Volt Resources' (AX:VRC) recent pre-feasibility study on Namangale outlines a 170ktpa operation feeding a high-purity graphite concentrate into the lithium-ion battery (LiB) and expandable graphite end-markets. We have compared Namangale to six of the most advanced East African graphite projects and note Volt’s high ranking in terms of estimated operating margin and concentrate purity. We note the project’s slightly above average capital intensity, but also that it is c 17% lower than Magnis Resources’ BFS-stage Nachu project situated close by. We initiate coverage on Volt with a fully diluted (50/50 debt/equity split) valuation of A$264m or 27 cents per share, using a 10% discount rate and US$1,684/t concentrate basket price. Volt has also secured a binding off-take agreement with a graphene developer, which we view as technically de-risking Namangale graphite for use in high-value and high-tech applications.
Met works positive for Namangale battery product
Metallurgical test work to date confirms Namangale as an attractive, natural source of battery-grade and expandable-grade graphite. With the current size of the natural flake market being c 0.4Mtpa, this market would need to grow considerably to meet expected electric vehicle adoption. Conversely, the synthetic graphite market, dominated by Chinese production, is around 1.2Mtpa. With the adverse environmental issues this graphite type brings to green-tech applications, it would be highly advantageous for Volt to disrupt this market, if possible, with a meaningful supply of cheaper, natural high-purity graphite flake. Namangale is forecast by Volt to produce 170ktpa of graphite concentrate. Volt currently has one binding offtake agreement related to graphene (see page 11 for details) and non-binding MoUs with three Chinese battery makers. Conversion of these MoUs into binding commercial offtake agreements is critical to de-risking our revenue assumptions.
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