TIDMFAR
RNS Number : 6294L
Ferro-Alloy Resources Limited
01 May 2020
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
1 May 2020
Ferro-Alloy Resources Limited
("Ferro-Alloy" or "the Company")
Full year results deferral in response to FCA statement of
policy
Production, Operations & Finance Update and
Appointment of Financial Adviser
Overview
-- Financial results deferred in line with FCA statement of policy
-- Production of acid-recoverable concentrates temporarily
suspended due to the unavailability of staff from Covid-19
restrictions but restarting in May 2020
-- Other operations have continued but with slower progress on
feasibility study due to travel restrictions during the Covid-19
pandemic
-- First stage of expansion plan completed
-- Outlook for Vanadium prices and high margins remains positive
Ferro-Alloy Resources Limited (LSE: FAR), the vanadium mining
and processing company with operations based in Southern Kazakhstan
announces that it will utilise the temporary relief measures
implemented by the Financial Conduct Authority ( " FCA " ) and the
Financial Reporting Council ( " FRC " ) regarding the publication
of annual financial results during the COVID-19 pandemic. The
Company will therefore defer the publication of its audited
financial results for the year ending 31 December 2019 ( "2019
Accounts"). The reason for the need to delay is that travel
restrictions are in place internationally and so the reporting and
auditing process is taking longer than usual.
The maximum delay permitted by the FCA exemption is two months;
hence, following the deferral, the Company's reporting timetable
for the 2019 Accounts means they must be published by no later than
30 June 2020. The Company expects to publish the 2019 Accounts in
June 2020.
Production update and shipment of vanadium pentoxide
Production Shipments
(tonnes of vanadium (tonnes of vanadium
pentoxide contained pentoxide contained
in AMV) in AMV)
Q3 2019 38.3 40.0
Q4 2019 43.1 35.7
Q1 2020 49.1 61.0
Work to further expand and improve production has continued and
the second new roasting oven was brought into operation in February
2020, effectively doubling the capacity to treat high-grade
concentrates. As described under the Covid-19 section below, the
acid-recoverable treatment process for low-grade concentrates was
temporarily closed in March 2020, leaving the new line as the sole
operation for the remainder of the first quarter of 2020.
Production outlook
The Company has successfully completed the first stage of its
expansion plan, including the construction of a 1,000m(2) extension
to the plant facility, the installation of the new
pyrometallurgical production facility including two roasters and
the new leaching circuit, and the improvement of the existing
acid-recoverable production line. The completion of the connection
to the adjacent high-voltage power line is well underway but
currently stalled by the Covid-19 restrictions on the availability
of our contractors. Although full use of the new facilities has not
yet been possible, the capacity of the two lines is now up to 40
tonnes per month, depending on the vanadium grade of input raw
materials.
Production from the low-grade acid-recoverable line is expected
to resume in early May but the combined output will be somewhat
restricted until the new power connection is completed.
Covid-19
Kazakhstan has been significantly less affected by Covid-19 than
many European countries but nevertheless, there have been over
3,000 detected cases and, sadly, over 25 people have died. With a
population only some 28% of that of the UK, this is a relatively
small but still serious outbreak. Kazakhstan was quick to respond
and declared a state of emergency on 16 March 2020. Measures taken
to control the spread have included a complete lock-down of several
major cities, the temporary closure of non-essential businesses and
industries, and an almost complete standstill on international and
domestic travel.
The protection of the health and safety of our employees is our
paramount concern and the Company has implemented all the measures
recommended and required by the Kazakhstan authorities. So far,
none of our employees has been affected and our operations have
continued. However, the restrictions on travel have disrupted and
curtailed operations in a number of ways which have reduced output
and progress with our projects.
The Company's main operation in Kazakhstan is manned by two
teams of workers, each working for half of the month while residing
on site, followed by half of the month on leave. During the
lock-down it was not possible to rotate the staff in the middle of
April as usual. Furthermore, it has not been possible to bring some
professional managers to site from their homes which in many cases
are long distances from the operation and normally involve flights
or long car journeys, or subcontracted staff for various tasks
involved in the project work.
The Company has responded to these challenges by asking the team
on site to stay on site for a second rotation, meaning they have
worked for the entire month on site. Whilst certain professional
managers have been retained on site, the more technically difficult
production circuit that treats acid-recoverable concentrates was
closed in March and our production was concentrated on the
pyrometallurgical line treating higher grade concentrates.
The current state of emergency has been extended by the
government to 11(th) May 2020 but the lock-down conditions have
already started to be relaxed, with industrial and construction
sectors, and certain types of services reopening in Nur-Sultan and
Almaty. The Company is bringing in the new rotation of staff today
and plans to re-start production from the acid-recoverable
concentrates with the new team early in May, so that production
from both lines will again be possible.
Progress on our feasibility study has likewise been slowed.
Visits by specialists to site have not been possible, and although
there is no curtailment of the shipment of samples, the necessary
radiological examination in order to complete transport and import
documentation has not been possible. The relevant institute is now
slowly returning to work.
It is not possible to forecast the course of the Covid-19
outbreak, but Kazakhstan's early intervention and relatively strong
countermeasures have enabled an early relaxation of controls and we
are looking forward to a slow but steady return to more efficient
operations.
Vanadium prices and outlook
The price of vanadium pentoxide in Europe started the year at
around US$5.30/lb and is currently a little over $7.00/lb. The
price had fallen throughout 2019 from extreme highs of approaching
$30/lb in late 2018. The unusually high price in 2018 and early
2019 resulted in some substitution with what was then cheaper
niobium and some production increases, resulting in an
overcorrection which caused the price to fall below its expected
long run level. Some recovery has already been experienced this
year and more is predicted as substitution by niobium is reversed
and the high-cost production instigated by the exceptionally high
prices becomes uneconomic to sustain.
The Company has been and continues to use a long-term forecast
price of around US$7.50/lb, close to today's level, which is a
little lower than external forecasters and other vanadium project
companies are using. Both the current market price and our
long-term estimate provide an exceptionally high margin to the
Company's forecast cash cost of production of US$1.54, contained in
the Competent Person's Report on our Balasausqandiq project by
GBM.
Covid-19 is likely to affect world production and supply in the
short term, but so far the price has been moving upwards overall.
Longer term, the implementation of higher standards for
construction steel throughout the world and increasing use of other
alloys using vanadium are likely to increase demand for vanadium
from its traditional markets. The roll-out of vanadium redox flow
batteries for renewable energy storage, which was stalled by the
exceptionally high vanadium price in 2018 and 2019, is now expected
to resume and grow to be a very significant additional market for
vanadium.
Financing
At the time of the Company's listing in March 2019, the Company
outlined its expansion plans of which around half have been
completed. As announced in December 2019, the nature of the fall in
the vanadium price in 2019 was further and faster than expected and
impacted the profitability and cash flows of the Company,
particularly during the period when production was limited by the
implementation of the expansion and Covid-19 restrictions. The
Company's previous forecasts, based on a slower fall in vanadium
prices over 2019 and 2020, would have been sufficient to meet the
capital expenditure requirements for the completion of the
expansion out of operating cash flows but the reduction in vanadium
prices has reduced the cash flows available. The Company has
limited excess cash at this time but we are mindful that in the
current Covid-19 environment it is important to raise capital only
on terms that will be advantageous to existing shareholders and, in
conjunction with our advisers, have commenced discussions with
multilateral institutions, strategic partners and global capital
providers in the mining industry. We expect to report further on
progress on these initiatives at the time of the announcement of
our Final results in June.
Appointment of new Financial Adviser
We are pleased to announce that VSA Capital has been appointed
as a financial adviser to the Company alongside the Company's
existing broker, Shore Capital. VSA will be providing research
services going forward. VSA has unique knowledge of the Vanadium
space through their long involvement in mining and also Vanadium
Flow Batteries.
For further information, visit www.ferro-alloy.com or
contact:
Ferro-Alloy Resources Limited info@ferro-alloy.com
Nick Bridgen, Chief Executive Officer
Shore Capital (Broker) Tel: +44 (0)207 408
Corporate Advisory: Toby Gibbs / Mark 4090
Percy / John More
Corporate Broking: Jerry Keen
---------------------
VSA Capital (Financial Adviser) Tel: +44 (0)203 005
Andrew Monk / Simon Barton 5000
---------------------
St Brides Partners Limited (Financial Tel: +44 (0)207 236
PR & IR Adviser) 1177
Catherine Leftley / Priit Piip
---------------------
Further information about Ferro-Alloy Resources Limited
The Company's operations are all located at the Balasausqandiq
Deposit in Kyzylordinskaya Oblast in the South of Kazakhstan.
Currently the Company has two main business activities:
a) the high grade Balasausqandiq Vanadium Project (the "Project"); and
b) an existing profitable vanadium concentrate processing operation (the "Existing Operation")
Balasausqandiq is a very large deposit, situated in
Kyzylordinskaya Oblast in Southern Kazakhstan. The ore contains
vanadium as the principal product, together with by-products of
carbon, molybdenum, uranium, rare earth metals, potassium, and
aluminium.
A reserve on the JORC 2012 basis has been estimated only the
first ore-body number which amounts to 23 million tonnes, not
including the small amounts of near-surface oxidised material which
is in the Inferred resource category. In the system of Reserve
estimation used in Kazakhstan the Reserves are estimated to be over
70m tonnes in ore-bodies 1 to 5 but this does not include the full
depth of ore-bodies 2-5.
There is an additional existing concentrate processing operation
is situated at the site of the Balasausqandiq Deposit. The
production facilities were originally created from a 15,000 tonnes
per year pilot plant which was then adapted to treat low-grade
concentrates and is now in the process of being expanded and
further adapted to treat a wider variety of rawmaterials.
The Company has already completed the first steps of a
development plan which is expected to result in annualised
production capacity increasing gradually to around 1,500 tonnes of
contained vanadium pentoxide. The development plan includes
upgrades to infrastructure, an extension to the existing factory
and the installation of equipment to increase the throughput and to
add the facilities to convert AMV into vanadium pentoxide.
The strategy of the Company is to develop both the Existing
Operation and the Project in parallel. Although they are located on
the same site and use some of the same infrastructure, they are
separate operations.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDABMATMTAMMAM
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May 01, 2020 02:00 ET (06:00 GMT)
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