Ferro-Alloy Resources see significant progress and results in the coming months

Ferro-Alloy Resources Ltd (LON:FAR), the vanadium mining and processing company with operations based in Southern Kazakhstan, has announced its interim results for the six months ended 30 June 2022.


Operating highlights

·    Feasibility study ongoing on both Phase 1 and Phase 2 of the Balasausqandiq project

·    Drilling of four ore-bodies (OB 1 – 4) nearing completion, early indication of a possible 40% resource increase from early X-ray fluorescence results of 800m strike comparison in OB1

·    Metallurgical test work confirms 93% recovery into leach

·    Expansion and adaptation of Existing Operation near completion

·    Half year production of vanadium pentoxide 95% higher than H1 2021

·      Production of ferro-molybdenum scheduled to increase with commissioning of new resin circuit in H2

·    High grade nickel concentrate production to start in H2, with associated additional recovery of vanadium

·    Conversion of AMV to vanadium pentoxide to start in final quarter of 2022

·    Vanadium pentoxide prices remaining high compared with historic average levels

·    Annualised production rate is expected to reach the targeted 1,500 tonnes of vanadium pentoxide equivalent towards end of 2022

·    Carbon by-product proven suitable for use in tyre manufacture, significantly increasing its potential value

Financial performance

·    H1 revenue of US$3.9m, while materially ahead of last year, has been impacted by the supply chain issues caused by the war in Ukraine and the after effects of Covid-19

·    Uncertainty remains as to the impact these issues will have on the outcome for H2 but the Company expects H2 revenues to be significantly greater than H1

Proposed fundraise

·    In order to ensure that the ongoing feasibility study on both Phase 1 and Phase 2 of the Balasausqandiq project can be completed as quickly as possible, with the maximum scope and quality, regardless of the potential impact of supply chain issues the Company has been experiencing as a result of the geopolitical climate and the residual impact of Covid-19, the Company will launch an equity fundraise immediately following this announcement

·    The Company, with the full support of its strategic investor, Vision Blue Resources Limited, is proposing to raise a total of approximately US$10 million before expenses by way of a placing, direct subscription and PrimaryBid offer

·    Full details of the proposed fundraise will be set out in an announcement to be published by the Company immediately following the publication of this announcement

Sir Mick Davis, Ferro-Alloy Resources Non-executive Chairman, commented:

“The early results of the expanded feasibility study are confirming the potential for Balasausqandiq to become a globally significant vanadium operation.  Installations around the world of vanadium flow batteries are increasing, which is perhaps the basis for vanadium prices remaining strong compared with historic levels. This, and the highly attractive suite of by-products, in particular carbon black where there is potential for a significant value increase, amply justify Vision Blue’s confidence in the long-term future of Balasausqandiq project.

“Both the existing operation and the planned process plant for Balasausqandiq will have a strongly positive ESG impact, something critical for attracting customers and investors going forward. With vanadium benefitting energy storage in both vanadium redox flow batteries as well as certain technologies for mobile batteries used in electric vehicles, we are in pole position to contribute significantly to a clean energy future.

“I expect to see significant progress and results in the coming months, particularly when the geopolitical headwinds begin to ease, and I look forward to updating shareholders on our developments.”

Operations Review


Ferro-Alloy Resources Limited (“the Company”) is currently undertaking a comprehensive bankable feasibility study on both Phase 1 and Phase 2 of the Balasausqandiq project in the Kyzylordinskaya oblast of southern Kazakhstan.  Current indications are that this project will be one of the largest vanadium operations in the world with negative vanadium production costs after by-product credits. The Competent Person’s Report (“CPR”) issued in 2018 showed a net present value for the project of US$2 billion after capital expenditure on Phase 1 of just US$100m, with the Phase 2 expansion being financed from earnings.  So far in the study, the conclusions of that report have been supported, with the metallurgical recovery into leach independently tested to achieve up to 95% (CPR – 93%), and an early comparison of an 800 metre strike length of the first ore body showing up to 40% more ore in that section.  A study into the uses of the carbon by-product to be produced by the project shows it to be even more prospective than envisaged in the CPR, with a 40% carbon concentrate able to replace a proportion of carbon black grade N550 in the making of tyres with no diminution of performance.  Although commercial negotiations have not yet taken place, the value of this material, based on the value of carbon black that it replaces, is likely to be significantly higher than previously estimated.

In the existing operation, we have achieved record production and successfully accomplished several further important steps in the development of the operation, targeting 1,500 tonnes per year of vanadium pentoxide or equivalent, in revenue terms, in molybdenum and nickel.

Both the existing operation and the planned process plant for Balasausqandiq will have a strongly positive ESG impact.  The vanadium from production will benefit energy storage in both vanadium redox flow batteries, the front-running technology for fixed ground long-term energy storage, but also potentially in certain technologies for mobile batteries used in electric vehicles. Furthermore, in both operations we are aiming to leave little or no residues from processing operations, since all the components of the ore are potentially useful. The CO2 emissions caused by our production at Balasausqandiq are expected to be a fraction of most other producers which generally require concentration and high-temperature roasting to liberate the vanadium.  The carbon concentrate which we plan to market as a replacement for carbon black is produced without burning hydrocarbons as is the usual production process.

Balasausqandiq feasibility study

One ore-body (“OB1”) has already been explored and provided a reserve of 23 million tonnes, sufficient for a mine-life of over 20 years at the Phase 1 level of production of 1 million tonnes of ore per year.  Increasing the drilling density of OB1 plus drilling of a further three ore bodies (OB 2 – 4) is now nearing completion although sample preparation and assaying are expected to take up to another three months. The aim of this further drilling is to prove sufficient ore reserve to give a significant mine-life for the Phase 2 production target of four million tonnes per year.  There is an area of topography within OB1 that is difficult to access for exploration purposes which is currently being omitted from the programme, but a decision on whether this will have to be drilled or replaced in the programme will be taken when preliminary modelling is completed.  The access difficulties are not expected to create any difficulties for actual mining in due course.

No new assay results have yet been received but a comparison of an 800 metre strike length of OB1 as previously modelled, with the results of the increased density of drilling, using semi-quantitative X-ray fluorescence measurements, shows a 40% increase in tonnes of ore, albeit at a slightly lower grade.

Metallurgical test-work has shown a recovery of vanadium pentoxide into leach of up to 95%, slightly in excess of the pilot plant results used in the CPR.  Test-work is ongoing to confirm the final product recovery.

A study has also been carried out on the enrichment of carbon in the plant tails after the vanadium recovery process and the potential use of this material as a substitute for carbon black in the production of rubber, principally tyres.  The study has shown that the carbon content can easily be upgraded from the approximately 18% tails grade to around 40% by standard flotation means, giving a 75% recovery of carbon, and that the 40% concentrate can be substituted in the making of tyres for around 20% of N550 grade carbon black without loss of performance. Carbon black is an expensive form of carbon that is usually made by the incomplete combustion of hydrocarbons, with only some 40% of the carbon feed being recovered in the product, so use of our material will greatly reduce the CO2 emissions caused in the making of tyres compared with the standard material.  Production of sufficient concentrate for testing by a tyre manufacturer prior to commercial discussions is ongoing.

We expect to be able to announce the results of the exploration and metallurgical programmes early in 2023 and the full feasibility study into Phase 1 of the Balasausqandiq project in the middle of 2023, with Phase 2 following afterwards.

Expenditure on the feasibility study in the first half of 2022 was US$1.7m.

The Existing Operation


The existing plant was developed from the former pilot plant, designed to develop and test the process which will be used for the Balasausqandiq process plant.  After successful completion of the test programme, the decision was made to expand and develop the plant on a long-term commercial basis partly in order to keep the trained work-force and management occupied and ready for the main Balasausqandiq project and partly for the earnings that will greatly assist the financing of the project.

The expansion and adaptation is now nearly complete to produce a plant capable of extracting vanadium, molybdenum and nickel from secondary imported raw materials, mainly spent catalysts used in the de-metalisation of crude oil. The last stage of the planned development, to produce a high-grade nickel concentrate from the tailings, is now complete but commissioning is awaiting the delayed delivery of a new press filter from Italian suppliers, now expected in October.  A significant part of this project is also to extract more vanadium from the tailings in a secondary recovery during repulpation of the nickel-rich tailings.  Upon completion of this last step, the plant will be extremely competitive in that all of the valuable components of the feed will be recovered and the operation will be environmentally benign with little or no residues remaining on site for disposal – all the content will be recovered as products.  The plant is now extremely flexible and allows management to select a wide range of raw materials for processing with varying metal contents depending on the market price for such materials.  The targeted production level is around 1,500 tonnes per year of vanadium equivalent (in terms of revenue). Throughput and therefore profitability of the plant in the first half of 2022 was impacted by the January riots in Kazakhstan, delays in shipments of concentrates caused by COVID-19 in late 2021, the Ukrainian invasion in 2022 and world-wide shipping delays.  Certain reagents also became scarce during this period as China prohibited the export of ammonium sulphate, in particular. The Ukrainian invasion caused not only shipping disruption but also banking delays which held up some vital payments to suppliers for up to a month at a time. Shipping costs remain elevated, affecting both imports and exports.  Production of vanadium pentoxide equivalent (based on revenue) reached a peak of 56.5 tonnes in April 2022, but the early months in the period and June and July were particularly affected by delays to concentrate deliveries.

The result of these external problems has been a disappointing start to 2022, however, production was at record levels and the net loss for the half year was reduced to US$694,000 after meeting parent company costs and the management of the ongoing feasibility study. The net loss is also after allowing for the falling vanadium price over the period, which resulted in a downwards revenue adjustment of US$417,000, being the difference between the price at the time the sale was agreed and the price during the contractual pricing period which is linked to delivery.


Production during the first half year was mixed, with very good production when the plant was not constrained by raw-material or reagent supply issues. The capacity of the plant was very much greater than the actual output.

QuarterTonnes of vanadium pentoxide contained in AMV2022Tonnes of vanadium pentoxide contained in AMV2021Growth from same quarter / half of 2021Tonnes of molybdenum contained in ferro-molybdenum(2022 only)
H1 2022172.288.2+95%22.3


The existing processing plant is operating well. Two new step-changes in production are both expected in the next couple of months. When the delayed press filter arrives, the new nickel concentrate production can begin, and when the delivery of sorption resin arrives from France, there will be a significant increase in ferro-molybdenum production. Currently, the nickel-rich tailings and molybdenum-containing solutions are being stockpiled pending the start of these operations, allowing for a particularly sharp increase as the stockpiles are reduced over the ensuing year.  Towards the end of 2022 the annualised production rate is expected to reach the targeted 1,500 tonnes of vanadium pentoxide equivalent, at current prices this would translate into revenue potential of c. US$2m per month during 2023.  Later in the year a further new dissociation oven will arrive, allowing the conversion of ammonium metavanadate to vanadium pentoxide.  A previous oven acquired for this purpose was diverted to the drying of calcium molybdate to allow conversion to ferro-molybdenum, contributing more profit than its originally intended use.

Although the transport and banking issues associated with the Ukrainian invasion are largely stabilising, with little effect now on delivery schedules except as to pricing, we expect some continuing disruption. Uncertainty remains as to the impact these issues will have on the outcome for H2 but the Company expects H2 revenues to be greater than H1. Nevertheless, the improvements to the plant scheduled for the remainder of 2022 will enable us to extract more value from each tonne of raw material delivered and should have a significant impact on profitability in the future.


Although the existing operation is forecast to make significant profits, particularly after the developments discussed above, the directors have considered that the overwhelming priority is for the successful completion of the feasibility study into the Balasausqandiq project and to accelerate its development.  For this reason, the Company has decided to carry out a fundraise placing of US$10m so that whatever geopolitical situation or other unforeseen events arise, the study can continue as quickly as possible.

The proposed placing is wholly supported by our strategic shareholder, Vision Blue Resources Limited (“Vision Blue”), who have offered to subscribe for 100% of the placing, but are willing to be scaled back to their pro rata shareholding if demand from elsewhere requires it.

Directors Chris Thomas and Nicholas Bridgen also plan to subscribe to the placing.

The earnings from the existing operation are expected to continue and any surplus funds earned, that are not needed for the feasibility study, will be applied to the accelerated development of the Balasausqandiq project including front-end engineering and the ordering of long lead-time items.

Product prices in the period

Vanadium Pentoxide

At the start of 2022 the price of vanadium pentoxide was around US$8.75/lb, lifting slightly to over US$9/lb by 30 June 2022 (having reached a peak of US$12/lb during the period) and reaching US$8/lb in early September 2022.


At the start of 2022 the price of ferro-molybdenum was around US$44/kg, falling to US$43/kg by 30 June 2022 and reaching US$36/kg at the end of August 2022.


In contrast to the previous 24 months, the ongoing risk of COVID-19 on the Group and its operations is considered small. However, the situation continues to be monitored and in the event that new variants increase illness and/or transmission, mitigating steps may be required to be re-instated. Similarly, since the delays to raw-material deliveries which we experienced in January and February, we have not been informed of any COVID-19 related issues causing further delays, although the continuing lockdowns in China are disrupting markets at the macro-level.

Earnings and cash flow

The Group generated total revenues of US$3.9m for the period compared to US$1.5m for the first six months of 2021, reflecting the higher production output noted above.

The cost of sales increased to US$3.5m from US$1.5m for the first six months of 2021, reflecting primarily the purchase cost of the increased volume of concentrate that was processed.

Administrative expenses amounted to US$1.2m (2021: US$0.8m).

The Group made a loss before and after tax of US$0.7m (2021: loss of US$1.1m).

Net cash outflows from operating activities totalled US$0.5m (2021: cash outflow of US$1.3m). Both investment activities and capital expenditure marginally increased during the period, with net cash outflows from investing activities totalling US$1.7m (2021: US$1.6m). The main investment activity of the period was the continued development of the feasibility study. Net cash outflows from financing activities totalled US$0.04m (2021: inflows of US$10.1m) the difference reflecting Vision Blue’s investment in the Group during 2021.

Balance sheet review

At the period end, non-current assets totalled to US$8.0m (2021: US$6.4m) reflecting the continued capitalisation of expenses to exploration and evaluation assets incurred during the period with respect to the feasibility study and the expansion of equipment at the plant site.

Current assets, excluding cash balances, totalled US$4.8m at the period end compared with US$2.9m at 31 December 2021. The increased position during the period is a result of both cash payments having been made on account by the Group with trade suppliers in order to secure a flow of concentrates to be processed by the plant as well as increased trade debtor balances as a result of significant product sales made before the period end (subsequently settled post period end).   

The Group held an aggregate cash balance of US$0.5m at the period end (2021: US$8.2m).

With respect to non-current liabilities, the reduction in the overall balance from US$0.9m at 31 December 2021 to US$0.05m is attributable to the reclassification of bonds previously issued by the Company, that will mature within the next 12 months, to current liabilities.

Current liabilities have increased from US$1.3m at 31 December 2021 to US$4.2m at the period end. The increase is represented by the bond liability reclassification noted above, a fair value through profit and loss payable provision of US$0.4m being recognised with respect to product sales that have suffered negative market price movements between the date of sale and date of delivery / acceptance by the customer and an increase in trade creditors for concentrate / plant processing materials of US$1.5m.

Description of principal risks, uncertainties and how they are managed

(a)  Current processing operations

Current processing operations make up a small part of the Group’s expected future value but provide useful cash flows in the near term and allow the Group to gain and retain an experienced workforce  and build our expertise in the production processes and operating in the local environment. The principal risks of this operation are the prices of its products (vanadium, molybdenum and nickel), availability and price of vanadium bearing concentrates, availability of reagents and the efficiency of the production processes.

The Company is constantly reviewing the market opportunities for alternative supplies of vanadium bearing concentrates and has sufficient long-term contracts in place. The Company aims to extract all the useful components of the raw materials so that no residues remain on site and so that the maximum value is obtained from each tonne treated.  By this means, we aim to be one of the most efficient and lowest cost secondary vanadium treatment plants so that our competitive position reduces the danger of high prices for raw materials making the operation uneconomic.

(b)  Geopolitical situation

While the invasion of Ukraine by Russia does not directly impact the Company’s operations, the directors continue to closely monitor the situation. The main risk is to product sales transport routes, many of which involve transit through Russia.  Whilst these are currently operating, sanctions have been made against Russian and Belorussian vehicles transiting through Europe. There is a risk that further sanctions might prevent transit through Russia into Latvia, to and from where some of the Company’s imports and exports currently flow. The Company is investigating alternative transit routes for raw material imports and product exports through the West of Kazakhstan, either via the Caspian Sea or overland south of the Caspian.  Routes to China are working normally.

(c)   Financing risk

In March 2021 the Company signed an investment agreement with Vision Blue.  Under the terms of this agreement, investments totalling US$10.1m have already been made and Vision Blue has the right to subscribe a further US$2.5m at the original deal price of 9 pence per share at any time up to two months after the announcement of the Phase 1 feasibility study. Vision Blue has further options to subscribe up to US$30m at higher prices to partially finance the construction of the Balasausqandiq project. However, the Balasausqandiq project will require substantial funds to be raised in debt and possibly further equity which will be dependent upon market conditions at the time and the successful completion of the feasibility study.

The existing operation is operating well and, after the commissioning of the new nickel concentrate operation, an associated increase in vanadium production, and the increased production of ferro-molybdenum, is forecast to make significant profits from later in 2022. However, experience in the first half of 2022 has shown that the operation is sensitive to geopolitical factors, the resolution of which are not guaranteed in the short or medium term. Since the main objective over the next 12 months is to bring to fruition the Balasausqandiq project, we have decided to ensure that the feasibility study is fully funded under any foreseeable conditions and therefore the directors have resolved to carry out a fundraise placing in September 2022.  In the event that the existing operation returns to the previously anticipated operating environment, significant surplus funds will be generated which will be used for front-end engineering and accelerating the implementation of the main project.

(d)  Climate change risk

The climate in the environment around the operations in Kazakhstan is generally hot with temperatures often reaching 40 C, but with a short sharp winter where temperatures in January and February frequently reach -22 C.  Although there are rivers in the vicinity from which water could be drawn (subject to permissions), there is currently plentiful ground water.  Significant changes to rainfall patterns might have currently unknown effects on the availability of such water for production purposes.  The operation is being designed to minimise water use and to recycle where possible.

(e)  Risks associated with the developing nature of the Kazakh economy

According to the World Bank, Kazakhstan has transitioned from lower-middle-income to upper-middle-income status in less than two decades. Kazakhstan’s regulatory environment has similarly developed and the Company believes that the period of rapid change and high risk is coming to an end.  Nevertheless, the economic and social regulatory environment continues to develop and there remain some areas where regulatory risk is greater than in developed economies.

(f)   Balasausqandiq project

The Balasausqandiq project is a much larger contributor to the Group’s value than current operations and the extent of its profitability is primarily dependent on long term vanadium prices.

The project is also dependent on raising finance to meet capital costs anticipated to amount to in excess of US$100m for the first phase.  Raising this money will be dependent on the successful outcome of the feasibility study which is ongoing. The favourable financial and other characteristics of the project determined by studies so far completed give the directors confidence that the outcome of the study will be successful.  Initial discussions with the providers of finance, including the Development Bank of Kazakhstan (for which our project has passed through initial screening), have been encouraging.

Directors’ Responsibility Statement

We confirm that to the best of our knowledge:

a.    the condensed set of unaudited financial statements which have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its undertakings included in the consolidation as a whole, as required by DTR 4.2.4R;

b.    the interim management report includes a fair review of the information required by DTR 4.2.7R; and

c.     the interim management report includes a fair review of the information required by DTR 4.2.8R.

This interim financial report for the six months ended 30 June 2022 has been approved by the Board and signed on its behalf by:

William Callewaert


14 September 2022

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