ASX-listed Volt Resources has executed a binding term sheet with segregated portfolio company Unbounded Opportunities Fund (UOF) to provide funding and development support for the Bunyu graphite mine and processing plant, in Tanzania.

Under the terms of the agreement, UOF will make a conditional $11.1-million equity investment through Volt’s subsidiary Volt Graphite Tanzania (VGT), acquiring a 62% stake in the project, while Volt Resources will retain a 38% interest.

The agreement establishes a framework for joint project development, including measures aimed at increasing yearly production rates, improving capital cost efficiency and maintaining low unit operating costs.

UOF will prepare an updated feasibility study for Stage 1 of the Bunyu graphite project, with a targeted project capital cost of $37-million, production of 40 000 t/y of 94% total graphite content (TGC) concentrate and a target unit operating cost of $450/t.

UOF has committed to fund any capital cost overruns without altering its equity position, although its equity stake may be reduced if the actual operating cost exceeds the target by more than 10%.

“This is a significant milestone for Volt to find a substantial partner to provide equity funding, combined with project cost and management support, to facilitate the development of the Bunyu graphite project.

“To overcome the funding issues arising from relatively low graphite prices, UOF is confident it can deliver increased annual concentrate production rates with efficient capital cost expenditure and lower unit operating costs when compared with the 2023 feasibility study.

“We look forward to working with UOF in the coming months to complete the significant programme of work to move the Bunyu graphite project to financial close,” Volt executive chairperson Asimwe Kabunga said.

“UOF is extremely pleased to be working with Volt Resources on the development of the Bunyu graphite project. We are confident in our joint ability to execute this project successfully and deliver outstanding results in Tanzania, for the mutual benefit of both group’s stakeholders. We are also interested in Volt’s downstream graphite refining strategy and look forward to discussions to facilitate the development of this business,” UOF director Saleem Aziz Habib Al Balushi added.

The funding transaction will be implemented through VGT, which holds all permits, licences and intellectual property for the project.

UOF will establish a special purpose vehicle to hold its project interest. Upon completion of the investment, the equity structure of VGT will comprise 62% UOF and 38% Volt.

 The agreement also recognises that the government of Tanzania will receive a free carried interest through a new project special purpose vehicle, which will dilute UOF and Volt on a pro-rata basis while maintaining UOF’s majority control.

Under the terms of the agreement, UOF will prepare an updated feasibility study to facilitate Volt’s engagement with lenders. The study will define revised capital and operating costs and the planned production capacity of 40 000/y.

UOF will fund any cost overruns, but its equity position may be adjusted if unit operating costs, calculated at 85% of plant capacity, exceed the $450/t target by more than 10%, subject to fuel and electricity price caps.

Roles and responsibilities are divided between the two parties, with UOF responsible for finalising mining, engineering, procurement and construction contracts, establishing project and operations teams and managing construction and operations.

Volt will be responsible for securing debt financing, offtake agreements, permits, local coordination and community engagement. Completion of UOF’s investment is conditional on the execution of all financing and project agreements, fulfilment of conditions precedent and the availability of project development funds.

Key conditions include bankable offtake contracts covering at least 80% of yearly production, non-recourse project debt financing covering 70% of capital cost, land surface rights free of encumbrances, an updated feasibility study and financial model, finalisation of contracts, securing special economic zone status for Bunyu and the negotiation of a definitive government framework and shareholders agreement.

Volt and UOF have four months, extendable by mutual agreement, to satisfy all of these conditions and enter into definitive transaction documentation, after which the term sheet will terminate if not completed.

The next steps include finalising the definitive shareholders agreement, progressing lender engagement, advancing offtake negotiations, delivering the updated feasibility study, and completing all permitting and regulatory requirements in Tanzania.