REG - Ferro-Alloy Resrcs. - Commercial Potential of Carbon Black Substitute

Ferro-Alloy ResourcesAnnouncement

21/11/2024 07:00

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RNS Number : 0267N  Ferro-Alloy Resources Limited  21 November 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION (EU) NO. 596/2014 (INCLUDING AS IT FORMS PART OF THE LAWS OF
ENGLAND AND WALES BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
("MAR").

 

21 November 2024

Ferro-Alloy Resources Limited

("Ferro-Alloy" or the "Group" or the "Company")

 

Study Confirms Commercial Potential of Carbon Black Substitute

 

Ferro-Alloy Resources Limited (LSE:FAR), the vanadium producer and developer
of the large Balasausqandiq vanadium deposit in Southern Kazakhstan, is
pleased to announce an update on its carbon black substitute ("CBS") product
following the completion of a new marketing study.

 

Summary

·    A new marketing study by Smithers (the "Study") estimates the price
of the Company's CBS product at US$500 per tonne in the tyre market and
between US$550 - US$600 per tonne in the non-tyre market (excluding any value
attributable to the product's strong sustainability credentials)

·    The Study follows a test programme undertaken by Smithers' materials
science and engineering division which, by substituting standard carbon black
with the Company's CBS product in a typical rubber formulation for passenger
vehicle tyre side walls, demonstrated that the Company's CBS product can be
used in the manufacture of vehicle tyre sidewalls and other rubber uses

·    Previous test work performed by SGS Canada Inc indicated that the CBS
product can be recovered from the vanadium process plant tailings by simple
flotation methods, giving approximately 220,000 tonnes of CBS product per year
and potential gross revenue generation in excess of US$110 million per year
for Phase 1 of the Balasausqandiq project

·    The Company estimates that the CBS product can be shipped to either
Western Europe or China economically; markets closer to the project will also
be investigated

·    The Company also estimates the combined Scope 1 and Scope 2
emissions, based on current preliminary desktop research, to be between 0.36
tonnes and 0.6 tonnes of carbon dioxide equivalent ("CO(2)e") per tonne of CBS
product produced in comparison with between two tonnes and five tonnes of
CO(2)e per tonne of standard carbon black production, giving a strong
marketing advantage and potential future savings in carbon credits

·    The Company has commenced marketing activities for commercial
opportunities for the CBS product

 

 

 

 

Commenting on the update, Nick Bridgen, CEO of Ferro-Alloy Resources, said:

"This marketing study confirms the enormous value of the Company's CBS revenue
stream that is now expected to be comparable in size with the Company's main
vanadium product. With relatively small production costs, it adds hugely to
the anticipated project NPV."

"The Company has since commenced marketing activities for the CBS product and
is assessing the opportunities to secure an offtake agreement for future
production."

"Ferro-Alloy's Balasausqandiq deposit is already expected to be the world's
lowest cost primary producer of vanadium, and this co-product, recovered from
the tailings from the vanadium operation, will enhance that competitive
position even further."

 

Background

As previously announced, the ore-resource at the Balasausqandiq deposit
contains over 8% carbon in a form similar to carbon black. Carbon black is a
high value form of carbon predominantly used as a reinforcing filler in the
making of rubber, particularly for the manufacture of vehicle tyres.

The Company's CBS product is produced through concentration to a level of
around 40% of the carbon contained in the tailings (waste) of the vanadium
circuit, followed by drying and further milling.

 

Marketing study

The marketing study has been completed by the market reports division of
Smithers, the global consultancy firm with rubber expertise, to estimate a
market price for the product in both tyre and non-tyre markets.

The Study has estimated the price of the Company's CBS product in the tyre
market to be around US$500 per tonne and between US$550 and US$600 per tonne
in the non-tyre market.

The Study took into account the successful test work conducted by Smithers'
materials science and engineering division, the price being determined in
relation to other, similarly performing reinforcing fillers available in the
market. It did not factor in any value for the expected vastly reduced Scope 1
and Scope 2 CO(2)e emissions (direct and indirect emissions generated by a
company's own operating activities) resulting from the production of the CBS
product, in comparison with the manufacture of standard carbon black (see
below).

The Company believes that the expected low CO(2)e emissions generated from the
production of the CBS product will facilitate favourable marketing and may
produce an additional price advantage (see below).

 

Technical studies

As previously announced on 26 September 2024, significant test work has been
completed to determine the methods for concentrating the carbon in the ore to
create the CBS product, and into the performance of the CBS product compared
with standard N660 grade carbon black commonly used to make passenger vehicle
tyre sidewalls.

Production

Work carried out independently by SGS Canada Inc during the feasibility study
programme has confirmed that a 40% carbon concentrate can be recovered from
the tailings of the vanadium circuit using flotation to concentrate the
carbon. A recovery of around 72% of the original carbon content is obtained,
producing approximately 220,000 tonnes of CBS product per year at the revised
mining rate of 1.65 million tonnes of ore per year. This product is then
milled and dried in preparation for shipment.

Capital costs are expected to be relatively low, involving a simple flotation
plant, milling, pelletising and drying equipment.  Operating costs are
expected to be modest.

Product technical performance

After initial test work was carried out at universities in the CIS, a test
programme was conducted in the UK by Smithers' materials science and
engineering division. In this programme, the Company's CBS product was
substituted at various levels for standard carbon black in a typical rubber
formulation for passenger vehicle tyre side walls. The results of testing the
manufactured rubber confirmed that the CBS product was performing as a
reinforcing filler and, at lower substitution levels, had no significant
diminution in performance and had some advantages. Higher levels of
substitution are likely to be possible in agricultural and truck tyres.

 

Logistics

The Company estimates, based on research conducted on current available global
logistics rates, that the CBS product can be shipped to either Western Europe
or China economically. Closer markets will also be investigated.

 

Sustainability  / costing credentials

The production of standard carbon black is usually made by the incomplete
combustion of oil or gas in an oxygen depleted atmosphere where, typically,
the resulting product amounts to only 40% of the original carbon input. The
production of standard carbon black is, therefore, both expensive and high in
CO(2) emissions.

The Company's CBS product is made by the concentration of naturally occurring
carbon from the waste produced by the treatment of the Balasausqandiq ore, and
not from the combustion of hydrocarbons, resulting in much lower production
costs and significantly fewer emissions - an important consideration for tyre
and other rubber producers.

Based on preliminary desktop research, the Company currently estimates that
the combined Scope 1 and Scope 2 emissions per tonne of CBS product produced
will be between 0.36 tonnes and 0.6 tonnes of CO(2)e. By way of comparison,
the production of a tonne of standard carbon black ranges from around two to
five tonnes of CO(2)e*.

In the European Union, amendments to the Carbon Border Adjustment Mechanism
("CBAM"), approved in 2022, indicate the potential inclusion of organic
chemicals, including carbon black, in the future as part of a broader effort
to integrate the chemical sector into CBAM, with a final decision due by the
end of 2025 or early 2026.  If adopted, importers of carbon black will have
to buy carbon credits, currently costing around US$72 per tonne of CO(2)e
emitted, for the emissions embedded in their imports of carbon black.  This
would lead to CBAM costs of between US$144 per tonne and US$360 per tonne for
importers of standard carbon black depending on the emissions of the actual
producer. The far lower emissions generated from the production of the
Company's CBS product would attract much lower CBAM costs, giving a further
potential price advantage,  not taken account of in the Study. Even in the
absence of legislation, market forces are likely to incentivise the use of
materials which have been produced with lower carbon emissions.

 

The carbon black market

The worldwide carbon black market amounts to approximately US$20 billion per
annum, with approximately 70% going into tyre manufacture. Many tyre
manufacturers have stated their aims of reducing the CO(2)e emissions
associated with their products and some are experimenting with the use of
recovered carbon black, produced by pyrolysis from used tyres which is energy
intensive. The sourcing of lower carbon substitutes for carbon black is an
ongoing issue for tyre manufacturers.

 

ENDS

 

* Fabian Rosner, Trisha Bhagde, Daniel S. Slaughter, Vassilia Zorba, Jennifer
Stokes-Draut,Techno-economic and carbon dioxide emission assessment of carbon
black production, Journal of Cleaner Production, Volume 436, 2024, 140224,
ISSN 0959-6526: www.sciencedirect.com/science/article/pii/S0959652623043822

 

For further information, visit www.ferro-alloy.com or contact:

 

 Ferro-Alloy Resources Limited  Nick Bridgen (CEO) / William Callewaert (CFO)  info@ferro-alloy.com

 Shore Capital                  Toby Gibbs/Lucy Bowden                         +44 207 408 4090

 (Joint Corporate Broker)

 Panmure Liberum Limited        Scott Mathieson/John More                      +44 20 3100 2000

 (Joint Corporate Broker)

 BlytheRay (Financial PR)       Tim Blythe/Will Jones                          +44 20 7138 3204

 

Notes to Editors

About Ferro-Alloy Resources Limited:

The Company's operations are all located at the Balasausqandiq deposit in
Kyzylordinskoye 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 vanadium concentrate processing operation (the "Existing
Operation")

Balasausqandiq is a very large deposit, with vanadium as the principal product
together with several by-products. Owing to the nature of the ore, the capital
and operating costs of development are very much lower than for other vanadium
projects.

The most recent mineral resource estimate for ore-body one (of seven) provided
an Indicated Mineral Resource of 32.9 million tonnes at a mean grade of 0.62%
V(2)O(5) equating to 203,364 contained tonnes of vanadium pentoxide
("V(2)O(5)"). 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 to 5 or the remaining
ore-bodies which remain substantially unexplored.

The Project will be developed in two phases, Phase 1 and Phase 2, with Phase 1
treating 1.65m tonnes per year.

There is an existing concentrate processing operation 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 expanded and adapted to
recover vanadium, molybdenum and nickel from purchased concentrates.

The existing operation is located on the same site and uses some of the same
infrastructure as the Project, but is a separate operation which will continue
in parallel with the development and operation of the Project.

 

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