Ferro-Alloy Resources expecting a busy 2022 (LON:FAR)

Ferro-Alloy Resources plc (LON:FAR) Chief Executive Nick Bridgen caught up with DirectorsTalk for an exclusive interview to discuss the Bankable Feasibility Study at the Balasausqandiq vanadium deposit, how this deposit differs from others, what to expect from ore bodies 2-5, the significance of carbon and what investors can expect in terms of updates going into 2022.

Ferro-Alloy Resources is a low-cost vanadium producer, based in Kazakhstan. This week, the company announced an update on the progress of the expanded feasibility study for the large Balasausqandiq vanadium deposit in Southern Kazakhstan and with me to discuss the update is CEO, Nick Bridgen.

Q1: As mentioned, you’ve announced an update to the Bankable Feasibility Study at the large Balasausqandiq vanadium deposit. What’s been the progress on the ground over the recent months, particularly with the post Vision Blue investment into the company?

A1: Well, picking on the three biggies, the exploration has started, obviously there’s a huge amount of preparation work, designing the programme and designing and agreeing companies and assaying and all the rest of it. The actual drilling has now started, that started six days ago, and it’s relatively fast to do, there’s two parts of it. Core drilling where you take out a cylinder of rock from inside the drill cores, and RC drilling which is where you collect the chippings and assay those. We’ve got two contractors, the core drilling has started, the RC drilling will start in February, but it’s very fast so we should get the results of those soon after that.

The other one is a metallurgical work, the difficultly at the outset was the metallurgy but we built a test plant and proved the process and so there’s no surprises there. The first results have come in and are consistent exactly with what we found with our test plant so that’s good. We’ve already started the next stage of metallurgical testing that is what they call ‘locked cycle’ tests where you simulate repeated cycles, just to see whether anything comes out of that, that we don’t already know.

The third one, I suppose, it’s the carbon. Carbon is really a co-product rather than the byproduct and we’ve got several byproduct metals, but carbon is the most important and that’s very similar to carbon black and we’ve commissioned some scientists at a university in Almaty and a test laboratory in Minsk to prove that up as most likely a filler for making rubber for making tyres. That’s a very high value form of carbon and it can also be used for smelting to make ferrosilicon, and we were in parallel testing that.

So, the three big parts of the study are well underway, first results have been coming in all good and we just wanted to report on progress.

Q2: Can you remind us why Balasausqandiq is such an important deposit and how it differs to other vanadium deposits?

A2: Yeah, vanadium is very common in the earth’s crust, there’s no shortage of it, the world will never run out of it.

The difficulty is that 95% of it comes in the form of magnetite, which is difficult to extract the good vanadium from, you have to roast it to roughly 1,100 degrees a therefore to cut down on the amount of roasting that you do, they make a concentrate first, but there’s still a large, mass volume that needs to be cooked up and it’s multi-stage processing so the recovery is low and the cost is very high.

Ours is a sedimentary deposit, completely different, we have no iron in ours at all, we can treat directly with acid with very low acid consumption and therefore much cheaper plant to build and much cheaper operating costs. It’s also very, very large so we have all the ingredients for what is, quite obviously, the front running vanadium project in world today.

Q3: Now you’ve explored only one of five known ore bodies, body one is sufficient to feed phase one alone, what do you expect from ore bodies two to five?

A3: Well, a lot is known about them. They’re already in the reserve category under the Kazakhstan system of reserve reporting, they didn’t quite make the grade for enough exploration to reach the same indicated status on the JORC, the international basis so we’re simply upgrading what we already know.

I suppose the best indicator of what we expect is that altogether the middle of the range because there’s not enough exploration to give accurate numbers, but the middle of the range of expected total is 126 million tonnes altogether. So, we’ve already got 23 from ore body number one so roughly there’s a hundred million to come.

Now, we don’t need to prove up that much because we are embarking on the feasibility study for phase one and phase two, and together they’ll produce 4 million tonnes a year of ore mining and so we need 80 roughly in total.

So, we’ll explore until we get to that figure, but we have quite a lot in reserve.

Q4: I think you’ve touched on this already, but you talk a lot of the byproducts, there’s a great big, long list, and you specifically mentioned carbon. So, what is the significance of the carbon?

A4: Well, the carbon, it’s about 14%/15% of our ore and about 18% of our tailings is made of this form of carbon and it’s mixed with silica, which is the background mineral after we’ve taken out all the metals.

This form of carbon, when we looked at it, it’s a very interesting form, it has a very small particle size which means that it has a very large surface area per gram and it’s physically and chemically the same as carbon black. Now, carbon black, this form of carbon, it’s normally made by burning oil or gas, it’s essentially a soot and people are familiar with it as toner in their printer cartridges but its main use of in making rubber, it’s what gives tyres their black color, it’s called a filler.  Carbon black cells is, depending on the grade, depending on how small the particle size, can be well over $1,000 or $2,000 a tonne. It’s a very high value form of carbon and that’s what we’ve got.

So, we’ve identified previously that we can use that for smelting with the silica to make ferrosilicon and sell it to local smelters, but that was the easiest one to prove so that’s the one we went with on our competent persons report.

A far bigger market, and potentially higher value market, is as a filler for carbon black so we’ve commissioned some research from some scientists in a university in Almaty who already have done a lot of research on this material from other sources. They together with a university in Minsk will prove up its suitability for use as a filler in making rubber and carbon can account for about 20% of our revenue on our previous assumptions, those will be modified by this research.

Q5: Just looking forward, what can investors expect in the way of updates from Ferro-Alloy Resources going into 2022?

A5: Well, the metallurgical work will be finished, this ‘locked cycle’ testing that I talked about will be finished in during the first quarter of next year, which will be announced.

The exploration we’re doing in phases, but we were going to do a little bit more exploration on ore body number one and this is because we want to really understand the underground geometry of this deposit. Remember all the other old bodies are part of the same deposit, they share all the same characteristics and so if we really understand one ore body, then we can tailor the programme on the rest to exactly give us the information we need.

So, we’ll do a bit more on ore body number one, we’ll announce those results as they come out and then the results of the further drilling as we go along. I don’t think they’ll be any surprises because so much it’s already known about this deposit but nevertheless, it will reassure people for it to be independently verified and announced.

The carbon work, I’m not sure when that will be finished, it’s a little bit open-ended, they will take what they take, but I think it’s designed to be finished around the end of February so those will be announced.

Then there’s phase one and phase two, the work on phase one will be finished a little bit before the work on phase two so later in the year, we’ll announce the Bankable Feasibility for phase one, followed a short time afterwards by phase two.

So, it will be a bit busy 2022 for announcements.

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