Stage 1 Feasibility Study For Bunyu Graphite Project

Stage 1 Feasibility Study Highlights:

  • Key objective of Stage 1 development is to establish infrastructure and market position in support of the development of the significantly larger Stage 2 expansion project
  • Stage 1 based on a mining and processing plant annual throughput rate of 400,000 tonnes of ore to produce on average 23,700tpa of graphite products positioning Volt as a meaningful participant in the global flake graphite market
  • Stage 1 financial analysis delivers favourable NPV and IRR over a payback period of 4.4 years
    • Pre-tax NPV (10%) of US$18.6M
    • Pre-tax IRR 21.0%
  • Total EBITDA of US$93.6M over 7 year Stage 1 project period – average annual EBITDA of US$13.1M
  • Development schedule of 12 months to first ore production - project development approvals and Stage 1 funding initiatives are well advanced
  • Stage 1 FS indicates average FOB operating cost of US$664 per tonne and start-up capital cost estimate of US$31.8M
  • Stage 1 development incorporates a significant amount of infrastructure, utilities and mine development work that benefits the Stage 2 expansion
  • DFS for Stage 2 is planned to proceed concurrently with Stage 1 project development
  • Volt currently completing the final binding offtake agreements for substantially all of Stage 1 annual production

Stage 1 Feasibility Study Key Outcomes and Highlights

The Bunyu Stage 1 FS was based on a mining and processing plant annual throughput rate of 400,000 tonnes to produce on average 23,700tpa of graphite products. The FS financial analysis showed favourable NPV and IRR over a payback period of 4.4 years. The capital and operating cost estimates used for the FS have been prepared to an accuracy of ±15%.

The 2018 mineral resource models were used to determine the Stage 1 FS Ore Reserve. The selected mining scenario, based on the outcomes of an open pit optimisation, was for three pits to be developed over 7 years with a total of 2.8Mt of mill feed being mined. The Ore Reserve reported within the pits comprises 46% Proven and 54% Probable Ore Reserves.

Overall location map Bunyu Graphite Project

Figure 1: Overall location map for the Bunyu Graphite Project

 

Figure 2 shows the planned layouts of the Bunyu 1 area. As well as the Bunyu 1 Stage 1 mine, the operation includes the processing plant and associated infrastructure. The planned location of the Stage 2 plant and infrastructure is also identified in Figure 2.

Figure 2: Bunyu 1 - Project Layout

Stage 1 Financial Outcomes:

Based on the technical, operating and financial parameters used for the Stage 1 Feasibility Study, the following key financial metrics are derived per Table 1 below:

Financial Performance Summary

Table 1: Bunyu Stage 1 FS - Financial Performance Summary

 

Sensitivity analysis was undertaken for five key economic drivers being graphite prices, feed grade, mineral recovery, capital expenditure and operating expenditure as shown in Table 2 and Figure 3 below. The sensitivity range used is +/- 30% movement from the FS estimate for each of the drivers. Revenue factors have the largest impact on project economics with graphite prices having the largest impact on NPV. Expenditure sensitivity analysis highlights the Bunyu Stage 1 FS has relatively low sensitivity to capital expenditure outcomes with operating expenditure movements providing a larger impact on project NPV.

NPV Sensitivity Analysis

Table 2: Bunyu Stage 1 FS NPV Sensitivity Analysis (Disc. Rate @ 10%, US$M, real, before tax)

 NPV Sensitivity Analysis

Figure 3: Bunyu Stage 1 FS NPV Sensitivity Analysis (Disc. Rate @ 10%, US$, real, before tax)

 

Income tax
Tanzanian corporate income tax rate of 30% has been applied to the project plus minimum tax (MTA) of 0.5% of sales revenue in loss years. Payments of corporate tax on profits are estimated to commence from year 5 of production, after utilising the benefits of carried forward income tax losses.

Exploration and Mineral Resource Definition

Exploration within the Bunyu Project area was undertaken using a staged approach for target identification and progression through to the definition of a Mineral Resources. The initial phase of drilling was between October and November 2015 (at a nominal spacing of 200m across strike on section lines spaced at 400m along strike). A second programme during 2016 (infilled areas to a nominal spacing of 100m across strike on section lines spaced at 200m along strike) and the Mineral Resources at Bunyu 1, 2 and 3 were updated by ROM Resources leading to the resource update as part of the PFS announcement in December 2016.

An outcome from the PFS for the Bunyu 1, Bunyu 2 and 3 deposits was that additional drilling was required to increase the resource size and to infill the existing drilling density, with both RC and diamond drilling, to increase the resource confidence at all three deposits. In late 2017, an infill drilling programme was conducted within the upper, central zone of Bunyu 1 at a spacing of approximately 40m to 40m, targeting the higher grade, near surface mineralisation. A summary of the Bunyu 1 drilling programmes is provided in Table 3.

Table Drilling programmes at Bunyu 1

Table 3: Drilling programmes at Bunyu 1

 

The geological model developed by Volt was reviewed in conjunction with Optiro and determined to be sound and representative of the Bunyu 1 area. Volt’s sectional interpretations were modified to interpret the higher grade mineralisation using a nominal cut-off grade of 3.5% TGC and to produce consistent layers of higher grade mineralisation along strike. In April 2018 the mineralisation interpretation was adjusted to include assay results from the 2017 drilling.

This interpretation was used to develop a wireframe model of the top four interpreted layers of higher grade graphitic mineralisation north of the interpreted fault zone, which are intersected by the Stage 1 north pit, and the top main layer south of the interpreted fault zone, that is intersected by the Stage 1 central and south pits. A layer of mineralisation that is to the south of the fault zone and above the main layer of mineralisation was also included. This model forms the basis of the 2018 Mineral Resource estimated for the Stage 1 development.

The geological interpretation is illustrated in the cross-section figures 4-6 which show the continuity of the graphite bearing stratigraphic units between drill holes and the three pits planned for the mining inventory: north, central and south pits respectively.

The 2018 resource model was developed for investigation of the Stage 1 pit designs. The global Mineral Resource for Bunyu 1 reported with the December 2016 PFS has not been re-estimated. The 2018 model is restricted to above 240 mRL and includes only the top two layers of mineralisation within the southern area and the top four layers of mineralisation within the northern area.

The Mineral Resources have been reported for the 2018 model above a 2.93% TGC cut-off grade and are included in Table 4. This cut-off grade was determined from technical and economic assessment of the mineralisation within the Stage 1 FS pits by Orelogy. This resource tabulation is not a resource statement for the entire Bunyu 1 project and is presented for validation of the 2018 resource model which has been used as the basis of the 2018 Stage 1 FS pit designs. Geological interpretation has identified additional mineralised layers: seven within the northern area, eight within the southern area and two within the eastern area.

Table 4: Bunyu 1 - Mineral Resources within the 2018 resource model (restricted above the base of model surface and above 240 mRL) reported above a cut-off grade of 2.93% TGC

Mineral Resources within the 2018 resource model

Note: this update does not cover the global Mineral Resources at Bunyu 1

 

 

Bunyu 1 Stage 1 North pit cross section

Figure 4: Bunyu 1 Stage 1 North pit cross section showing mineralised units and general topography

 

Bunyu 1 Stage 1 Central pit

Figure 5: Bunyu 1 Stage 1 Central pit cross section showing mineralised units and general topography

Mining

Volt's strategy for the Bunyu 1 Stage 1 Graphite Project is based on a plant throughput rate of 400,000 tonnes of ore per annum and a nominal mine life of approximately 7 years. Figure 7 graphically shows the activities involved across the project to bring the proposed product to market.

The Stage 1 FS mining study including pit optimisation, pit, waste rock dump and stockpile designs, dewatering, AMD ore and waste consideration and global mining schedule, grade, ore and waste tonnage and estimated mining operating costs and site establishment capital cost at Bunyu 1, has been undertaken by the Mining Consultant (Orelogy Mine Consulting).

The 2018 mineral resource model was used to determine the Bunyu 1 Stage 1 FS Ore Reserve and associated mine production schedule. The selected mining scenario, based on the outcomes of an open pit optimisation, was for three pits to be developed over 7 years with a total of 2.8Mt of mill feed being mined.

Outline of ore movement

Figure 7: Outline of ore movement from pit to market

 

The scope of the Stage 1 FS was to develop a project plan for a relatively small component of the Bunyu 1 deposit. The Bunyu Stage 1 FS Ore Reserve is considered a subset of the 2016 Namangale 1 Ore Reserve released by Volt on 15 December 2016 as part of the 2016 Namangale Pre-Feasibility Study. It therefore does not replace or update this reserve and is for the purposes of underpinning the Stage 1 FS. The overall Ore Reserve for Bunyu (previously Namangale) will be updated as part of the Bunyu Stage 2 DFS which will be based on the whole of the Bunyu 1 deposit.

Table 5 below details the Stage 1 Ore Reserve for Bunyu 1.

Stage 1 Ore Reserve

Table 5: Bunyu 1 Stage 1 Ore Reserve (Cut-off grade 2.93%)

 

The Bunyu Stage 1 FS Ore Reserve comprises 46% Proved and 54% Probable Ore Reserves. Both the Stage 1 Ore Reserve and Mineral Resource underpinning it have been prepared by competent persons in accordance with JORC requirements. The Bunyu Stage 1 FS Ore Reserve is a subset of the 2018 Mineral Resource Estimate and all Inferred Mineral Resource has been treated as waste.

The Bunyu Stage 1 FS mine plan and associated Ore Reserve were developed by Orelogy Consulting Pty Ltd. A site geotechnical assessment for the Bunyu Stage 1 FS open pits was carried out by specialist consultants Pells Sullivan Meynink. A total of four holes were drilled specifically to collect geotechnical data. Geotechnical logging of drill core was completed along with geotechnical testing of selected drill core. Geotechnical slope criteria were provided for the four different modelled weathering domains. The Bunyu Stage 1 pits are shallow, extending no more than approx. 40m below surface. The pits do not extend into fresh material.

Specialist consultant AQ2 undertook a site hydrological and hydrogeological appraisal as part of the Bunyu Stage 1 FS and the management of surface and groundwater has been based on the outcomes of their assessment. Groundwater inflows are expected to be minimal due to the low permeability of the predominantly oxide material and the drawdown of the water table from surrounding bores to supply water to the process plant.

The proposed mining method is a conventional, drill, blast, load and haul, open pit with waste material stacked in waste dumps. Mining is to be undertaken by a contractor under the control and management of VGT personnel and will likely be operated on a 12 hour 365 day per year basis as required. A bench height of 6 metres has been selected, excavated in 3 x 2 metre lifts or flitches. This is considered appropriate for both the orebody and the equipment proposed by mining contractors’.

An open pit optimisation was undertaken where only Measured and Indicated Mineral Resource were considered ore material, while all other material was reported as waste. The optimisation utilised the following modifying parameters.

  • Dilution and oreloss – Dilution has been modelled by reblocking the Resource Model, which uses a 0.5 metre block height, to a 2 metre block height to reflect the selectivity of the 2 metre flitch. The model was then re-reported and any material diluted below the cut-off grade was treated as waste. All Ore Reserves are based on this diluted mining model.
  • Pit Wall Slopes – Based on initial design recommendation from Pells Sullivan Meynink, which were confirmed prior to completion of the Ore Reserve estimate.
  • Mining Costs – Based on an initial Orelogy estimate of approx. $6.30US/tonne compiled from information collated from budget price submissions from prospective shortlisted mining contractors. This is in line with the final cost estimate.
  • Processing Parameters – The proposed ore treatment process involves crushing followed by grinding and graphite flotation. The final graphite product will be filtered, dried and bagged for transport and subsequent loading onto ships in sea containers. An initial estimate for processing cost of $24.25US/tonne was developed by BatteryLimits and Orelogy, which included allowances for processing fixed and variable costs, grade control and sustaining capital. A TGC recovery of 91% and average product grade of 93.5% were also provided by BatteryLimits and based on metallurgical testwork.
  • A net price inclusive of $859.40US/tonne TGC was supplied by Volt, which included allowances for government and vendor royalties, transport to port, port charges, shipping and insurance.
  • An initial project capital was not applied.

On the basis of the above parameters, a breakeven cut-off grade of 2.93% TGC was determined. This calculation did not include an allowance for dilution as the regularised model used to develop the Ore Reserve (described above) already allowed for dilution.

The open pit optimisation process was utilised to determine the extent of the highest value pits that provide the required inventory for the Stage 1 project (approx. 2.8Mt). As such small shells were selected to achieve this target that lay well within any final economic limit for Bunyu 1. Consequently, the optimisation parameters were only critical in terms of generating shells of different relative size and value, not in confirming an ultimate economic pit limit.

The optimisation shells selected indicated that pits were developed in three areas, nominally North, Central and South. Pit development will be staged with the North and then Central pits contributing to the initial plant feed with the South pit development commencing from Year 3. Ore feed is transitional with varying states of oxidation; the top of fresh rock is below the Stage 1 pit limits.

The Bunyu Stage 1 FS mining schedule was designed to generate a minimum 400,000tpa of plant feed annually, resulting in an average feed grade of 6.26% TGC. The schedule summary is shown in Table 6 below. Approximately 223kt of surficial waste material within the South pit are utilised as bulk fill material in the construction of the Tailings Storage Facility and Water Storage Dam. This material is removed during the plant construction phase and therefore the Bunyu Stage 1 Ore Reserve waste tonnes are depleted by this amount prior to scheduling. Consequently the schedule comprises a reduced waste tonnage of 2,044kt for the same amount of ore (2,815kt) mined over a 7.1 year periods at a lower strip ratio of 0.73. No Inferred Mineral Resource has been included as ore in the Bunyu Stage 1 FS Mining Schedule. The schedule was generated in monthly periods for the first two (2) years and the quarterly thereafter. Table 6 provides an annual summary of the schedule, which shows that Proved Ore Reserves constitute 82% of the plant feed for the first three (3) years of operation.

 Stage 1 FS Mining Schedule

Table 6: Bunyu Stage 1 FS Mining Schedule – Summary

 

Mining costs have been based on budget price submissions from mining contractors, with additional allowances for rehandle, overhaul and AMD management included by Orelogy as required. Site infrastructure requirements and costs have been developed by BatteryLimits, but the mining infrastructure and mining fleet will be supplied by the contractor.

Product will be transported by truck to either Mtwara or Dar es Salaam ports for on-shipping to the customer. Some upgrade of the road from site to the main B5 highway will be required and this has been allowed for in the FS estimation.

The current status of the environmental and regulatory requirements for the project are detailed below.

Metallurgical Testwork

During the feasibility and prior to the diamond drill core from the 2017 drill program becoming available an optimisation testwork program was conducted on remnant material from the 2016 bulk trench samples to investigate: '

  • Use of an all in one reagent, to potentially reduce the number of onsite reagents
  • Effects of increasing primary grind size
  • Rougher concentrate regrinding methods
  • Effects of grinding media size
  • Screening of intermediate cleaner concentrates to preserve coarse flakes

The outcomes were incorporated into the variability and composite metallurgical testwork undertaken on diamond drill core samples totalling 960kg for the Stage 1 planned development.

Testwork was undertaken at ALS Balcatta with composite details below.

Table 7: Bunyu 1 FS Composite DetailsFS Composite Details

Some comminution testwork was undertaken to complement the PFS range of testwork, the primary focus was grinding and flotation testwork on both a composite and variability samples showing overall the results indicate the variability in the area is low.

Table 8: Final Master Composite Flotation Results

Final Master Composite Flotation Results

 

Table 9: Summary of Variability Flotation Results

Summary of Variability Flotation Results

The above results were used in determining FS estimates including metallurgical performance, reagent consumption and graphite product mix for marketing discussions and price assumptions.

Processing, Infrastructure and Logistics

Processing will be by well-proven crushing, grinding and flotation methods. At Stage 1, ore will be fed to the processing plant, located at Bunyu 1, at a nominal rate of 400,000tpa to produce a nominal 2024,000tpa graphite product averaging 92-96% TGC at a nominal 93% recovery. This is based on metallurgical testwork programs managed by Battery Limits and undertaken at ALS Laboratory (ALS) Perth assessing the ore from the diamond drill core’s amenability to beneficiation by froth flotation through a range of testwork programs.

The proposed processing flowsheet consists of the following primary activities.

  • ROM Bin with grizzly and Apron Feeder
  • Two-stage Crushing Circuit – a primary jaw crusher and secondary cone crusher
  • Grinding – Rod mill in closed circuit with a vibrating screen
  • Flotation consisting of roughing and five stages of cleaners with inter-stage attrition regrinding
  • Secondary cleaner screening to remove coarse flake graphite to minimise overgrinding potential
  • Filtration and product drying
  • Screening of final product graphite
  • Bagging of sized fractions of graphite product
  • Tailings will be stored in a tailings storage facility on the mining lease
Outline of ore processing

Figure 7: Outline of ore processing to produce final graphite product

 

The bagged graphite product will be then trucked approximately 550 km to the port at Dar es Salaam (DAR) in eastern Tanzania where the bags will be loaded into 20’ or 40’ sea containers in preparation for shipping to customers. The feasibility study investigations have recommended DAR as the lower cost port option for Stage 1. This is due to the modest Stage 1 product tonnages and current absence of coastal shipping in Tanzania. Discussions and investigations are ongoing for a Mtwara based shipping solution for Stage 1 that is cost competitive and robust.

VGT will operate the processing and power plant, and manage a mining contractor, graphite product fleet transport and logistics functions.

Additional infrastructure to support the processing plant will include:

  • Bores and water storage reservoir for water supply
  • Office and workshop facilities
  • Generators for process plant and ancillary power
  • Access roads within the plant and the Project site
  • Camp facilities
  • A 3 MW generator plant using diesel fuel will supply power to the plant.

Water recovery will be utilised to minimise the process water requirement.

Regulatory and Environment

Regulatory

The Bunyu Prospecting Licences for the Project were granted in 2015/16 and remain valid until 2019/20. Under the Tanzanian Mining Act (2010), administered by the Ministry of Minerals, a Mining Licence (ML) or Special Mining Licence (SML) may be issued after the applicant has submitted various documents and plans including the following items:

  • Feasibility report (PFS provided by Volt)
  • Environmental certificate after approval of an Environmental and Social Impact Assessment (ESIA)
  • Environmental Management Plan (EMP)
  • Employment and Training Program
  • Procurement Plan
  • Resettlement Action Plan (RAP)
  • Program of Mining Operations
  • Infrastructure Requirements Report
  • Local Content Plan

VGT lodged applications for two Mining Licence (“ML”) applications covering the 18km2 footprint for Stage 1 and the Stage 2 expansion. The recent appointment of the Mining Commission has resulted in a large number of licence applications being approved. Once the environmental approval is obtained, the Company expects the mining licences to be approved soon thereafter.

Regulatory changes in July 2017 have been assessed by Volt and it is believed these changes will not prevent Volt from progressing with the current business strategy and plans for development of the Bunyu Project.

A summary of these legislative changes, which were enacted by the Tanzanian Parliament effective 1 July 2017 over the legal framework governing the natural resources sector in Tanzania, and their expected impact on Volt, was contained in the Company’s ASX announcement of the 7 July 2017.

The key impacts of those regulatory changes on Volt were summarised as follows:

  • The Tanzanian Government will have a 16% non-dilutable free carried interest in Volt’s Tanzanian subsidiary which increases from a current interest of nil.
  • There are a number of reporting and compliance related provisions in the new legislation that could cause some increased costs, but they are not materially more than Volt currently plans to monitor and report against. Therefore, these changes are seen as having negligible impact on the project.
  • The royalty rate remains at 3% for industrial mineral products which includes graphite products.
  • The introduction of beneficiation of minerals, metallic and precious minerals warehouses, concentrate liens and related provisions are not expected to have a material impact on Volt’s Bunyu project.
  • Volt has no material agreements with the Tanzanian Government and, therefore, is not impacted by the Review and Re-Negotiation of Unconscionable Terms Act.

Based on the information currently available, Volt remains of the view that the above legislative changes will not cause or prevent Volt from progressing with its current business strategy and plans for development of the Bunyu projects. All financial outcomes presented in this study represent 100% of the Bunyu Stage 1 Project held by Volt’s Tanzanian subsidiary.

Environment, Social and Community

During the first quarter of 2018, VGT lodged its Environmental and Social Impact Study (ESIS) with the National Environmental Management Council (NEMC). The lodgement of the ESIS follows the completion of a significant body of work including flora and fauna surveys, heritage surveys, and stakeholder identification, including public consultation and the development of environmental and social monitoring and management plans.

The ESIS covers the area required for the Stage 1 and Stage 2 expansion projects at Bunyu 1. The ESIS forms a key component of Volt’s near-term development plans for Bunyu 1 and following assessment by NEMC, will be lodged with the Environment Minister for approval. Once approved, Volt will be issued with its Environmental Certificate for the Bunyu project.

Following the issue of the Environmental Certificate, the ML applications can be progressed, and other secondary approvals obtained.

The Resettlement Action Plan has been completed and all approvals for the compensation arrangements for approximately 1,100 people either farming and/or living within the mining licences area. This is an important milestone as without the compensation arrangements being approved, the Bunyu Project would not be able to proceed to development. The footprint that the compensation area covers incorporates the Stage 1 development and Stage 2 expansion project.

Implementation Schedule

The two-stage approach to project development starting with a smaller-scale Stage 1 start-up project will enable establishing local relationships, project development and logistics paths. This will provide commercial quantities for marketing of larger annual flake graphite production, developing downstream processing options and enhance the ability to fund the subsequent Stage 2 development. The DFS for Stage 2 is planned to proceed concurrent with Stage 1 project development.

A high-level project schedule for stage 1 has been developed in Figure 8. The projected timeline from the approval of funding to first ore is just over one year with first shipment of product assumed during the commissioning period, assuming environmental and mining licence approvals and a number of secondary permits and licences are secured in a timely manner.

Project implementation schedule

Figure 8: Project implementation schedule

 

The most likely contracting strategy will be an EPC contract for the main plant, and a range of contracting strategies will be utilised in the construction of the infrastructure for the Project that are fit for purpose. Operating contracts for mining, a range of services and operating support contracts will be required to support the Stage 1 operation

 

Capital and Operating Cost Estimate Breakdown

The capital and operating cost estimates have been prepared to an accuracy of ±15%. The capital cost estimate summary is shown in Table 10. The capital cost estimate is US$31.8 M.

Capital cost estimate summary

Table 10: Capital cost estimate summary

 

The operating cost estimate is US$664/t graphite product (FOB) average for Stage 1, with a summary shown in Table 11. The equivalent CIF operating cost is estimated at US$678/t.

Operating cost estimate summary

Table 11: Operating cost estimate summary

Human Resources

The operating strategy for the Stage 1 FS is based on mining by contractor with management, processing, and administration by VGT. The Tanzanian government require local content plans and the progressive upskilling and empowering of local people and local businesses for a range of businesses including mining. A comprehensive local content plan has been submitted as part of the mining licence application process. There will be a training program that ensures on-the-job training and employment opportunities for Tanzanian citizens and has engaged local HR experts P5 HR Consulting Ltd to support the feasibility study and the project development and implementation.

VGT intends to maximise local employment as per our commitment to be a responsible employer to offset the impacts of potential physical and economic displacement. Expatriate labour will be employed only where suitable skills cannot be sourced locally or within country and expatriate staff will require to be fully trained and certified with relevant mining experience. Working permits will be valid for 24 months with possible renewals of a further 36 months, or longer under certain circumstances. A localisation program will be developed to ensure a smooth transition to local employment. The Stage 1 operations workforce is estimated at 61 people with up to 60 additional contractors.

Marketing and Sales

Currently natural and synthetic graphite production is around 2.5 million tonnes per annum. However, two industries that use natural and synthetic graphite have the potential to more than double global demand over the next five years - lithium-ion batteries and fire-retardant building materials. Industrial Minerals forecast growth in flake graphite is shown in Figure 9.

For the growth sectors of lithium-ion batteries and fire-retardant building materials, it is expected most new supply will be naturally-sourced graphite, which is materially beneficial to the Bunyu Project. It is the view of Volt’s Board and Senior Management that demand for flake graphite from the expandable applications sector (including fire-retardant building materials) will continue to increase ahead of industry forecasts, representing a significant opportunity for the Company over the short to medium term.

Flake Graphite Demand Forecast 2014-2025

Figure 9: Industrial Minerals: Flake Graphite Demand Forecast 2014-2025

 

Volt has had dialogue with end users, traders and intermediaries across China, Japan, Korea, Europe and North America. Due to the size of the Chinese graphite market, China has been identified as a target market for Volt’s product from Stage 1. Anecdotal evidence implies that China has ample small/medium flake graphite reserves in the ground. However, it has limited reserves of coarse flake sizes. Product size above 100# is classified as coarse flake and generally suitable for supplying the expandable graphite market. With this market background Volt signed non-binding Cooperation Agreements and Term Sheets with leading end-user groups in China in mid 2017 as follows.

CNBM General Technologies (previously CNBMGM) – Cooperation Agreement
SOE - largest building materials group in China with net assets exceeding US$80 B
10,000-15,000 t/y for 5 years with a further 5 years mutual option to extend.

AOYU – Cooperation Agreement
One of China’s leading Graphite miners and processors
10-20,000 t/y off-take for 5 years with a further 5 years mutual option to extend.

Qingdao Tianshengda Graphite Co. Ltd. (Tianshengda) – Term Sheet
Major graphite processor and distributor, specialising in expandables
10,000 t/y off-take for 5 years with a further 5 years mutual option to extend.

Qingdao Guangxing Electronics Material Co. Ltd. (GEM) – Term Sheet
Major graphite processor and distributor, specialising in expandables 5,000 t/y off-take for 5 years with a further 5 years mutual option to extend.

Further discussions have been held in April 2018 with CNBMGT, Tianshengda, GEM and other Chinese graphite groups to progress offtake discussions. Volt is now in the process of completing the final binding offtake agreements for substantially all of Stage 1 annual production. These offtake agreements are in addition to the existing binding offtake agreement with US based graphene company, Nano Graphene Incorporated.

Stage 1 will produce on average 23,700tpa of natural flake graphite product up to 96% TGC, with the majority of sales to China being the biggest market for flake graphite. Volt has worked with the customer groups that it is in discussion with to reduce the processing on the +100# product to increase the yield, flake size and target a lower grade (around 92%TGC). This has been confirmed in metallurgical testwork on diamond drill core in 2017 and for the feasibility metallurgical testwork and flowsheet development in the 2018 FS.

A portion of annual flake graphite product tonnage from Stage 1 will allow for sales to potential customer groups that require larger sample shipments to commit to contracts for the Stage 2 development.

Forecast pricing across the relevant flake sizes, purity and product types have been sourced from a combination of bespoke industry reports and material including research bodies, BMI and Industrial Minerals and Canaccord research. Shorter term pricing also reflects current industry reporting and discussions with end users.
Product size, grade distribution and average sales price is shown in Table 12.

Graphite product size, grade distribution and average sales price

Table 12: Graphite product size, grade distribution and average sales price

 

Expected average product basket price for Stage 1 based on the TGC grade, product size distribution and pricing is US$1195/t (CIF Qingdao). Prices are based on forecast annual prices for the 7 year life of Stage 1.

By Year 3 the Company plans to develop a third party SPG processing arrangement whereby fines products below 106 micron will be treated to produce uncoated spheroinised and purified (SPG) anode feedstock to market to battery cell manufacturers. It is assumed SPG product recovery of 50% will be achieved with the remaining 50% sold into the recarburizer and other existing and developing micro carbon product markets. The processing cost assumptions have been based on the AOYU cooperation agreement, discussions and site visits in mid-2017. Further discussions with third parties have identified other opportunities for toll processing or SPG joint venture or profit sharing arrangements.

Key Study Contributors

The consultants listed in table 13 contributed to the key components of the FS.

Contributing Consultants

Table 13: Contributing Consultants to the FS

Stage 1 Development Funding

As announced on 27 March 2018, the Company has prepared and lodged a prospectus with the Tanzanian regulators, the Dar es Salaam Stock Exchange and the Capital Markets and Securities Authority, seeking to raise US$40 million through the issue of Tanzanian listed Notes (Bonds).

Comments on the prospectus have been received from the relevant Tanzanian regulators and the Company is now seeking to finalise the prospectus. Once the content of the prospectus and other matters have been agreed, the Company expects to issue the prospectus to qualified institutional buyers and sophisticated investors in East Africa. The prospectus remains open for 10 business days following which the Company will proceed to a development decision on the Bunyu Stage 1 project.

Funds raised from the issue of the Bonds are expected to be used to cover the Bunyu Stage 1 development costs, interest during construction and the costs associated with the Bond issue. Any additional project development capital required (if any) is likely to be funded from a combination of debt, equity or product off-take pre-commitments.

Next Steps

Volt is currently completing the environmental approval for the Bunyu project and has lodged two mining licence applications covering the footprint for Stage 1 and the Stage 2 expansion project. Concurrently it is working with Exotix Capital and other advisers to seek approval for and issue a prospectus to raise the development capital for the Stage 1 development of the Bunyu Project.

The Company is also completing offtake agreements with Chinese partners for most of 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 commencement of construction.

Once funding is obtained, the Company will proceed with the Front End Engineering and Design for Stage 1 and place orders for long lead time components.

Concurrent with the Stage 1 development, Volt plans to commence work on the definitive feasibility study for the Stage 2 expansion.

Competent Person Statement

The information in this document that relates to Mineral Resources is based upon information compiled by Mrs Christine Standing who is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists. Mrs Standing is an employee of Optiro Pty Ltd and has sufficient experience relevant to the style of mineralisation, the type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mrs Standing consents to the inclusion in the report of a summary based upon her information in the form and context in which it appears.

The information in this document that relates to Ore Reserves was compiled by Mr Ross Cheyne who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Cheyne is a Director of Orelogy Consulting Pty Ltd and has sufficient experience relevant to the style of mineralisation, the type of deposit under consideration and to the activity undertaken to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Cheyne consents to the inclusion in the report of a summary based upon his information in the form and context in which it appears.