➤ Ukrainian management wants to restart the suspended Zavalievsky graphite operation, which is majority owned by Australian firm Volt Resources Ltd.

➤ Volt Managing Director Trevor Matthews is still confident that Zavalievsky can ramp up to 100,000 tonnes per year by 2025 if supply chain issues are fixed.

➤ Volt Resources is changing off-take partners for its Bunyu graphite project in Tanzania.

Volt Resources Managing Director Trevor Matthews. Source: Volt Resources Ltd.

Volt was about to restart production after the winter-induced shutdown at Zavalievsky — considered to be Europe's biggest graphite deposit — when Russia invaded Ukraine. The conflict has kept Zavalievsky from gathering the momentum needed to help Ukraine to become a major graphite supplier and contribute to meeting increasing electric vehicle battery demand.

Volt is now focusing on financing and reaching a final investment decision for Bunyu and building its downstream battery materials business in the U.S. and Europe. This includes developing a coated spherical purified graphite, or CSPG, facility within Energy Supply Developers LLC's planned U.S. gigafactory "supersite" due online in 2025, along with small-scale production from its own facility planned with American Energy Technologies Company.

S&P Global Commodity Insights spoke with Trevor Matthews, Volt's managing director, about company strategy and the situation in Ukraine. The following conversation has been lightly edited for clarity and space.

S&P Global Commodity Insights: Where were you when Russia invaded Ukraine?

Trevor Matthews: The Zavalievsky business had been shut down since mid-December for the winter, as the process water and tailings pipes freeze up. We were just about to restart the business when the war broke out, so we just suspended any plans about restarting and kept it that way.

I was in Perth talking to brokers in the U.K. when the invasion occurred. I spoke to the Ukraine staff straight away, and we made plans to get everybody to stay home with their families, at least while the conflict is underway, while still paying their salaries so they can cover living expenses.

Then when the Russians encircled Kyiv, our senior managers, corporate and marketing staff located there moved to Lviv and other locations in the west of the country. A couple of marketing staff relocated to Poland and Germany.

You only completed the Ukraine investment in July 2021. Did you have any inkling of what would happen, with your in-country sources, given reports surfaced in August 2021 that Russia had started pumping less gas to Europe?

I was in Ukraine in January with my chairman, Asimwe Kabunga. Everybody was just walking around normally, shopping and doing their normal things. If everybody thought there was going to be a war breaking out, there would have been a rush to the borders by some people, but nothing like that was happening at all.

When you spoke to people on the ground, the view was that virtually no one in Ukraine believed Russia would invade. They thought there would be some increased activity in the eastern provinces, given Russia had already annexed Crimea in 2014 and there had been separatist fighting since then in the two provinces in the east. So it was thought they might do something locally but not at the scale they did. When I spoke to people locally, the view was "this has been going on for years."

Having looked at that history during our due diligence, the location of the project also limited the risk. If you're going to have activity more focused in the east, then our project is just 160 kilometers from Ukraine's western border with Moldova. During this whole conflict, you could draw a 200-kilometer radius around the process plant, and there has been no military action whatsoever in that area, as it's mainly rural with no obvious military targets. There are no major cities, which is where most of the fighting has been taking place.

What is the sentiment of the staff on the ground in Ukraine?

It's pretty quiet at Zavallya where the mine is, so within a couple of weeks of the war starting, [Zavalievsky group of companies CEO] Dmytro Nikulin and the in-country management were saying, "There's no fighting near the mine, can we start up?" My response was, "I understand you're on the ground there and you have a different perspective," but sitting in Australia and looking at what's going on, we wouldn't get much support from shareholders or financial markets generally to invest working capital to restart the business.

Starting with the prime minister, Ukraine's authorities have been quite vocal about companies continuing to operate, or for those who have closed operations to restart if they can, to support the Ukraine economy. Ultimately they still need economic activity to fund this war effort even with all the external support they're getting. The value-added tax has even been cut from 20% to 2% as an incentive for businesses.

Almost everybody in Ukraine wants us to restart, but I won't recommence operations if it's economically unsustainable. Costs have gone up, including fuel and most of the input costs. Some of the materials that we would have normally procured in Ukraine aren't there anymore, like reagents and grinding media from the east, which is where Ukraine's industrial hubs are mainly based. Zavalievsky used a Russian frother reagent, which is obviously not an option now, so we'd need to buy from Europe, which is much more expensive.

How does the war affect your downstream ambitions and future graphite production expansion plans?

We were able to get Zavalievsky to about a 15,000 tonnes per year annualized production rate before being suspended. There's enough graphite there to meet front-end requirements for those downstream projects. We also have the capacity to source graphite material from third parties for the U.S. and Europe downstream operations. Syrah Resources Ltd. still has plenty of capacity in Mozambique, and there are other producers in Brazil and Madagascar.

I'm currently in the process of changing off-take partners for Bunyu, which is shovel-ready and just waiting on financing to make a final investment decision, as banks have raised concerns about the financial transparency of our current off-takers. I'm now targeting off-take customers from Europe, the U.S., South Korea, Japan or listed entities from China. We plan to have Bunyu starting production with capacity of 23,600 t/y by 2024, then ramp that up to 170,000 t/y two years later. This compares to total current global production of 1 Mt per year.

Given the demand in Europe, I'd like to think we could get Zavalievsky to 100,000 t/y by 2025, though if the war is still going on, the ability to borrow money will be very difficult. If we spent the next 1.5 years working out the plans, it would only take about 15 months to build a plant of that size if we can make sure our supply chains are working once the war ends. We're already talking about that pathway with European financial institutions, which also involves near-term mine improvement plans.

What is the key challenge for critical minerals supply chains currently?

We're looking at a small-scale production facility in the U.S. with American Energy Technologies Co., including graphite spheroidization and coating technology. Given the small quantities needed to send to battery-makers for qualification, we shouldn't need a big plant for this phase — and these plants can scale up by just bolting on new equipment.

Bigger companies may be able to sustain themselves and live through three years of costs with limited revenue from the small CSPG samples being sent to cell-makers, but it's tough for new entrants.

But some of the larger cell makers I have spoken to agree that the three-year qualification period required for new entrants to produce battery anode material from metals simply cannot sustain itself if industry and western governments want to diversify critical minerals supply away from China, bring on new production and develop supply chains for battery materials.

There is going to have to be a reduction of the qualification period, maybe to 1.5 years or one year, but that will require the carmakers and everybody to shift their position to help the supply chain respond.

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