Volt Resources Ltd (ASX:VRC) (FRA:R8L) is nearing completion of the due diligence process that if successful will result in acquisition of a 70% interest in the Ukraine-based Zavalievsky (ZG) group of companies.
The ZG Group’s graphite mine and processing facilities are adjacent to the town of Zavallya, about 280 kilometres south of the Ukraine capital Kyiv and 230 kilometres north of the main port of Odessa.
Completion of the acquisition will transform Volt into one of the few ASX-listed graphite producers and this is on track to occur this quarter.
This will also position Volt well ahead of most of its peer graphite companies to become a graphite producer without the usual time and risk related to complete greenfield project financing, construction, commissioning and ramp-up.
Due diligence progress
Volt has appointed four international and locally recognised consultants to undertake the acquisition due diligence under the agreed scopes of work to review and report on different areas of the Zavalievsky business including:
- Financial and Tax – Deloitte Ukraine;
- Legal and Commercial – AVELLUM;
- Technical (processing, engineering, capital projects, organisation) – Bilfinger Tebodin Ukraine; and
- Technical (geology, mining, environment) – Wardell Armstrong International.
The Financial and Tax draft due diligence report by Deloitte Ukraine and the Legal and Commercial draft due diligence report by AVELLUM have been received and both are under review by the Volt board and management
The combined Technical draft due diligence report by Bilfinger Tebodin Ukraine and Wardell Armstrong International is expected this week.
According to Volt, due diligence to date hasn’t identified anything that would prevent the acquisition from completion.
Advantages of purchase
The Zavalievsky graphite business in Ukraine is close to key markets with developments in the lithium-ion battery (LIB) facilities planned to service the European-based car makers and renewable energy sector.
ZG 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.
As well as the imminent producer status, 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.
ZG’s 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 cash flow, 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 start the production of spheronised purified graphite for the European LIB anode market within the next 12 months.
The Zavalievsky mine’s strategic location for the future supply of SPG to the European markets has already attracted interest from LIB cell manufacturers and major car-makers.
Completion of the transaction remains subject to the satisfactory completion of Volt’s due diligence enquiries by May 14, 2021.
During this period, Volt intends to finalise its arrangements to fund the first instalment of US$3.8 million of the proposed US$7.6 million purchase price for the acquisition of the 70% interest in the ZG Group, which may be equity, debt or a combination of the two.