Volt bags offtake deals in China

Published at Jun 16, 2016, in Small Caps

Volt Resources (ASX:VRC) has plugged into the growth of lithium-ion battery production in China, signing three non-binding offtake deals to the tune of 100,000 tonnes of graphite per annum.

It told its investors in a note today that it had managed to bag three separate non-binding memorandum of understandings with three Chinese companies – all of which manufacture lithium-ion batteries.

Combined, the three MOU’s equate to 100,000 tonnes of graphite per annum from the company’s flagship Namangale project in Tanzania.

The three non-binding deals lay the groundwork for detailed test work with an eye towards wrapping up binding offtake arrangements.

The three companies are Optimum Nano, Huzhou Chungya, and Shenzhen Sinuo – with the former of the trio the second largest producer of lithium-ion batteries in China.

It has supplied 80,000 electric vehicles with lithium ion batteries to date – specialising in providing batteries to electric buses and trucks.

VRC said a recent Benchmark Intelligence report indicated that despite 100% of the natural spherical graphite being produced in the country and production expanding at nearly 50% last year – there are fears that emerging players such as Tesla could make supply scarce.

“What is abundantly apparent is the incredible expansion plans that are taking place in the lithium-ion battery industry within China,” VRC executive chairman Stephen Hunt said.

“Signing the MOUs is a very significant step in the marketing process and positioning ourselves to be at the forefront of graphite supply.”

In other VRC news, it confirmed that it had managed to bag $4 million from a placement of 40 million shares at 10c each before costs – a price which is a 29.6% and 12% premium to the company’s 30 and 15 volume weighted average price respectively.

The placement was made to “a strategic institutional investor” – demonstrating the corporate appetite for graphite companies as the likes of Telsa continue to make waves in the lithium-ion battery market – and subsequently the raw material market.

Last month it managed to bag the services of Edward Sugar-backed EAS Advisors to help tap investors in North America.

Sugar has a track record of investing in early-stage ASX-listed resources plays, having participated in deals worth a cumulative $US3.5 billion ($A4.8 billion) to date.

The offtake agreements come despite the company not having yet completed a pre-feasibility study at its Namangale project – with the company confirming today that a pre-feasibility study would be completed in the fourth quarter this year.

If nothing else, the non-binding MOUs with Chinese manufacturers will give investors greater certainty around the demand-side for graphite from the project.

More on Volt Resources’ Namangale project

The project is one of the largest in Tanzania, with a JORC compliant inferred resource of 179 million tonnes at an average grade of 5.1% total graphitic content.

MOZ’s Tanzania operations are located close to the deep-water port of Mtwara, 140km from the Namangale Prospect.

Location of the Nachingwea Project tenements, including Namangale project

Location of the Nachingwea Project tenements, including Namangale project (ex-Mozambi Resources)

Sealed roads and high-voltage are available across its prospects, connecting MOZ to export routes internationally.

Mtwara Port has a capacity of 400,000 metric tonnes per year and could handle up to 750,000 metric tonnes per year with the same number of berths if additional equipment is put in place for handling containerised traffic.

The port is currently heavily underutilised, with approximately 34% of its total capacity currently in use.

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