Volt Resources — Fully funded to complete pre-development goals

Volt Resources — Fully funded to complete pre-development goals

Volt has secured A$3.2m via two share issues to existing and new shareholders. The two raises (A$2.3m on 1 November and A$0.9m on 3 November 2017) will allow Volt to complete the critical path revised feasibility study (FS) on its Bunyu graphite project and for working capital purposes. These fund-raises will go towards completing management’s revised FS to better tailor its Bunyu graphite project to more closely match the opportunity in the battery-anode and fire-retardant end-markets, both of which provide the highest growth end-markets for future Bunyu graphite products. We also consider the success of these fund-raises, with the first heavily oversubscribed (56% above the original A$1.5m value), as a vote of confidence in Tanzania and its ability to treat graphite as an industrial mineral and separate from the ongoing negotiations regarding producers of precious metals and diamonds in country.

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Written by

Volt Resources

Fully funded to complete pre-development goals

Fund-raise

Metals & mining

3 November 2017

Price

A$0.024

Market cap

A$23m

A$1.28/US$

Net cash* (A$m) at end June 2017 *Excludes November 2017 fund-raise

0.1

Shares in issue

977.4m

Free float

71%

Code

VRC

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.0

(3.7)

(67.1)

Rel (local)

0.3

(7.0)

(70.9)

52-week high/low

A$0.08

A$0.02

Business description

Volt Resources is a graphite development company. Its main asset is the currently 100%-owned Bunyu graphite project located in Tanzania. The company has completed a PFS, is now undertaking an FS on a revised modular project design and intends to initiate first graphite production by end 2018.

Next events

Revised FS

Q118

Analysts

Tom Hayes

+44 (0)20 3077 5725

Charles Gibson

+44 (0)20 3077 5724

Volt Resources is a research client of Edison Investment Research Limited

Volt has secured A$3.2m via two share issues to existing and new shareholders. The two raises (A$2.3m on 1 November and A$0.9m on 3 November 2017) will allow Volt to complete the critical path revised feasibility study (FS) on its Bunyu graphite project and for working capital purposes. These fund-raises will go towards completing management’s revised FS to better tailor its Bunyu graphite project to more closely match the opportunity in the battery-anode and fire-retardant end-markets, both of which provide the highest growth end-markets for future Bunyu graphite products. We also consider the success of these fund-raises, with the first heavily oversubscribed (56% above the original A$1.5m value), as a vote of confidence in Tanzania and its ability to treat graphite as an industrial mineral and separate from the ongoing negotiations regarding producers of precious metals and diamonds in country.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

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.

Phase 1 small enough to keep CY18 as start-up

Pending a successful completion of its Phase 1 financing (see our 25 October update note), 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 FS, all permit approvals being received and conversion of its pre-commercial MOU-type agreements into binding commercial offtake agreements.

A$4.8m available from options expiring end CY17

Volt has a total of 240.1m options exercisable at 2c expiring before end CY17. Given the current share price of 2.4c, if exercised these options would raise a further potential A$4.8m in funds to Volt.

Valuation: Cheap on EV/t basis, DCF on hold for FS

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/t), 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, Year-end: June, A$000s

 

 

2015

2016

2017

Profit & loss account

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

 

 

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)

Cash flow statement

 

 

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

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Volt Resources and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Represe
ntative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Volt Resources and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Represe
ntative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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