansion and product development plans for the graphite business. “Membership of the EBA250 network will facilitate that process and position Volt and its potential European graphite business as an early leader of graphite production and downstream products in Europe.”