REG - Ferro-Alloy Rsrcs - Final Results
29/04/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220429:nRSc7854Ja&default-theme=true
RNS Number : 7854J Ferro-Alloy Resources Limited 29 April 2022
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018.
29 April 2022
Ferro-Alloy Resources Limited
("Ferro-Alloy" or the "Company" or the "Group")
Final results for the year ended 31 December 2021
Ferro-Alloy Resources Limited (LSE:FAR), the vanadium mining and processing
company with operations based in Southern Kazakhstan, is pleased to announce
its final results for the year ended 31 December 2021.
Overview
· Strategic long-term investment by Vision Blue Resources and
co-investors of US$ 10.1m to date to fund completion of Balasausqandiq
feasibility study and expansion of existing operations
· Balasausqandiq feasibility study further extended to assess potential
for increased by-product credits, including from rare earths, that could
account for more than one third of revenues. Study now expected to complete at
the end of the first half of 2023
o Potential recovery of uranium, molybdenum, aluminium, potassium, and
rare-earth by-products is being studied within metallurgical test-programme
o Studies already underway to assess the potential to produce ferro-silicon
and high value carbon that could be used as carbon black to manufacture rubber
for tyres
o Drilling of ore-body 1 completed and expanded drilling programme for
remaining ore-bodies commenced. Based on the results of infill drilling of
ore-body 1, drilling programme increased from 6,000 metres of core-drilling to
10,000 metres and impacted by slower than planned drilling by subcontractors
· Expansion of existing operations progressing
o Second roasting oven commissioned in 2021 with third roasting oven
commissioned in March 2022
o Nickel tailings now being stockpiled in readiness for production from new
nickel recovery process later in 2022
o Construction of new laboratory, warehouses and connection to adjacent
reliable high voltage power line completed
· Solid production performance achieved
o 9.4% increase in vanadium pentoxide production to 260 tonnes with
production rates in the second half 70% ahead of the 2020 average
o First sales of ferro-molybdenum achieved, with production of 6 tonnes of
contained molybdenum in the fourth quarter
· Strengthened board and management team
o Appointment of Sir Mick Davis as non-executive chairman and Peet Nienaber
as non-executive director
o Appointment of William Callewaert to the board as Chief Financial Officer
in April 2022
o Process initiated to recruit an experienced project director to bring the
project to production
· Improved financial results
o Revenue increased 96% to US$ 4.7m (2020:US$ 2.3m)
o Loss before tax of US$ 2.83m (2020: loss before tax of US$ 3.94m)
o The Group held cash of US$ 2.81m at 31 December 2021 (2020: US$ 0.707m)
· Improved outlook for 2022
o Third roasting oven increased capacity by 50%
o Group already operating profitably
o Nickel recovery project will increase revenues from each tonne treated
with no additional raw material costs
· Price of vanadium pentoxide currently $12/lb, up from $5.4/lb at the
beginning of 2021. Ferro-molybdenum and nickel prices up by 100% and 92%
respectively from 1 January 2021 to date
Sir Mick Davis, Non-executive Chairman, commented:
"Ferro-Alloy has made good progress on a number of fronts following Vision
Blue's investment in early 2021 demonstrating the value we see in the
Company's assets. The expanded feasibility study is already showing the
potential for Balasausqandiq to become a globally significant vanadium
operation with a highly attractive suite of by-products that could eventually
contribute over one third of revenues. The combination of a very large
deposit, access to excellent existing power and logistics infrastructure and
the potential to achieve net-negative cash vanadium production costs are
highly compelling. Furthermore, increasing intensity of vanadium use in the
steel sector and growing applications in energy storage gives us confidence in
the future demand for the Company's product."
Nick Bridgen, CEO, commented:
"The Company is in an exciting phase of development as we invest in our
existing operations to maximise profitability from each tonne of material
treated and undertake our expanded feasibility study. Following the completion
of a number of operational initiatives, including the commissioning of the
third roaster in April 2022 which has materially increased our production
capacity, the existing plant is performing well and is positioned to finance
the remainder of the feasibility study and thereafter contribute to the
development of Phase 1 of the Balasausqandiq project. We have several further
operational initiatives planned in the coming months all of which are focussed
on maximising profitability and cashflows from our existing operations as we
continue to focus on delivering the larger growth projects ahead of us.
"In June 2021 we welcomed Sir Mick Davis to our board as non-executive
chairman and Peet Nienaber and as a non-executive director, and in April 2022
we welcomed William Callewaert as Chief Financial Officer. All three of these
additions greatly strengthen the experience of the board and I look forward to
the next chapter with confidence."
Annual Report
The Annual Report for the year ended 31 December 2021 will be available on the
Company's website shortly at www.ferro-alloy.com (http://www.ferro-alloy.com)
For further information, visit www.ferro-alloy.com or contact:
Ferro-Alloy Resources Limited
Nick Bridgen, Chief Executive
Officer
info@ferro-alloy.com
Shore Capital (Joint Corporate Broker)
Corporate Advisory: Toby Gibbs / John More
Tel: +44 (0)207
408 4090
Liberum Capital (Joint Corporate Broker)
Tel: +44 (0)203
100 2000
Scott Mathieson/Lydia Zychowska
St Brides Partners Limited (Financial PR & IR Adviser)
Catherine Leftley/Ana
Ribeiro
Tel: +44 (0)207 236 1177
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 "Balausa 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 numerous 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.
A reserve on the JORC 2012 basis has been estimated only for the first
ore-body (of five) 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 to 5.
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 adapted to treat
concentrates and expanded. Further expansion is being undertaken, targeting
annual operating cash generation of $10m.
The Existing Operation will provide not only useful cash flows but also an
experienced management and infrastructure that will greatly assist and de-risk
the main prize - the development of Balasausqandiq.
Report on Operations
Introduction
The 2021 financial year was one of considerable development and investment as
we continued our strategy of expanding our existing operations while
progressing the feasibility study into the development of the transformative
Balasausqandiq vanadium project.
In March 2021, the Company entered into an investment agreement under which
Vision Blue and their associates invested US$ 10.1m (part convertible loan and
part equity) during the year to fund the completion of the feasibility study
into the Balasausqandiq project and the expansion of the existing operations.
Under the terms of the investment agreement, Vision Blue have an option to
invest a further US$ 2.5m at the investment agreement price of 9 pence per
share after completion of the Phase 1 feasibility study, plus a further US$
10m at 25 pence per share and US $20m at 77 pence per share to fund the
construction of Phase 1 of the Balasausqandiq project.
Following the strategic investment from Vision Blue, the Company increased the
scope of the feasibility study beyond the previously planned Phase 1 to
include Phase 2 as well as the assessment of options to generate revenues from
additional by-products. Drilling was initially focused on Ore Body 1 ("OB1")
and is moving to Ore Bodies 2, 3 and 4 during the remainder of 2022.
Metallurgical test work to validate the process and confirm critical process
parameters tested in the pilot plant such as leach extraction, extraction
kinetics, effect of recycle streams, solid/liquid separation requirements,
reagent consumptions and final vanadium pentoxide product quality is ongoing
in the SGS laboratory in Canada.
Production continued to increase in 2021 despite challenging global conditions
during the first half of the year. Production of ammonium metavanadate ("AMV")
grew by 9.4% year on year although by the fourth quarter, after the worst
effects of the Covid-19 pandemic and the world-wide transport issues of the
first half of the year had subsided, production was running at some 70%
greater than the average of 2020. In October 2021 the Company started
production and commercial sales of a new product - ferro-molybdenum. The sale
of nickel concentrates continued as planned until the end of the year but are
now being stockpiled pending treatment in a planned nickel recovery process
which will yield much higher returns. After production of nickel starts later
in 2022, the full range of valuable materials will be recovered from the raw
materials treated, leaving little or no residues or tailings.
The investment programme for the existing operations included the connection
to the high voltage power line, construction of a new laboratory, a new
warehouse, construction and commissioning of a new pre-roaster oven and the
creation of the new ferro-molybdenum department. A third roaster oven was
ordered and installed after the year end.
The prices of vanadium pentoxide, the Group's principal product, rose over the
year from US$ 5.40/lb to US$ 8.75/lb and at 24 April 2022 is around US$
12.00/lb. Molybdenum (in ferro-molybdenum) has risen from around US$ 23/kg to
around US$ 44/kg over the year and is now at around US$ 46/kg. Nickel
similarly rose over the year from US$ 17/kg to US$ 21/kg and is now at US$
34/kg.
Production
During the year, production of vanadium pentoxide amounted to 260 tonnes, 9.4%
above 2020. Growth occurred mainly in the last quarter, while the earlier
quarters were affected by the continuing Covid-19 situation and global
logistics problems causing limitations on raw materials available for
production. The Company started converting the previous calcium molybdate
product into the higher priced ferro-molybdenum in October 2021, with
production totalling 6 tonnes of contained molybdenum in the fourth quarter.
Production of Vanadium Pentoxide Growth vs last year Production of Molybdenum
Quarter (2021) (tonnes of vanadium pentoxide contained in AMV) (tonnes of molybdenum contained in ferro-molybdenum and in calcium molybdate)
Q1 57.4 +20% 13.7
Q2 30.8 -37% 2.1
Q3 70.2 -23% 13.5
Q4 101.2 +104% 9.4
2021 total 259.6 +9.4% 38.7
Production outlook
The Group's operations are now operating smoothly and profitably but a number
of additional initiatives are underway to ensure that the existing operation
reaches its full planned potential. The Company's production focus is not only
on maximising the production of vanadium but also on maximising the recovery
of all the valuable components from each tonne of raw material treated, and to
process each product to the point where full international pricing can be
obtained without discounts. We aim to become the most competitive company in
our field, to maximise profitability from each tonne treated and thus reduce
the sensitivity of the enterprise to the potential effects of rising raw
material prices. To this end, in 2022 we have, or plan to:
· Increase the production of vanadium by the installation of the third
roasting oven which was installed and commissioned at the end of March 2022.
· Set-up of the new ferro-molybdenum department with the focus on
increasing production of ferro-molybdenum, including some additional
production from molybdenum contained in water recovery ponds. This was
completed in April 2022.
· Start production and sales of vanadium pentoxide to decrease the
discount that is given by selling AMV. This project was delayed in 2021
because the use of some of the equipment was diverted to the production of
ferro-molybdenum which was more profitable. The replacement equipment for use
in conversion of AMV to vanadium pentoxide is now being constructed.
· Start processing of the nickel-rich tailings which were formerly sold
but are now being stockpiled ready for the start-up of a nickel recovery
process during 2022. The Company has developed a process superior to the
previously planned electric arc furnace which will produce a high-grade
concentrate from which the Company plans to make ferro-nickel using the
alumothermic process. The equipment to be used is the same as existing
equipment already in operation. Its operation is well-known to the Company and
it can be constructed in Kazakhstan, enabling cancellation of the proposed
electric arc furnace that was to have been built in Russia.
Feasibility study
Following the investments by Vision Blue, the decision was made to expand the
scope of the feasibility study to include not only the first phase of
development of Balasausqandiq, known as Phase 1, but also to include Phase 2.
Phase 1 envisages the treatment of 1 million tonnes of ore per year to produce
5,600 tonnes of vanadium pentoxide, and Phase 2 envisages an expansion to 4
million tonnes per year with production rising to 22,400 tonnes of vanadium
pentoxide. Including the latter involves the drilling of Ore-Bodies 2, 3 and 4
to prove sufficient reserves under the JORC system of classification that the
Company uses. Furthermore, the scope of the study has been expanded to include
an investigation of the suitability of the carbon-silica tailings for use as a
filler in making rubber - particularly tyres, and more recently, the decision
has been taken to include the recovery of rare earth elements in the study,
with early indications that, if successful, they will add significantly to the
project's value.
A concept study into the development of a ferro-silicon process plant will
also be carried out. This is a logical development of the vanadium operation
which makes use of the carbon-silica tailings to make ferro-silica, where the
untreated tailings will replace all of the silica and around half of the
carbon requirements. The project appears to be extremely profitable as not
only are the raw materials available on site but it can also make use of power
generated from gas at very low cost, potentially making the Company one of the
lowest cost producers in the world.
At Balasausqandiq, there are five currently known ore-bodies. The confirmatory
infill drilling of OB1, the reserves of which (based on the previous ore
reserve estimate) are sufficient for Phase 1 of the project, has been
completed. The core samples are currently being assayed with the results
expected by around the end of May 2022. In April 2022, the Company started the
core and reverse circulation drilling of Ore Bodies 2, 3 and 4 to provide the
reserves necessary to support the feasibility study into Phase 2.
The Company has commissioned SRK Consulting (Kazakhstan) Limited ("SRK") to
produce the overall feasibility study, with the metallurgy and process plant
being covered by Tetra Tech Inc. Based on the results of infill drilling of
OB1, SRK's recommended drilling programme is rather more extensive than
previously planned, with the original core-drilling increased from 6,000
meters to 10,000 meters. The rate of drilling by subcontractors to date has
also been slower than planned, resulting in a delay in the expected date of
completion of Phase 1 of the study to around the middle 2023. The Company is
currently taking steps to keep as close as possible to the original schedule
including the addition of a third core drill-rig and further rigs are under
discussion.
The leaching process brings into solution not only the vanadium but also
various other components of the ore, including uranium, molybdenum, aluminium,
potassium and rare earth elements. Recovery from the leach solution is carried
out by a three-stage sorption process in which uranium and molybdenum are
recovered in the first, vanadium in the second and rare earth elements can
possibly be recovered in the third. The aluminium and potassium can be
precipitated from the solutions as potassium alum. The recovery of these
by-products will be confirmed within the metallurgical test-programme which is
ongoing.
Potentially the most valuable by-product is carbon, which makes up around 14%
of the ore and is contained in the tailings with the remaining material being
mostly silica. The carbon is similar in physical and chemical form to carbon
black which is a high-value form of carbon, usually made by the incomplete
combustion of oil or gas. The Company has previously successfully tested two
potential uses for this product; the first as a filler for making rubber and
the second for smelting to make ferro-silicon. Two test-programmes are
currently underway to further test each of these uses. The Company has worked
with a Kazakhstan university to test the processes for concentration of the
carbon in the tailings and the use of a 40% carbon concentrate to produce
rubber which is now being tested in the Belorussian Technological University
to prove its physical and mechanical properties. The use of similar carbon
concentrates tested by the same laboratory in Kazakhstan has indicated that
there may be a very large, high-value, potential market for this material for
making tyres.
Strengthened management team
The Group has taken a number of steps to ensure it has the appropriate
management resources in place to support its ongoing development through the
expansion of existing operations, the delivery of the extended feasibility
study and the expected commencement of project construction in the second half
of 2023.
In April 2022, William Callewaert was appointed Chief Financial Officer to
oversee the operation and development of the Group's finance function. William
graduated in 2002 from the University of Durham with an honours degree in Law
after which he trained as a Chartered Accountant in audit services with
leading tax, accounting and business advisory firm, Blick Rothenberg. Having
qualified in 2006, William's career progressed within advisory services at
Grant Thornton and KPMG in both the UK and offshore. Most recently, William
was a Business Advisory Director of the advisory department at BDO Guernsey.
As a result of this appointment, the Group's financial and commercial team are
at full compliment.
To support the continued development of the project in Kazakhstan, a process
has also been initiated to recruit an experienced project director to oversee
the final stages of the feasibility study, manage the construction of the mine
and plant and bring the project into production.
Earnings and cash flow
The Group reported increased revenues of US$ 4.73m for the period compared to
US$ 2.37m in 2020, reflecting a considerable increase in production and sales.
Revenue, and the corresponding trade receivable, are recognised at the time of
transfer of control to the customer but, as is common in the industry, the
final pricing determination is often based on assay and prices after arrival
of the goods at the port of destination. Therefore, revenues recognised at the
time of shipment are subject to adjustment to prices prevailing up to four
months later. Typically, the customer makes a provisional payment based on
volumes, quantities and spot price at the date of shipment and makes a final
payment once the product has reached its final destination. As a result, when
prices are rising, the final receipt can exceed the initial revenue recorded
and vice versa. Where prices decrease significantly, this can result in the
Company being in a net payable position if a downward adjustment to the
consideration exceeds the provisional payment received.
Amounts receivable from, or payable to, customers for sales which are still
subject to final price determination are initially recorded at the estimated
fair value at the time of shipment, with changes in fair value recorded as
other revenue. Changes in this fair value during the year and, for those
sales where the final determination has not been made, fair values assessed on
the basis of prices prevailing at the year end, increased revenue by US$ 0.02m
to US$ 4.73m (2020: increase by US$ 0.07m to US$ 2.37m). In periods of
rising prices this adjustment would be expected to be positive and when
falling, negative. In the long run such pluses and minuses can be expected to
even out. The final price determinations made after the end of 2021 in respect
of sales made before the end of the year were not significantly different from
the fair value assessed at the end of the year.
US$'000 2021 2020
Revenue from shipments recorded at the price at time of dispatch 4,709 2,300
Adjustments to revenue after final price determination and fair value changes 22 73
Total Revenue 4,731 2,373
Cost of sales increased to US$ 4.9m from US$ 3.8m in 2021 primarily reflecting
the increased volumes and increases in the price of the vanadium concentrate
purchased at the high prices prevailing in 2020/21 and utilised in 2021. The
largest part of the cost of sales is the purchase of raw materials, the price
for which is determined as a percentage of the value of the content of
vanadium at prices prevailing at the time of purchase.
Administrative expenses of US$ 2.4m (2020: US$ 2.2m) principally comprised
employee costs, ongoing listing costs, audit and professional services and
unrecoverable VAT. The costs directly relating to the Company being listed on
the London Stock Exchange amounted to US$ 0.119m (2020: US$ 0.103m).
Net finance costs were US$ 0.117m (2020: US$ 0.133m) the majority of which
relate to interest payable on bonds issued by the Group.
The Group made a loss before tax of US$ 2.83m (2020: loss before tax of US$
3.94m).
Net cash outflows from operating activities totalled US$ 4.98m (2020: US$
1.33m) with the increase principally reflecting an increase in the volume of
raw materials held for processing to ensure consistent production output.
Changes in trade receivables increased to US$ 0.4m (2020: US$ 0.1m) as a
result of payment for goods being requested prior to shipping to customers.
Changes in trade payables decreased by US$ 0.85m (2020: increase US$ 0.5m) in
addition to a change in inventory which generated a cash outflow of US$ 1.2m
(2020: US$ 1.0m outflow).
Net cash outflows from investing activities totalled US$ 2.5m (2020: US$ 1.1m)
and included US$ 2.2m (2020: US$ 0.73m) of capital expenditure associated with
expanding the processing operation and US$ 0.33m (2020: US$ 0.33m) of
expenditure on the feasibility study for the exploration and evaluation asset.
Net cash inflows from financing activities included subscriptions for shares
amounting to US$ 5.9m (2020: US$ 1.6m), the issue of bonds amounting to US$
0.48m (2020: US$ 0.9m) and the issue of a convertible loan note for US$ 4m
(2020: US$ nil).
The Group held cash of US$ 2.81m at 31 December 2021 (2020: US$ 0.707m).
Key performance indicators
The Group is in a period of development and its current operations, the
processing of bought-in secondary vanadium-containing materials for extraction
of vanadium, are relatively small in comparison with the main objective of the
Group to develop the Balasausqandiq mine and processing facility. Moreover,
the current operations are themselves undergoing a significant expansion which
means that operations are not in a steady state capable of meaningful
inter-period comparisons. The Directors are, therefore, of the opinion that
Key Performance Indicators may be misleading if not considered in the context
of the development of the operation as a whole for which the information for
shareholders is better given in a descriptive manner than in tabular form.
Furthermore, the existing processing business of the company is complex and
the business model has been developed to allow maximum flexibility in the type
of raw-materials treated so that market variations in raw material prices can
be moderated by the ability to select raw materials which may be more
profitable to treat notwithstanding they be of lower grade and result in a
lower level of production. Nevertheless, the Directors consider that the main
indicator of performance, although subject to interpretation as described
above, is the level of production. This has been dealt with in the section
"Production" above.
Balance sheet review
Total non-current assets increased to US$ 7.25m from US$ 5.1m principally due
to the continued capitalisation of the feasibility study as Exploration and
Evaluation Assets and the addition of new production plant items at the mine
site. The decrease in prepayments for equipment is largely related to the new
powerline being brought into a state of readiness.
Current assets increased from US$ 1.66m to US$ 5.7m, principally reflecting an
increase in inventory held by the Company for processing and an increase in
cash from the finance raising activities completed during the year, as noted
above.
Corporate
During the year, the Company undertook a number of fund-raising activities in
order to support its ongoing and future operations.
The primary financing activity of 2021 was the conclusion of the strategic
investment in the Company by Vision Blue and others. Under the terms of the
investment agreement, Vision Blue and its co-investors invested, in aggregate,
US$ 5.65m (net) by way of share subscriptions (47,087,747 Ordinary Shares
issued at 9p per share) in addition to the provision of a convertible loan
note of US$ 4.1m (net). Vision Blue has the option to make further
investments, under the terms of the Investment Agreement, at varying share
prices, as noted above.
In addition, the Company issued 242 bonds with a two-year maturity, at a
domination of US$ 2,000 each, for total net proceeds of US$ 476,000.
Description of principal risks, uncertainties and how they are managed
- 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 valuable experience of the vanadium industry. The principal
risks of this operation are the prices of its products (vanadium, molybdenum
and nickel), availabilities of vanadium bearing concentrates and efficiency of
recovery of products.
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.
- Geopolitical situation:
While the invasion of Ukraine by Russia is not directly impacting the
Company's operations, the Directors are closely monitoring situation. The main
risk is to 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.
- Financing risk:
The Company is in a strong financing position. The existing operation is
operating well and, subject to the uncertainties over prices and costs, is
forecast to make significant profits in 2022 and onwards. In March of 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 Stage 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.
- Climate change risk:
See the separate environmental and social report on page 17.
- 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.
- Balasausqandiq project:
The Balasausqandiq project is a much larger contributor to the Group's value
than current operations and 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 western bankable
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 with the
Development Bank of Kazakhstan for which our project has passed through
initial screening, have been encouraging.
Signed on behalf of the Board of Directors on
28 April 2022
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2021
Note 2021 2020
$000
$000
Revenue from customers (pricing at shipment) 4 4,709 2,300
Other revenue (adjustments to price after delivery and fair value 4 22 73
changes)
Total revenue 4 4,731 2,373
Cost of sales 5 (4,893) (3,779)
Gross loss (162) (1,406)
Other income 6 28 8
Administrative expenses 7 (2,471) (2,233)
Distribution expenses (94) (178)
Other expenses 8 (11) -
Loss from operating activities (2,710) (3,809)
Net finance costs 10 (117) (133)
Loss before income tax (2,827) (3,942)
11 - (2)
Income tax
Loss for the period (2,827) (3,944)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations (158) (528)
Total comprehensive loss for the period (2,985) (4,472)
Loss per share (basic and diluted) 20 (0.008) (0.012)
The notes form part of these consolidated financial statements.
Consolidated Statement of Financial Position for the year ended 31 December Note 31 December 2021 31 December 2020
2021
$000
$000
ASSETS
Non-current assets
Property, plant and equipment 12 4,863 2,800
Exploration and evaluation assets 13 1,434 813
Intangible assets 14 21 21
Prepayments 18 930 1,467
Total non-current assets 7,248 5,101
Current assets
Inventories 16 2,100 694
Trade and other receivables 17 116 205
Prepayments 18 670 52
Cash and cash equivalents 19 2,810 707
Total current assets 5,696 1,658
Total assets 12,944 6,759
EQUITY AND LIABILITIES
Equity
Share capital 20 41,252 35,606
Convertible loan notes 20 4,019 -
Additional paid-in capital 397 397
Foreign currency translation reserve (3,620) (3,462)
Accumulated losses (31,388) (28,561)
Total equity 10,660 3,980
Non-current liabilities
Loans and borrowings 21 901 412
Provisions 22 42 47
Total non-current liabilities 943 459
Current liabilities
Loans and borrowings 21 489 524
Trade and other payables 23 828 1,736
Interest payable 24 -
Payables at FVTPL 24 - 60
Total current liabilities 1,341 2,320
Total liabilities 2,284 2,779
Total equity and liabilities 12,944 6,759
Consolidated Statement of Changes in Equity for the year ended 31 December
2021
Share Convertible Additional paid in capital Foreign currency translation reserve Accumulated Total
capital
loan notes
$000
$000
losses
$000
$000
$000
$000
Balance at 1 January 2020 33,965 - 397 (2,934) (24,617) 6,811
Loss for the year - - - - (3,944) (3,944)
Other comprehensive expenses
Exchange differences arising on translation of foreign operations - - - (528) - (528)
Total comprehensive loss for the year - - - (528) (3,944) (4,472)
Transactions with owners, recorded directly in equity
Shares issued, net of issue costs 1,641 - - - - 1,641
Balance at 31 December 2020 35,606 - 397 (3,462) (28,561) 3,980
Balance at 1 January 2021 35,606 - 397 (3,462) (28,561) 3,980
Loss for the year - - - - (2,827) (2,827)
Other comprehensive expenses
Exchange differences arising on translation of foreign operations - - - (158) - (158)
Total comprehensive income (loss) for the year - - - (158) (2,827) (2,985)
Transactions with owners, recorded directly in equity
Shares issued, net of issue costs (Note 20) 5,646 - - - - 5,646
Convertible loan notes - 4,019 - - - 4,019
Balance at 31 December 2021 41,252 4,019 397 (3,620) (31,388) 10,660
Consolidated Statement of Cash Flows for the year ended 31 December 2021
2021 2020
$000
$000
Cash flows from operating activities
Loss for the year Note (2,827) (3,944)
Adjustments for:
Depreciation and amortisation 5, 7 455 431
Write-off of property, plant and equipment (84) -
Write-off of VAT non-refundable 7 499 301
Write-off of prepayments 7 - 7
Write-off of receivables 7 - 15
Expenses on credit loss provision 7 - 15
Share payments and issuance of call option 20 - 75
Income tax 11 - 2
Net finance costs 10 117 133
Cash from operating activities before changes in working capital (1,840) (2,965)
Change in inventories (1,209) 1,044
Change in trade and other receivables (397) 90
Change in prepayments (628) (25)
Change in trade and other payables (846) 517
Change in payables at FVTPL (59) 7
Net cash from operating activities (4,979) (1,332)
Cash flows from investing activities
Acquisition of property, plant and equipment 12 (2,211) (733)
Acquisition of exploration and evaluation assets 13 (333) (326)
Acquisition of intangible assets 14 (1) (1)
Net cash used in investing activities (2,545) (1,060)
Cash flows from financing activities
Proceeds from issue of share capital 20 5,900 1,649
Transaction costs on share subscriptions (254) (82)
Proceeds from issuance of convertible loan notes 4,019 -
Proceeds from borrowings 21 476 924
Interest paid 21 (80) (19)
Net cash from financing activities 10,061 2,472
Net increase in cash and cash equivalents 2,537 80
Cash and cash equivalents at the beginning of year 19 707 648
Effect of movements in exchange rates on cash and cash equivalents (434) (21)
Cash and cash equivalents at the end of year 2,810 707
Note to the consolidated financial statements for the year ended 31 December 2021
1 Basis of preparation
The consolidated financial statements for the year ended 31 December 2021
comprise the Company and the following subsidiaries:
Company Location Company's share in share capital Primary activities
Energy Metals Limited UK 100% Dormant
Vanadium Products LLC Kazakhstan 100% Performs services for the Group
Firma Balausa LLC Kazakhstan 100% Production and sale of vanadium and associated by-products
Balausa Processing Company LLC Kazakhstan 100% Development of processing facilities
(a) Statement of compliance
These financial statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union ("IFRS").
(b) Basis of measurement
The consolidated financial statements are prepared on the historical cost
basis except as otherwise noted below.
(c) Functional and presentation currency
The national currency of Kazakhstan is the Kazakhstan tenge ("KZT) which is
also the functional currency of the Group's operating subsidiaries. The
functional currency of the Company is US$.
The presentation currency of the consolidated financial statements is US$.
(d) Going concern
The consolidated financial statements are prepared in accordance with IFRS on
a going concern basis.
The Directors have reviewed the Group's cash flow forecasts for a period of at
least 12 months from the date of approval of the financial statements,
together with sensitivities and mitigating actions. In addition, the Directors
have given specific consideration to the continued risks and uncertainties
associated with the geopolitical situation with respect to Russia and Ukraine.
The Company signed an investment agreement with Vision Blue on 15 March 2021
as a result of which Vision Blue and their co-investors have so far subscribed
for shares and convertible loan notes to the value of US$ 10.1m to fund the
expansion of the existing operation and completion of the feasibility study in
the Balasausqandiq project, both of which are in process.
Vision Blue may, at their option, invest a further US$ 2.5m at the original
deal price of 9 pence per share at any time up to two months after the issue
of the feasibility study for the development of Phase 1 of the Balasausqandiq
project, expected during the first half of 2023. Since the share price is
currently significantly higher than this figure, the Directors are confident
that these funds are likely to be available.
The Group's production has now reached a profitable level and although the
amount of those profits available to fund the feasibility study and investment
programme may vary with metal prices and other factors, the Directors are
confident that the Company has sufficient resources to continue as a going
concern for at least the next 12 months.
2 Use of estimates and judgements
Preparing the financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Carrying value of processing operations
The Directors have tested the processing operations' property, plant and
equipment for impairment (Note 12) at 31 December 2021. In doing so, net
present value cash flow forecasts were prepared to approximate value in use
which required key estimates including vanadium pentoxide, ferro-molybdenum
and ferro-nickel prices, production including the impact of corresponding
ongoing costs and an appropriate discount rate. Key estimates included:
· Production volumes of 66 tonnes per month of vanadium pentoxide (as
AMV), 10 tonnes of molybdenum (as ferro-molybdenum) and from September 2022,
17 tonnes of nickel (as ferro-nickel).
· Average prices of vanadium pentoxide of US$12/lb, ferro-molybdenum of
US$45.2/kg and ferro-nickel of US$32.8/kg in 2022 and thereafter, reflecting
management estimates having consideration of market commentary less a
discount, and used by the Company as a long-term assumption for other planning
purposes.
· Discount rate of 10% post tax in real terms.
Based on the key assumptions set out above, the recoverable amount of PP&E
(US$ 89.2m) exceeds its carrying amount (US$ 4.6m) by US$ 84.6m and therefore
PP&E were not impaired.
Sensitivity analysis
Any impairment is dependent on judgement used in determining the most
appropriate basis for the assumptions and estimates made by management,
particularly in relation to the key assumptions described above. Sensitivity
analysis to potential changes in key assumptions has, therefore, been provided
below.
The impact on the impairment calculation of applying different assumptions to
product sales prices, production volumes and post-tax discount rates, all
other inputs remaining equal, would be as follows:
Decrease in headroom
$'000
Impact if product sales prices decreased by 20% (24,113)
Impact if production volumes decreased by 20%:
(24,111)
Impact if post-tax discount rate increased by 2 percentage points: (10,071)
Fair value of trade receivables and payables classified at fair value through
profit and loss (Note 24)
The consideration receivable in respect of certain sales for which performance
obligations have been satisfied at year end and for which the Group has
received prepayment under the terms of the sale agreements, remain subject to
pricing adjustments with reference to market prices in the month of arrival at
the port of final destination for AMV and month of shipment from the port for
calcium molybdate. Under the Group's accounting policies, the fair value of
the consideration is determined and the remaining receivable is adjusted to
reflect fair value, or, if the final estimated consideration is lower than the
amounts received prior to the year end, a payable at FVTPL is recorded. In the
absence of forward market prices for the commodity, management estimated the
forward price based on: a) spot market prices for vanadium pentoxide and
molybdic oxide at 31 December 2021 less applicable deductions for AMV or
calcium molybdate; b) foreign exchange rates; c) risk free rates and d) carry
costs when material.
As at 31 December 2021 the Group recognised a payable at FVTPL of US$ nil
(2020: US$0.06m).
Inventories (Note 16)
The Group holds material inventories which are assessed for impairment at each
reporting date. The assessment of net realisable value requires consideration
of future cost to process and sell and spot market prices at year end less
applicable discounts. The estimates are based on market data and historical
trends.
Exploration and evaluation assets (Note 13)
The Group holds material exploration and evaluation assets and judgement is
applied in determining whether impairment indicators exist under the Group's
accounting policy. In determining that no impairment indicator exists
management have considered the Competent Person's Report on the asset, the
strategic plans for exploration and future development and the status of the
Subsoil licence. Judgement was required in determining that the application
for deferral of obligations under the licence (Note 26) will be granted and
management anticipate such approvals being provided given the impact of
Covid-19, their understanding of the Kazakh market and plans for the asset.
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements and have been
applied consistently by Group entities, except for the implementation of new
standards and interpretations.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases. The accounting policies
of subsidiaries have been changed when necessary to align them with the
policies adopted by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at exchange rates at the dates of the
transactions.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are translated to the functional currency at the exchange rate
at that date.
Non-monetary items in a foreign currency that are measured based on historical
cost are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising in translation are recognised in profit
or loss.
(ii) Presentation currency
The assets and liabilities of foreign operations are translated to US$ at the
exchange rates at the reporting date. The income and expenses of foreign
operations are translated to US$ at the average exchange rate for the period,
which approximates the exchange rates at the dates of the transactions. Where
specific material transactions occur, such as impairments or reversals of
impairments, the daily exchange rate is applied when the impact is material.
Foreign currency differences are recognised in other comprehensive income and
are presented within the foreign currency translation reserve in equity.
Foreign currency differences arising on intercompany loans, where the loans
are not planned to be repaid within the foreseeable future and form part of a
net investment, are recorded within other comprehensive income and are
presented within the foreign currency translation reserve in equity.
(c) Financial instruments
Financial assets and financial liabilities are recognised in the Group's
consolidated statement of financial position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost,
at fair value through other comprehensive income ("FVTOCI") or at fair value
through profit or loss ("FVTPL") depending upon the business model for
managing the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial
assets, other than those at FVTPL, at the end of each reporting period. The
Group applies a simplified approach to measure the credit loss allowance for
trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking
into account payment history, payments made subsequent to year end and prior
to reporting, past default experience and the impact of any other relevant and
current observable data. The Group applies a general approach on all other
receivables classified as financial assets. The general approach recognises
lifetime expected credit losses when there has been a significant increase in
credit risk since initial recognition.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
party. The Group derecognises financial liabilities when the Group's
obligations are discharged, cancelled or have expired.
Customer contracts
Under its customer sale arrangements, the Group receives a provisional payment
upon satisfaction of its performance obligations based on the spot price at
that date, which occurs prior to the final price determination, with the Group
then subsequently receiving or paying the difference between the final price
and quantity and the provisional payment. As a result of the pricing
structure, the instrument is classified at FVTPL and measured at fair value
with changes in fair value recorded as other revenue.
Other receivables
Other receivables are accounted for at amortised cost. Other receivables do
not carry any interest and are stated at their nominal value as reduced by
appropriate expected credit loss allowances for estimated recoverable amounts
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances in banks, call deposits and
highly liquid investments with maturities of three months or less from the
acquisition date that are subject to insignificant risk of changes in their
fair value and petty cash.
Financial liabilities
The Group has the following non-derivative financial liabilities: borrowings
and trade and other payables. Such financial liabilities are recognised
initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition these financial liabilities are measured at
amortised cost using the effective interest method.
Long-term borrowings
After initial recognition, interest-bearing borrowings are subsequently
measured at amortised cost using the effective interest rate method. Gains and
losses are recognised in profit or loss. Amortised cost is calculated by
taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the effective interest rate. The effective
interest rate amortisation is included as finance costs in the statement of
profit or loss.
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a deduction
from equity, net of any tax effects.
(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and impairment losses. Land is measured at cost.
Cost includes expenditure that is directly attributable to the acquisition of
the asset. The cost of self-constructed assets includes the cost of materials
and direct labour, any other costs directly attributable to bringing the asset
to a working condition for their intended use, the costs of dismantling and
removing the items and restoring the site on which they are located.
When parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items (major components) of
property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is
determined by comparing the proceeds from disposal with the carrying amount of
property, plant and equipment, and is recognised net within other income/other
expenses in profit or loss.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is
recognised in the carrying amount of the item if it is probable that the
future economic benefits embodied within the part will flow to the Group and
its cost can be measured reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of property, plant and
equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its residual value.
Significant components of individual assets are assessed and if a component
has a useful life that is different from the remainder of that asset, that
component is depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and
equipment, since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the asset. Leased
assets are depreciated over the shorter of the lease term and their useful
lives unless it is reasonably certain that the Group will obtain ownership by
the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and prior periods are as follows:
· Buildings
10-50 years;
· Plant and equipment 4-20 years;
· Vehicles
4-7 years;
· Computers
3-6 years;
·
Other
3-10 years.
Depreciation methods, useful lives and residual values are reviewed at each
financial year end and adjusted prospectively if appropriate.
Assets under construction are not depreciated and begin being depreciated once
they are ready and available for use in the manner intended by management.
(e) Exploration and evaluation assets
Exploration and evaluation expenditure for each area of interest once the
legal right to explore has been acquired, other than that acquired through a
purchase transaction, is carried forward as an asset provided that one of the
following conditions is met.
· Such costs are expected to be recouped through successful exploration
and development of the area of interest or, alternatively, by its sale;
· Exploration and evaluation activities in the area of interest have
not yet reached a stage which permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves, and active and significant
operations in relation to the area are continuing.
Exploration and evaluation costs are capitalised as incurred. Exploration and
evaluation assets are classified as tangible or intangible based on their
nature. Exploration expenditure which fails to meet at least one of the
conditions outlined above is written off. Administrative and general expenses
relating to exploration and evaluation activities are expensed as incurred.
The exploration and evaluation assets shall no longer be classified as such
when the technical feasibility and commercial viability of extracting a
mineral resource are demonstrable. This includes consideration of a variety of
factors such as whether the requisite permits have been awarded, whether
funding required for development is sufficiently certain of being secured,
whether an appropriate mining method and mine development plan is established
and the results of exploration data including internal and external
assessments.
Exploration and evaluation assets will be reclassified either as tangible or
intangible development assets and amortised on a unit-of-production method
based on proved reserves.
Exploration and evaluation assets are assessed for impairment when facts and
circumstances suggest that the carrying amount of exploration and evaluation
assets may exceed their recoverable amount, which is the case when: the period
of exploration license has expired and it is not expected to be renewed;
substantial expenditure on further exploration is not planned; exploration has
not led to the discovery of commercially viable reserves; or indications exist
that exploration and evaluation assets will not be recovered in full from
successful development or by sale.
Impairment losses recognised in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used
to determine the recoverable amount.
(f) Intangible assets
(i) Intangible assets with finite useful lives
Intangible assets that are acquired by the Group, which have finite useful
lives, are measured at cost less accumulated amortisation and accumulated
impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All
other expenditure, including expenditure on internally generated goodwill and
brands, is recognised in profit or loss as incurred.
(iii) Amortisation
Amortisation is calculated over the cost of the asset, or other amount
substituted for cost, less its residual value.
Amortisation is recognised in profit or loss on a straight-line basis over the
estimated useful lives of intangible assets from the date that they are
available for use since this most closely reflects the expected pattern of
consumption of future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as
follows:
· Patents
10-20 years;
· Mineral rights 20
years.
Amortisation methods, useful lives and residual values are reviewed at each
financial year end and adjusted if appropriate.
(g) Leased assets
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments: fixed payments (including in-substance fixed
payments), less any lease incentives receivable and variable payments based on
index or rate amounts expected to be payable by the Group under residual
value guarantees, payments of penalties for terminating the lease, if the
lease term reflects the Group exercising that option. Lease payments to be
made under reasonably certain extension options are also included in the
measurement of the liability. The lease payments are discounted using the
interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions.
(h) Inventories
Inventories are measured at the lower of cost and net realisable value. The
cost of inventories is based on first-in first-out method, and includes
expenditure incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and
condition. In the case of manufactured inventories and work in progress, cost
includes an appropriate share of production overheads based on normal
operating capacity.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
(i) Impairment
(i) Non-financial assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. An
impairment loss is recognised if the carrying amount of an asset or its
related cash-generating unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell (otherwise referred to as fair value
less cost to develop in the industry). Fair value less costs to sell is
determined by discounting the post-tax cash flows expected to be generated by
the cash-generating unit, net of associated selling costs, and takes into
account assumptions market participants would use in estimating fair value. In
assessing the value in use, the estimated future cash flows are adjusted for
the risks specific to the asset/cash-generating unit and are discounted to
their present value that reflects the current market indicators. In assessing
value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset or CGU. For the
purpose of impairment testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other
assets or CGUs.
The Group's corporate assets do not generate separate cash inflows. If there
is an indication that a corporate asset may be impaired, then the recoverable
amount is determined for the cash generating unit to which the corporate asset
belongs.
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in profit or loss.
Impairment losses recognised in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is reversed only to
the extent that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
(j) Employee benefits
(i) Defined contribution plans
The Group does not incur any expenses in relation to the provision of pensions
or other post-employment benefits to its employees. In accordance with
Kazakhstan State pension social insurance regulations, the Group withholds
pension contributions from Kazakhstan based employee salaries and transfers
them into State operated pension funds. Once the contributions have been paid,
the Group has no further pension obligations. Upon retirement of employees,
all pension payments are administered by the pension funds directly.
(ii) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is recognised
for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
(iii) Share-based payments
The grant-date fair value of equity-settled share-based payment arrangements
granted to employees is generally recognised as an expense, with a
corresponding increase in equity, over the vesting period of the awards. The
amount recognised as an expense is adjusted to reflect the number of awards
for which the related service and non-market performance conditions are
expected to be met, such that the amount ultimately recognised is based on the
number of awards that meet the related service and non-market performance
conditions at the vesting date. For share-based payment awards with
non-vesting conditions, the grant-date fair value of the share-based payment
is measured to reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
(k) Provisions
Recognition and measurement
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of
the discount is recognised as a finance cost.
Site restoration
In accordance with the Group's environmental policy and applicable legal
requirements, a provision for site restoration is recognised when the land is
disturbed as a result of pit development and plant decommissioning with a
corresponding increase in exploration and evaluation costs or property, plant
and equipment. Subsequent changes in the provision due to estimates are
recorded as a change in the relevant asset. The provision is discounted at a
risk-free rate with the costs incorporating risks relevant to the site
restoration and an unwinding charge is recognised within finance cost for the
unwinding of the discount.
(l) Revenue
(i) Goods sold
Revenue from customers comprises the sale of vanadium and molybdenum products
with other revenues from gravel and waste rock etc. being non-significant.
Revenue from vanadium products is recognised at a point in time when the
customer has a legally binding obligation to settle under the terms of the
contract when the performance obligations have been satisfied, which is once
control of the goods has transferred to the buyer at a designated delivery
point at which point possession, title and risk transfers.
The Group commonly receives a provisional payment at the date control passes
with reference to spot prices at that date. The final consideration is subject
to quantity / quality adjustments and final pricing based on market prices
determined after the product reaches its port of destination. The quantity /
quality adjustments represent a form of variable consideration and revenue is
constrained to record amounts for which it is highly probable no reversal will
be required. However, given the short period to delivery post year end the
final quantity / quality adjustments are known and revenue for the period is
adjusted to reflect the final quantity / quality occurring subsequent to year
end if material.
Changes in final consideration due to market prices is not determined to
qualify as variable consideration within the scope of the IFRS 15 "Revenue
from Customers". Changes in fair value as a result of market prices are
recorded within revenue as other revenue.
(m) Finance costs
Finance costs comprise interest expense on borrowings, unwinding of the
discount on provisions for historical costs and site restoration and foreign
currency losses. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised
in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis as either
finance income or finance cost depending on whether foreign currency movements
result in a net gain or loss, this includes exchange gains and losses that
arise on trade and other receivables and trade and other payables in foreign
currency.
(o) Income tax
Income tax expense comprises current and deferred tax. Current tax and
deferred tax are recognised in profit or loss except to the extent that they
relate to items recognised directly in equity or in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years. Deferred tax is recognised in respect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss. Deferred tax is
measured at the tax rates that are expected to be applied to the temporary
differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax assets and liabilities, and they
relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will
be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be
realised.
(p) Earnings per share
The Group presents basic and diluted earnings per share ("EPS") data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period, adjusted for own
shares held. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding, adjusted for own shares held, for the effects of
all dilutive potential ordinary shares.
(q) New and amended standards adopted
No new standards and interpretations issued by the IASB have had a significant
impact on the consolidated financial statements.
4 Revenue
2021 2020
$000
$000
Sales of vanadium products 4,078 2,197
Sales of calcium molybdate 392 68
Sales of ferro-molybdenum 161 -
Sales of gravel and waste rock 61 8
Service revenue 17 27
Total revenue from customers under IFRS 15 4,709 2,300
Other revenue - change in fair value of customer contracts 22 73
Total revenue 4,731 2,373
Vanadium and molybdenum products
Under certain sales contracts the single performance obligation is the
delivery of AMV or calcium molybdate to the designated delivery point at which
point possession, title and risk on the product transfers to the buyer. The
buyer makes an initial provisional payment based on volumes and quantities
assessed by the Company and market spot prices of vanadium pentoxide for AMV
and molybdic oxide for calcium molybdate at the date of shipment. The final
payment is received once the product has reached its final destination with
adjustments for quality / quantity and pricing. The final pricing is based on
the historical average market prices during a quotation period based on the
date the product reaches the port of destination for AMV and the month of
shipment from the port for calcium molybdate and an adjusting payment or
receipt will be made to the revenue initially received. Where the final
payment for a shipment made prior to the end of an accounting period has not
been determined before the end of that period, the revenue is recognised based
on the spot price that prevails at the end of the accounting period.
Other revenue related to the change in the fair value of amounts receivable
and payable under the sales contracts between the date of initial recognition
and the period end resulting from market prices are recorded as other revenue.
Refer to Note 17 and 24 for details of trade receivables and payables at FVTPL
recorded in 2021 and 2020.
5 Cost of sales
2021 2020
$000
$000
Materials 3,709 2,523
Wages, salaries and related taxes 656 435
Depreciation 425 405
Electricity 99 145
Professional services - 117
Transportation cost - 97
Taxes other than income - 31
Other 4 26
4,893 3,779
6 Other income
2021 2020
$000
$000
Other (Sales of equipment) 28 8
28 8
7 Administrative expenses
2021 2020
$000
$000
Wages, salaries and related taxes 1,035 909
Professional services 305 312
Write-off of non-refundable VAT 499 301
Expenses on credit loss provision - 15
Taxes other than income tax 17 114
Listing and reorganisation expenses 119 103
Audit 151 152
Materials 75 57
Rent 37 55
Depreciation and amortisation 30 26
Insurance 22 21
Bank fees 20 16
Travel expenses 18 19
Write-off of bad debts - 15
Security 14 14
Research 11 14
Communication and information services 7 9
Write-off of prepayments - 7
Other 111 74
2,471 2,233
8 Other expenses
2021 2020
$000
$000
Other 11 -
11 -
9 Personnel costs
2021 2020
$000
$000
Wages, salaries and related taxes 1,711 1,286
1,711 1,286
During 2021 personnel costs of US$ 630,000 (2020: US$ 351,000) have been charged to cost of sales, US$ 1,035,000 (2020: US$ 909,000) to administrative expenses and US$ 46,000 (2020: US$ 26,000) were charged to cost of inventories which were not yet sold as at the year end.
10 Finance costs
2021 2020
$000
$000
Net foreign exchange costs 35 98
Unwinding of discount on site restoration provision - 4
Interest expense on financial liabilities (bonds) 82 31
Net finance costs 117 133
11 Income tax
The Group's applicable tax rates in 2021 are an income tax rate of 20% for
Kazakhstan registered subsidiaries (2020: 20%) and 0% (2020: 0%) for Guernsey
and BVI registered companies. The Kazakh tax rate has been applied below as
this is most reflective of the Group's trading operations and tax profile.
During the years ended 31 December 2021 and 2020 the Group incurred tax losses
and, therefore, did not recognise any current income tax expense.
Unrecognised deferred tax assets are described in Note 15.
Reconciliation of effective tax rate:
2021 2020
$000 % $000 %
Loss before tax (Group) (2,827) 100 (3,942) 100
Income tax at the applicable tax rate (565) 20 (788) 20
Effect of unrecognised deferred tax assets / (utilisation of previously 581 (13) 502 (13)
unrecognised losses)
Net non-deductible expenses/non-taxable income or loss (16) (7) 284 (7)
- - (2) -
12 Property, plant and equipment
Land and buildings Plant and equipment Vehicles Computers Other Construction in progress Total
$000
$000
$000
$000
$000
$000
$000
Cost
Balance at 1 January 2020 1,687 2,014 587 39 104 1,445 5,876
Additions - 28 10 1 5 255 299
Foreign currency translation difference (158) (189) (56) (4) (10) (140) (557)
Balance at 31 December 2020 1,529 1,853 541 36 99 1,560 5,618
Balance at 1 January 2021 1,529 1,853 541 36 99 1,560 5,618
Additions 8 154 14 4 14 2,523 2,717
Transfers 569 740 7 - - (1,316) -
Disposals - (51) (39) - (8) (80) (178)
Foreign currency translation difference (46) (57) (14) (1) (3) (55) (176)
Balance at 31 December 2021 2,060 2,639 509 39 102 2,632 7,981
Depreciation
Balance at 1 January 2020 639 1,645 330 17 39 - 2,670
Depreciation for the period 51 294 42 7 12 - 406
Foreign currency translation difference (61) (160) (32) (2) (3) - (258)
Balance at 31 December 2020 629 1,779 340 22 48 - 2,818
Balance at 1 January 2021 629 1,779 340 22 48 - 2,818
Depreciation for the period 76 343 35 7 11 - 472
Disposals - (45) (39) - (10) - (94)
Foreign currency translation difference (17) (49) (9) (1) (2) - (78)
Balance at 31 December 2021 688 2,028 327 28 47 - 3,118
Carrying amounts
At 1 January 2020 1,048 369 257 22 65 1,445 3,206
At 31 December 2020 900 74 201 14 51 1,560 2,800
At 31 December 2021 1,372 611 182 11 55 2,632 4,863
During 2021 a depreciation expense of US$ 424,000 (2020: US$ 380,000) has been
charged to cost of sales, excluding cost of finished goods that were not sold
at year end, US$ 30,000 (2020: US$ 25,000) to administrative expenses, and US$
1,000 has been charged to cost of finished goods that were not sold at the
year end (2020: US$ 1,000). Construction in progress relates to upgrades to
the processing plant associated with the expansion of the facility.
13 Exploration and evaluation assets
The Group's exploration and evaluation assets relate to the Balasausqandiq
deposit. During the year ended 31 December 2021 the Group capitalised the cost
(US$ 333,000) of the services of Coffey Geotechnics Ltd with respect to the
production of the feasibility study as exploration and evaluation assets (in
2020: US$ 770,000). As at 31 December 2021 the carrying value of exploration
and evaluation assets was US$ 1,434,000 (2020: US$ 813,000).
2021 2020
$000
$000
Balance at 1 January 813 59
Additions (feasibility study) 626 770
Change in estimate (asset restoration obligation) (14) (14)
Foreign currency translation difference 9 (2)
Balance at 31 December 1,434 813
14 Intangible assets
Mineral rights Patents Computer software Total
$000
$000
$000
$000
Cost
Balance at 1 January 2020 100 34 3 137
Additions - 1 - 1
Foreign currency translation difference (9) (3) - (12)
Balance at 31 December 2020 91 32 3 126
Balance at 1 January 2021 91 32 3 126
Additions - 1 - 1
Foreign currency translation difference (3) - - (3)
Balance at 31 December 2021 88 33 3 124
Amortisation
Balance at 1 January 2020 100 10 3 113
Amortisation for the year - 1 - 1
Foreign currency translation difference (9) - - (9)
Balance at 31 December 2020 91 11 3 105
Balance at 1 January 2021 91 11 3 105
Amortisation for the year - 1 - 1
Foreign currency translation difference (3) - - (3)
Balance at 31 December 2021 88 12 3 103
Carrying amounts
At 1 January 2020 - 24 - 24
At 31 December 2020 - 21 - 21
At 31 December 2021 - 21 - 21
During 2021 and 2020 amortisation of intangible assets was charged to
administrative expenses.
15 Deferred tax assets and liabilities
Unrecognised deferred tax assets
2021 2020
$000
$000
Temporary deductible differences 119 320
Tax losses carried forward 11,590 10,511
Unrecognised tax deferred tax assets (11,709) (10,831)
- -
Deferred tax assets have not been recognised in respect of these items given
the taxable loss in the year and because the Kazakhstan processing operations
benefit from a tax incentive agreement which reduces the tax payable to nil
and it is, therefore, uncertain that future taxable profit will be available
against which the Group can utilise the benefits therefrom. The tax incentive
agreement is effective for ten years starting from 2018.
The increase in carried forward tax losses comprises the tax loss for the period and the effect of resubmissions of previous tax filings which contributed to an increase in tax losses.
Temporary deductible differences mostly relate to property, plant and equipment. Unutilised tax losses expire after 10 years from the year of origination.
Expiry dates of unrecognised deferred tax assets in respect of tax losses carried forward at 31 December 2021 are presented below:
Expiry year $000
2022 322
2023 1,020
2024 521
2025 251
2026 881
2027 528
2028 566
2029 2,362
2030 3,721
2031 1,675
11,847
Unrecognised deferred tax assets above are calculated based on the Kazakh tax rate of 20%.
16 Inventories
2021 2020
$000
$000
Raw materials and consumables 1,805 434
Finished goods 287 75
Work in progress 7 185
Goods in transit 1 -
2,100 694
During 2021 inventories expensed to profit and loss amounted to US$ 3,709,000
(2020: US$ 2,580,000).
17 Trade and other receivables
Current 2021 2020
$000 $000
Trade receivables from third parties 62 18
Due from employees 22 10
VAT receivable 58 205
Other receivables 9 8
151 241
Expected credit loss provision for receivables (35) (36)
116 205
The expected credit loss provision for receivables relates to credit impaired
receivables which are in default and the Group considers the probability of
collection to be remote given the age of the receivable and default status.
18 Prepayments
2021 2020
$000
$000
Non-current 930 1,467
Prepayments for equipment
930 1,467
Current
Prepayments for goods and services 670 52
670 52
The prepayments for equipment is related mainly to the high voltage powerline
connection. For more details see the earlier report on production.
19 Cash and cash equivalents
2021 2020
$000
$000
Cash at current bank accounts 2,795 688
Cash at bank deposits 14 14
Petty cash 1 5
Cash and cash equivalents 2,810 707
20 Equity
(a) Share capital
Number of shares unless otherwise
stated
Ordinary shares
31 December 2021 31 December 2020
Par value - -
Outstanding at beginning of year 330,589,052 312,978,848
Shares issued 47,087,747 17,610,204
Outstanding at end of year 377,676,799 330,589,052
Ordinary shares
All shares rank equally. The holders of ordinary shares are entitled to
receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company.
On 6 January 2020 the Company's shares were admitted to listing on the Astana
International Stock Exchange.
From 23 January 2020 the Company's shares were delisted from the Kazakh Stock
Exchange.
During 2021 the Company issued 47,087,747 ordinary shares of no par value by
way of a direct subscription into the Company for cash at price 9 pence per
share, raising a total of £4,200,000.
Convertible loan notes
Convertible loan notes are considered as equity as the conditions that are set
out in the Convertible Loan Note agreement provide for conversion into equity
in all circumstances except in certain conditions that the Directors do not
consider probable. In particular, the conditions required to be fulfilled
before conversion takes place include an obligation on the Company to receive
certain consents from the regulatory authorities which have already been
received, and avoidance of the possibility of triggering a requirement for the
issue of a prospectus which will automatically be achieved upon the effluxion
of time provided no further shares are issued.
Reserves
Share capital: Value of shares issued less costs of issuance.
Convertible loan notes: Further investment rights at issue price.
Additional paid in capital: Amounts due to shareholders which were waived.
Foreign currency translation reserve: Foreign currency differences on
retranslation of results from functional to presentational currency and
foreign exchange movements on intercompany balances considered to represent
net investments which are considered as permanent equity.
Accumulated losses: Cumulative net losses.
(b) Dividends
No dividends were declared for the year ended 31 December 2021 (2020: US$
nil).
(c) Loss per share (basic and diluted)
The calculation of the basic and diluted loss per share has been based on the
loss attributable to ordinary shareholders and weighted-average number of
ordinary shares outstanding. There are no convertible bonds and convertible
preferred stock, so basic and diluted losses are equal.
(i) Loss attributable to ordinary shareholders (basic and diluted)
2021 2020
$000
$000
Loss for the year, attributable to owners of the Company (2,827) (3,944)
Loss attributable to ordinary shareholders (2,827) (3,944)
(ii) Weighted-average number of ordinary shares (basic and diluted)
Shares 2021 2020
Issued ordinary shares at 1 January (after subdivision) 330,589,052 312,978,848
Effect of shares issued (weighted) 4,531,663 6,812,878
Weighted-average number of ordinary shares at 335,120,715 319,791,726
31 December
Loss per share of common stock attributable to the Company (basic and diluted) (0.008) (0.012)
21 Loans and borrowings
In 2021 the Company issued unsecured corporate bonds with effective interest
rates of 7.0%. Investors have subscribed for a total of 242 of the Company's
bonds with a nominal value of US$ 2,000 each but are issued at a premium to
achieve the effective interest rates agreed. The bonds are unsecured, have a
three-year term and bear the coupon rate of 5.8%, paid twice-yearly. The bonds
have been listed on AIX with identifier FAR.0323 and ISIN number KZX000000336.
The investors in certain bonds have the right to receive early repayment after
a minimum period of 12 months.
2021 2020
$000
$000
Non-current liabilities 901 412
Bonds payable
901 412
Current liabilities 465 512
Bonds payable (early repayment rights)
Interest payable 24 12
489 524
Terms and conditions of outstanding bonds in 2021 were as follows:
USD Currency Effective interest rate Nominal amount Actual Coupon rate Coupon Interest
amount
paid
Bonds payable USD 7.5% 506 503 5.8% 38 31
Bonds payable USD 7.0% 886 876 5.8% 41 50
Bonds payable USD 5.8% 20 21 5.8% 1 1
1,412 1,400 80 82
During 2021 the Group sold bonds to subscribers and received cash from
subscribers in the total amount of US$ 476,000 (2020: US$ 924,000).
Details of tranches of the bonds
Tranche date Bond denomination Actual price per bond Number of bonds Nominal Actual amount Earliest repayment date Maturity date
amount
08.02.2021 2000 1999 58 116,000 115,940 17.03.2023 17.03.2023
17.03.2021 2000 1956 52 104,000 101,708 17.03.2023 17.03.2023
17.03.2021 2000 1956 30 60,000 58,678 17.03.2023 17.03.2023
17.03.2021 2000 1956 102 204,000 199,504 17.03.2023 17.03.2023
Total 484,000 475,830
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions.
Loans and borrowings 2021 2020
$000 $000
At 1 January 936 -
Cash flows:
-Interest paid (80) (19)
-Proceeds from loans and borrowings 476 924
Total 1,332 905
Non-cash flows
- Interest accruing in period 95 33
- Bond discount/premium - (2)
At 31 December 1,427 936
22 Provisions
2021 2020
$000
$000
Balance at 1 January 47 64
Unwinding of discount - 4
Change in estimate (4) (14)
Foreign currency translation difference (1) (7)
Balance at 31 December 42 47
Non-current 42 47
42 47
Site restoration
A provision was recognised in respect of the Group's obligation to rectify
environmental issues in the Balasausqandiq mine, Kyzylorda region.
In accordance with Kazakhstan environmental legislation, any land contaminated
by the Group in the Kyzylorda region must be restored before the end of 2043.
The provision was estimated by considering the risks related to the amount and
timing of restoration costs based on the known level of damage. Because of the
long-term nature of the liability, the main uncertainty in estimating the
provision is the costs that will be incurred. In particular, the Group has
assumed that the site will be restored using technology and materials that are
available currently. A fund to cover this liability will be collected via
annual statutory contributions to the special liquidation fund at the rate of
1% of mining expenses as stipulated in the Subsoil contract. Based on the
working program which forms the part of the Subsoil contract the total amount
is expected to reach KZT 675m or US$ 1,838,000. The present value of
restoration costs was determined by discounting the estimated restoration cost
using a Kazakh risk-free rate for the respective period, and inflation of 7.5%
(2020: 7.5%). The estimated period for discounting was 22 years (2020: 23
years). Environmental legislation in Kazakhstan continues to evolve and it is
difficult to determine the exact standards required by the current legislation
in restoring sites such as this. Generally, the standard of restoration is
determined based on discussions with the Government officials at the time that
restoration commences.
23 Trade and other payables
2021 2020
$000
$000
Trade payables 625 1,035
Debt to directors/key management (Note 29) 7 522
Debt to employees 68 57
Other taxes 117 122
Advances received 11 -
828 1,736
24 Payables at FVTPL
2021 2020
$000
$000
Payables at FVTPL - 60
- 60
25 Financial instruments and risk management
(a) Overview
The Group has exposure to the following risks from its use of financial
instruments:
· credit risk;
· liquidity risk;
· market risk.
This note presents information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and
managing risk, and the Group's management of capital. Further quantitative
disclosures are included throughout these consolidated financial statements.
Risk management framework
The Chief Executive has overall responsibility for the establishment and
oversight of the Group's risk management framework.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed to reflect changes in market conditions and the Group's
activities. The Group aims to develop a disciplined and constructive control
environment in which all employees understand their roles and obligations.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables from
customers.
(i) Exposure to credit risk
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the reporting date was:
Carrying amount
2021 2020
$000
$000
Trade and other receivables, excluding amounts due from employees and VAT 71 -
receivable
Cash and cash equivalents 2,809 702
2,880 702
The maximum exposure to credit risk for trade and other receivables at the
reporting date by geographic region was:
Carrying amount
2021 2020
$000
$000
Kazakhstan 71 -
71 -
The maximum exposure to credit risk for trade and other receivables at the
reporting date by type of customer was:
Carrying amount
2021 2020
$000
$000
Trade receivables:
Wholesale customers 62 -
Other receivables
Other 9 -
1 71 -
The ageing of trade and other receivables at the reporting date was:
Gross Impairment Net Gross Impairment Net
2021 2021 2021 2020 2020 2020
$000
$000
$000
$000
$000
$000
Not past due 71 - 71 - - -
Past due more than 180 days 35 (35) - 36 (36) -
106 (35) 71 36 (36) -
The movement in the allowance for expected credit losses in respect of other
receivables during the year was as follows:
2021 2020
$000
$000
Balance at beginning of the year 36 21
Expected credit (loss) / gain change (1) 15
Balance at end of the year 35 36
Amounts due from customers at year end have been subsequently collected in
2021, except for credit impaired amounts. No additional expected credit loss
provision has been applied.
(ii) Cash and cash equivalents
As at 31 December 2021 the Group held cash of US$ 2,810,000 (2020: US$
707,000), of which bank balances of US$ 2,809,000 (2020: US$ 702,000)
represent its maximum credit exposure on these assets, which excludes petty
cash. 99% (2020: 64%) is held in banks with credit ratings of A+ and 1% in
banks with credit ratings of B to BBB- (2020: 36%). Credit ratings are
provided by the rating agency FitchRatings.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
The following are the contractual maturities of financial liabilities. It is
not expected that the cash flows included in the maturity analysis could occur
significantly earlier, or at significantly different amounts.
2021
Carrying Contractual cash flows On demand 0-6 mths 6 months - 1 year 1-3 years
amount
$000
$000
$000
$000
$000
$000
Financial liabilities
Trade and other payables and payables at FVTPL 601 601 9 592 - -
Loans and borrowings 1,390 1,477 - - 957 520
1,991 2,078 9 592 957 520
2020
Carrying Contractual cash flows On demand 0-6 mths 6 months - 1 year 1-3 years
amount
$000
$000
$000
$000
$000
$000
Financial liabilities
Trade and other payables and payables at FVTPL 1,674 1,674 9 1,665 - -
Loans and borrowings 936 1,015 - 23 540 452
2,610 2,689 9 1,688 540 452
(d) Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices will affect the Group's
income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
In order to ascertain market risk the Group has analysed the impact of
different levels of vanadium pentoxide prices on profitability as well as
closely monitoring the market conditions for other leading international
organisations operating in the vanadium industry. The sensitivity analysis
shows that a price of $4/lb for vanadium pentoxide is the minimum price that
must be achieved by the Group in order to maintain operations.
The current level of vanadium pentoxide prices is sufficient to keep the Group
at a stable future profitable level.
(i) Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that
are denominated in a currency other than the respective functional currency of
Group entities.
In respect of monetary assets and liabilities denominated in foreign
currencies, the Group ensures that its net exposure is kept to an acceptable
level by buying or selling foreign currencies at spot rates when necessary to
address short term imbalances.
Exposure to currency risk
The Group's exposure to foreign currency risk was as follows based on notional
amounts:
2021 US$-denominated GBP- EUR- RUB- KZT-
denominated
denominated
denominated
denominated
2021 2021 2021 2021 2021
$000
$000
$000
$000
$000
Cash and cash equivalents 2,725 42 - - 42
Trade and other payables (206) (24) (31) (33) (534)
Loans and borrowings (1,390) - - - -
Net exposure 1,129 18 (31) (33) (492)
2020 US$-denominated GBP- EUR- RUB- KZT-
denominated
denominated
denominated
denominated
2020 2020 2020 2020 2020
$000
$000
$000
$000
$000
Cash and cash equivalents 248 198 - - 260
Trade and other payables (700) (497) (31) (34) (412)
Loans and borrowings (936) - - - -
Net exposure (1,388) (299) (31) (34) (152)
The following significant exchange rates applied during the year:
in US$ Average rate Reporting date spot rate
2021 2020 2021 2020
KZT 1 0.0023 0.0024 0.0023 0.0024
GBP 1 1.3756 1.2827 1.3855 1.3576
RUB 1 0.0136 0.0139 0.0138 0.0134
EUR 1 1.1831 1.1414 1.1907 1.2268
(ii) Interest rate risk
Changes in interest rates do not significantly impact the Group's position as
at 31 December 2021. Management does not have a formal policy of determining
how much of the Group's exposure should be to fixed or variable rates.
However, at the time of raising new loans or borrowings management uses its
judgment to decide whether it believes that a fixed or variable rate would be
more favourable to the Group over the expected period until maturity.
The bonds interest rates are fixed by agreement.
Changes in interest rates at the reporting date would not significantly affect
profit or loss.
(iii) Other risks
IAS 1 requires the disclosure of the risks and measures to meet the risks
related to external capital requirements.
The Group manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising returns to shareholders
through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from 2020.
The capital structure of the Group consists of net debt (see Note 21) and the
equity of the Group (see note 20).
The Group is not subject to any externally imposed capital requirements.
The Group reviews the capital structure on a regular basis giving
consideration to the cost of capital and the risks associated with each class
of capital.
Debt is defined as long- and short-term borrowings as detailed in Note 21.
Equity includes all capital and reserves of the Group that are managed as
capital.
(e) Fair values versus carrying amounts
Management believes that the fair value of the Group's financial assets and
liabilities approximates their carrying amounts.
Categories of financial instruments
2021 2020
$000 $000
Financial assets (includes cash)
Trade and other receivables at FVTPL 71 -
Cash at amortised cost 2,809 702
2,880 702
Financial liabilities - measured at amortised cost
Trade and other payables at amortised cost 601 1,614
Trade payables at fair value through profit and loss - 60
Loans and borrowings at amortised cost 1,390 936
1,991 2,610
The basis for determining fair values is disclosed below.
Trade payables and receivables at FVTPL are recorded at fair value through
profit and loss as they fail the criteria for amortised cost owing to the
variability as a result of final pricing adjustments.
Financial instruments measured at fair value are presented by level within
which the fair value measurement is categorised. The levels of fair value
measurement are determined as following:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The Group's contract receivables and liabilities at the year end are recorded
at fair value through profit and loss and fair valued based on the estimated
forward prices that will apply under the terms of the sales contracts upon the
product reaching the port of destination. Any trade receivable fair value
reflects amounts receivable from the customer adjusted for forward prices
expected to be realised.
In the absence of observable forward prices the forward price is estimated
using a valuation methodology which is based on vanadium spot prices at the
year end adjusted for the discount for AMV / calcium molybdate versus vanadium
pentoxide / molybdic oxide, time value of money and carry costs. Given the
short period to final pricing the time value of money and carry costs are not
significant and the forward price materially approximates the spot price at
year end with the adjustment to reflect the difference between vanadium
pentoxide / molybdic oxide prices and AMV / calcium molybdate. Any fair value
of trade receivables and payables at FVTPL are categorised at Level 3. During
the year there were no transfers between levels of fair value hierarchy.
26 Commitments
Under the conditions of the subsoil use contract under which the Group has the
right to develop and exploit the Balasausqandiq deposit, the Group is obliged
to undertake a minimum level of mining and to make certain levels of
expenditure on the training of Kazakh employees, research and development and
the development of the Shieli region. There is also an obligation set aside
funds to provide for the eventual costs of mine closure and or site
reclamation.
· Minimum quantity of ore to be mined:
Year Tonnes
2018 15,000
2019 15,000
2020 15,000
2021 15,000
2022 15,000
2023 545,000
2024 763,000
2025 onwards Increase to 1,000,000 per year starting from 2025
· Training costs should be equal to 1% of the Group's capital
expenditures on subsoil activities. Costs in 2021: US$ 4,000 (2020: US$ 2,000)
· Research and development should be equal to 1% of the Group's income
from subsoil activities. Costs in 2021: US$ 11,100 (2020: US$ 13,700)
· The addition to the liquidation fund should be equal to 1% of the
Group's costs of mining ore. Costs in 2021: US$ 12,000 (2020: US$ 12,000)
· Expenditure on social development of the Shieli region should be
equal to 1.5% of the Group's costs of mining ore. Costs in 2021: US$ 750
(2020: US$ 400).
All obligations of the Subsoil Use Contract have been complied with except for
certain exploration work programme requirements, specifically the volume of
ore to be mined. As a result, the Group has applied for amendments to the
Subsoil Use Contract given the unique situation created by the Covid-19
pandemic during 2020 and 2021. The amendments that the Group have requested
relate to the transfer of 30,000 tons of ore to be mined between 2020 and 2021
to 2022 and 2023. As a result, and if the amendments are granted, the
obligation for mining in 2020 and 2021 will be equal to zero tons, 2022 to
2024 will be equal to 590,000 tons and starting from 2025 1,000,000 tons of
ore, per year. The request is in the process of review with the relevant
authorities of the Kazakh government.
27 Contingencies
(a) Insurance
The insurance industry in the Kazakhstan is in a developing state and many
forms of insurance protection common in other parts of the world are not yet
generally or economically available. The Group does not have full coverage for
its plant facilities, business interruption or third party liability in
respect of property or environmental damage arising from accidents on Group
property or relating to Group operations. There is a risk that the loss or
destruction of certain assets could have a material adverse effect on the
Group's operations and financial position.
(b) Taxation
The taxation system in Kazakhstan is relatively new and is characterised by
frequent changes in legislation, official pronouncements and court decisions
which are often unclear, contradictory and subject to varying interpretations
by different tax authorities. Taxes are subject to review and investigation by
various levels of authorities which have the authority to impose severe fines,
penalties and interest charges. A tax year generally remains open for review
by the tax authorities for five subsequent calendar years but under certain
circumstances a tax year may remain open longer.
These circumstances may create tax risks in Kazakhstan that are more
significant than in other countries. Management believes that it has provided
adequately for tax liabilities based on its interpretations of applicable tax
legislation, official pronouncements and court decisions. However, the
interpretations of the relevant authorities could differ and the effect on
these consolidated financial statements, if the authorities were successful in
enforcing their interpretations, could be significant.
There are no tax claims or disputes at present.
28 Segment reporting
The Group's operations are split into three segments based on the nature of
operations: processing, subsoil operations (being operations related to
exploration and mining) and corporate segment for the purposes of IFRS 8
Operating Segments. The Group's assets are primarily concentrated in the
Republic of Kazakhstan and the Group's revenues are derived from operations
in, and connected with, the Republic of Kazakhstan.
2021
Processing Subsoil Corporate Total
$000
$000
$000
$000
Revenue 4,731 - - 4,731
Cost of sales (4,893) - - (4,893)
Other income 28 - - 28
Administrative expenses (1,131) (31) (1,309) (2,471)
Other expenses - - (11) (11)
Distribution & other expenses (94) - - (94)
Finance costs 97 - (214) (117)
Loss before tax (1,262) (31) (1,534) (2,827)
2020
Processing Subsoil Corporate Total
$000
$000
$000
$000
Revenue 2,373 - - 2,373
Cost of sales (3,779) - - (3,779)
Other income 8 - - 8
Administrative expenses (990) (25) (1,218) (2,233)
Distribution & other expenses (178) - - (178)
Finance costs (68) - (65) (133)
Loss before tax (2,634) (25) (1,283) (3,942)
Included in revenue arising from processing are revenues of US$ 4,600,000
(2020: US$ 2,300,000) which arose from sales to three of the Group's largest
customers. No other single customer contributes 10 per cent or more to the
Group's revenue.
All of the Group's assets are attributable to the Group's processing
operations.
Sales to the Group's largest customers in 2021 were as follows:
London Chemicals (UK) US$ 2,300,000 (47%) (2020: US$
2,000,000 (87%))
Sideralloys SA (Switzerland) US$ 1,000,000 (25%) (2020: US$ 300,000 (12%))
MITAX Ltd (UK) US$ 1,300,000 (27%)
(2020: US$ nil (0%))
29 Related party transactions
Transactions with management and close family members
Management remuneration
Key management personnel received the following remuneration during the year,
which is included in personnel costs (see Note 9):
2021 2020
$000
$000
Wages, salaries and related taxes 400 527
Refer to Note 23 for details of payables to key management and the Directors'
Report for shares issued to key management. The amount of wages and salaries
outstanding at 31 December 2021 is equal to US$ 70,000 (2020: US$ 500,000).
30 Subsequent events
There are no subsequent events to report following the year end.
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR IPMLTMTATBMTRecent news on Ferro-Alloy Resources
See all newsREG - Ferro-Alloy Resrcs. - Grant of Share Options
AnnouncementREG - Ferro-Alloy Resrcs. - 2024 Final Results
AnnouncementREG - Official List - Official List Notice
AnnouncementREG - Stock Exch Notice - Admission to Trading - 13/03/2025
AnnouncementREG - Ferro-Alloy Resrcs. - Issue of Equity to Supplier
Announcement