Volt Resources completes due diligence and will complete European graphite acquisition to become producer

Volt Resources Ltd (ASX:VRC) (FRA:R8L) has completed due diligence for the acquisition of a 70% interest in the Zavalievsky group of companies (ZG Group) and following formal notification to the existing shareholders later today, the transaction will become unconditional. This acquisition will result in the transformation of Volt into a graphite producer from ZG Group's operations in Ukraine. Shares higher Investors have responded positively with shares up as much as 11.54% in early trade to A$0.29, a new three-year high. Due diligence on the following areas of the Zavalievsky business has been completed and accepted by the Volt board and management: 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 company will now formally advise the vendors that the due diligence enquiries have been satisfactorily completed, meaning the transaction is now unconditional and will proceed to completion within 10 business days. Completion occurs with the payment of the first instalment of US$3.8 million by Volt to the vendors and the transfer by the vendors of 70% of the issued share capital in each of the ZG Group companies to Volt. ASX listed graphite producer The acquisition will transform Volt into one of the few ASX listed graphite producers and will position the company 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. ZG Group has plans to install a processing plant and equipment in order to commence the production of spheronised purified graphite (SPG) 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 carmakers. Key transaction advantages The ZG graphite business is in Eastern Europe, close to key markets with significant developments in lithium-ion battery (LIB) facilities planned to service European-based carmakers and the renewable energy sector. Notably, ZG plans to produce battery anode material using existing graphite production to become a fully integrated supplier to LIB cell makers based in Europe and already produces a high value ‘green’ purified 99.5% TGC product and has the potential to significantly increase its high-value large flake production. In addition, the long life multi-decade producing mine has further exploration upside – as well as an existing customer base and graphite product supply chains which Volt expects to be able to leverage off in developing its existing Bunyu Graphite Project in Tanzania. Other advantages include: Excellent transport infrastructure covering road, rail, river and sea freight combined with reliable grid power, ample potable groundwater supply and good communications; An experienced workforce which can assist with training, commissioning and ramp-up for the Bunyu development (a key risk for financiers and could materially assist the ability to finance the company’s Bunyu graphite project development); Potential to generate material cashflow which could make Volt internally funded for corporate costs and working capital into the future; Co-products of quarry stone for the domestic market and garnet for the European market that could generate material cash flow for relatively low capital and operating cost leveraging the synergies from the graphite business infrastructure and experienced mining and processing staff; and A 79% interest in 636 hectares of freehold land, with the mine, processing plant and other buildings and facilities located on that land. ZG Group acquisition specifics Volt has signed binding Share Purchase Agreements (SPAs) with existing shareholders of the ZG Group to acquire a 70% interest in each of the companies comprising the ZG Group2, namely: Zavalievsky Graphite LLC - processing plant buildings, processing plant, mining equipment, power sub-station and distribution; Stone Found LLC – crushed granite operations and plant; and Graphite Invest LLC – holds a 70% interest in PJC Zavalievsky Graphite Kombinat – mine, land, main administration office building - it is this entity that holds a 79% interest in the 636 hectares of freehold land on which the Zavalievsky mine, processing plant and other related buildings and facilities are located. Under the SPAs, the existing shareholders have agreed to sell to Volt 70% of the total issued equity in each ZG Group company for an aggregate purchase price of US$7.6 million payable in two instalments of US$3.8 million. The first instalment is due on completion of the transaction (within 10 business days), with the second instalment due 6 months thereafter. Volt is reviewing a number of debt proposals to fund the first instalment of US$3.8 million of the US$7.6 million purchase price for the acquisition of the 70% interest in the ZG Group.