Volt Resources announced on 25 October that it has appointed Exotix Capital as lead to secure up to US$30m of a Tanzanian bond issue. Exotix Capital is a banking firm with specialist knowledge and a large network of African institutions, family offices and regional credit funds. A US$30m bond issue would satisfy the development capital required to build out Volt’s revised Phase 1 development approach to its Bunyu graphite project (previously named Namangale). Phase 1 is anticipated to produce 20ktpa of graphite products to feed into the expandable graphite, battery-anode and foundry product end-markets. To this end Volt has secured pre-commercial MOU-type agreements for upwards of 20ktpa of graphite products with Chinese customers and downstream graphite processors. We suspend our current forecasts and await Volt’s release of a revised development study to revise our base case valuation for the Bunyu graphite project.
Written by
Volt Resources |
Pursuing Phase 1 capital |
Phase 1 financing commenced |
Metals & mining |
25 October 2017 |
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Volt Resources is a research client of Edison Investment Research Limited |
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Volt Resources announced on 25 October that it has appointed Exotix Capital as lead to secure up to US$30m of a Tanzanian bond issue. Exotix Capital is a banking firm with specialist knowledge and a large network of African institutions, family offices and regional credit funds. A US$30m bond issue would satisfy the development capital required to build out Volt’s revised Phase 1 development approach to its Bunyu graphite project (previously named Namangale). Phase 1 is anticipated to produce 20ktpa of graphite products to feed into the expandable graphite, battery-anode and foundry product end-markets. To this end Volt has secured pre-commercial MOU-type agreements for upwards of 20ktpa of graphite products with Chinese customers and downstream graphite processors. We suspend our current forecasts and await Volt’s release of a revised development study to revise our base case valuation for the Bunyu graphite project.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/15 |
0.0 |
(0.7) |
(0.3) |
0.0 |
N/A |
N/A |
06/16 |
0.0 |
(3.3) |
(0.7) |
0.0 |
N/A |
N/A |
06/17 |
0.0 |
(2.4) |
(0.3) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
First Bunyu production targeted for end CY18
Pending a successful completion to its Phase 1 financing, Volt targets end CY18 for first graphite production from the Bunyu graphite project. This is also dependant on project execution milestones such as completion of a revised feasibility study, all permit approvals being received and conversion of its pre-commercial MOU-type agreements into binding commercial offtake agreements.
Permitting progress
Alongside its ongoing test work programmes on Bunyu graphite and finalising the development approach for this project, Volt is also obtaining the correct permits to start construction. An Environmental and Social Impact Assessment (ESIA) is expected to be finalised “in the next few weeks”. Pending approval of the ESIA, Volt will then lodge its Mining Permit Application, expected by end CY18.
Valuation: On hold until scoping study released
Our previous Namangale pre-feasibility study valuation of A$0.27/share is on hold while Volt completes a revised project scope and phasing for Namangale. This will involve a staged modular design to allow a ramp-up in production as the graphite market moves away from demand tied to traditional uses such as foundry products and towards growth in the markets for expandable graphite and battery anode material. However, in terms of its enterprise value per tonne of graphite resource (US$0.05), we calculate that it trades at a very high 99% discount to the wider market average of US$6.42/t. This is likely due to both its very large resource base and its early stage of project development.
Exhibit 1: Financial summary
Accounts: IFRS, Yr end: June, AUD: Thousands |
|
|
2015A |
2016A |
2017A |
Total revenues |
|
|
0 |
0 |
0 |
Cost of sales |
|
|
0 |
0 |
0 |
Gross profit |
|
|
0 |
0 |
0 |
SG&A (expenses) |
|
|
(668) |
(3,351) |
(3,307) |
Other income/(expense) |
|
|
0 |
0 |
0 |
Exceptionals and adjustments |
Exceptionals |
|
0 |
0 |
0 |
Depreciation and amortisation |
|
|
(3) |
0 |
0 |
Reported EBIT |
|
|
(670) |
(3,351) |
(3,307) |
Finance income/(expense) |
|
|
5 |
24 |
52 |
Other income/(expense) |
|
|
0 |
0 |
0 |
Exceptionals and adjustments |
Exceptionals |
|
0 |
0 |
0 |
Reported PBT |
|
|
(666) |
(3,327) |
(3,255) |
Normalised PBT |
|
|
(666) |
(3,327) |
(2,368) |
Income tax expense (includes exceptionals) |
|
|
0 |
0 |
153 |
Profit from discontinued operations (net of tax) |
|
|
0 |
(480) |
0 |
Reported net income |
|
|
(666) |
(3,807) |
(3,102) |
Basic average number of shares, m |
|
|
244 |
583 |
968 |
Basic EPS (cents) |
|
|
(0.3) |
(0.7) |
(0.3) |
Normalised EPS (cents) |
|
|
(0.2) |
(0.4) |
(0.3) |
Balance sheet |
|
|
2015A |
2016A |
2017A |
Property, plant and equipment |
|
|
0 |
0 |
124 |
Goodwill |
|
|
0 |
0 |
0 |
Intangible assets |
|
|
0 |
0 |
0 |
Other non-current assets |
|
|
703 |
10,773 |
16,614 |
Total non-current assets |
|
|
703 |
10,773 |
16,738 |
Cash and equivalents |
|
|
554 |
7,618 |
102 |
Inventories |
|
|
0 |
0 |
0 |
Trade and other receivables |
|
|
17 |
104 |
148 |
Other current assets |
|
|
0 |
104 |
52 |
Total current assets |
|
|
571 |
7,826 |
303 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
Other non-current liabilities |
|
|
0 |
0 |
0 |
Total non-current liabilities |
|
|
0 |
0 |
0 |
Trade and other payables |
|
|
160 |
1,108 |
667 |
Current loans and borrowings |
|
|
0 |
0 |
0 |
Other current liabilities |
|
|
0 |
0 |
22 |
Total current liabilities |
|
|
160 |
1,108 |
689 |
Equity attributable to company |
|
|
1,336 |
17,707 |
16,570 |
Non-controlling interest |
|
|
(222) |
(216) |
(218) |
|
|
|
|
|
|
Cashflow statement |
|
|
2015A |
2016A |
2017A |
Profit for the year |
|
|
(666) |
(3,807) |
(1,965) |
Depreciation and amortisation |
|
|
3 |
0 |
0 |
Share based payments |
|
|
216 |
1,774 |
0 |
Other adjustments |
|
|
3 |
554 |
0 |
Movements in working capital |
|
|
91 |
117 |
0 |
Cash from operations (CFO) |
|
|
(353) |
(1,362) |
(1,965) |
Capex |
|
|
(24) |
(3,039) |
(6,400) |
Acquisitions & disposals net |
|
|
(178) |
(364) |
(10) |
Other investing activities |
|
|
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(202) |
(3,403) |
(6,410) |
Net proceeds from issue of shares |
|
|
590 |
11,829 |
866 |
Movements in debt |
|
|
0 |
0 |
0 |
Other financing activities |
|
|
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
590 |
11,829 |
866 |
Currency translation differences and other |
|
|
0 |
0 |
0 |
Increase/(decrease) in cash and equivalents |
|
|
36 |
7,064 |
(7,509) |
Cash and equivalents at end of period |
|
|
554 |
7,618 |
102 |
Net (debt) cash |
|
|
554 |
7,618 |
102 |
Movement in net (debt) cash over period |
|
|
554 |
7,064 |
(7,516) |
Source: Company accounts, Edison Investment Research
|
|
Research: Financials
Record’s second quarter update showed an increase in dollar denominated AUME to a new high of over $60bn. Flows were modestly negative but this was well within the normal range of quarterly volatility; the main reasons for a moderate reduction in our earnings estimates are the currency-related reduction in sterling AUME and increased costs to enhance customer service and deal with regulatory changes. After recent weakness the shares trade on below average earnings multiples and offer an attractive yield.