VRC Catalysts, page-7

I've just been lingering the shadows...

These were a couple of my rhetorical chicken scratching thought i've noted down as i've been navigating some of the other detail in the background.

There's a fair chunk to get ones head around from an external perspective of answering "where is the value" but i think you boil it down to 2 main aspects.

Graphite Miner
Battery anode producer.

On the graphite miner aspect. As we know a small one in production in Ukraine (currently paused). Revenues aren't massively admittedly but not inconsequential and perhaps the biggest takeaway here is it test both the fiscal and technical understanding in regards to answering the question. Can these guys actually operate a mine or is it a pipedream. Well they can, have and will. Bodes better regarding Bunyu. It provides some element of geographical relevance re EU. I garner the MC for VRC has priced almost a big fat zero on that with the current ukraine situation. So i can probably see more upside on that than downside. I mean downside risk doesn't come much worse than a global powerhouse invading your country.

Second one has the PFS admittedly slightly outdated and i'd pressure test some of the revenues but even incorporating the current inflation maybe feathering the flake pricing etc a 1300M USD NPV pre-tax on stage 2 production. Capex wasn't actually super intensive and the staged production model was something not overtly dissimilar to what others have done in the past to decrease upfront capex and fund through production. I guess when it comes to the PFS's you (the market) either assesses against the stage 1 NPVv and begin to factor stage 2 NPV or as things progress eventually stage 2 will be what the market aligns with. Probably only once finance is secured for stage 1 - then stage 2 begins to look real. I use a rule of thumb (arbitrarily assigned fair value's that i've derived through experience in regards to development phases of projects and their post-tax NPV.

"my general rule of thumb for (FAIR VALUE) S/P as a function of NPV is as follows.
1) SS/PFS performed, no offtakes, no finance = 10-20% of NPV
2) DFS/BFS pilot plant no offtakes no finance = 15-30% of NPV
3) Either of the above with offtakes secured = 25-40%
4) Any of the above with finance secured = 35-50%
5) in construction near term production = 50-75%"

I can't answer for others where the Bunyu project sits - but there's a case that should the Stage 2 updated feasibility reflect similar NPV and with some very small offtake LOI (but not binding) it's probably a stage 1/2 given the date of the PFS, the size of the offtake. But anywhere between 10%-30% NPV is possible the range of "fair value" fair value being where i typically invest.

Also worth noting that post-tax npv's should generally be used as that's a better reality. $890M USD from memory. So looking at maybe 130M-350M fair value for stage 2 valuation PFS.

You could also probably want to factor some aspect of dilution to fund the thing to see how that would chop out. 180M usd so maybe 50:50 debt equity arrangement. Might need 100M aud raised in equity at some point. Obviously dependant on the S/P at the time but maybe if even a 100-150m you double the SOI. Probably would end up with a MC of 200M odd at the same price (4c) fully funded to production of stage 2 NPV. Again reviewing the rule of thumb metrics 35-50% (if already in production as a stage 1 maybe higher). then maybe 50% NPV post tax = 623M. Thus on the new SOI fair value would be 6c on bunyu alone fully funded.

Noting that once you end up in production you can flick to EPS valuation system. Maybe 200M AUD post tax profit annually on even 5-6bn SOI. 200/5500 x PE 15 = 54c. Makes relative sense 200M post tax profit 3.5bn odd MC. which is 60 times upside but you need to cook it down for dilution to fund it.

That's somewhat just if there were a miner, which TBH is probably not the primary value attributing factor moving forward.

On battery anode and this is complex part.
They've been accepted into the fold with a mob called ESD energy supply developers. So took me a while to figure what the meant but essentially like building an industrial area. and many vendors/companies operating out of there. Okay so primarily it's structured around battery production.

Sounds like a pipe dream. Except the people in charge of ESD and you start to build a strong sense of credibility here. Quoted battery capacity that ESD is planning to build will by 50gwh capacity - Volt's part in this. (We want you guys to provide the CSPG. (coated spherical purified graphite)

Sells for ~7500usd/t and 50gwh is around 60,000T annually which is ~ 450M USD. (revenue) Now assuming there's going to be operational cost (to unknown amounts) the key is that the "cost" of the graphite is effectively the AISC of bunyu. You can pretty much make 0 profit on the mine and still make bank on the downstream. I think they're going to clearing a hefty chunk on both front.

So my view was VRC stacks up at 50M mc with 1bn+ post tax NPV on mthe mine.
But the real company making plans to take that supply and process it downstream via the ESD partnership. Some further announcements which start to lock that picture into reality to better. I think a US listing will be a foregone conclusion post some more concrete stuff regarding the ESD.


The by-product of CSPG is material suitable for use as anode material in lead acid and alkaline batteries which in itself is pretty cool haven't unfortunate read revenues yet regarding that.

Anyways one to watch but holding a decent whack. Ukraine war will have flattened the S/P a lot so i'm viewing current state as opportunity given the graphite production in ukraine is probably only 5-10% of the business.


Wouldn't usually buy into the downstream story much but after reading the credentials of these ESD some of the partners/connections i changed tune.

Bit of verbal diatribe for a Thursday afternoon - but relatively paints out the picture here for the investment choice. Potentially going to try and catch up with Trevor should schedules align and will flesh out what else I can, but not an awful lot of burning platform for me to pick at that would interest people here. Probably more interested in the technical aspects of the downstream processing itself.

I think the next 4-12wks will start to help the market to formulate the strategy and where exactly the revenues intend to come from but also begin to start thinking. Okay this looks legit. Obviously team needs to execute now otherwise it mostly is a nice plan on a power-point.

No sentiment as nothing bought today but did buy earlier this week.

SF2TH