REG - Ferro-Alloy Rsrcs - Half-year Report
11/09/2023 07:00
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RNS Number : 9314L Ferro-Alloy Resources Limited 11 September 2023
11 September 2023
Ferro-Alloy Resources Limited
("Ferro-Alloy" or "the Company" or "the Group")
2023 Interim Results
Ferro-Alloy Resources Limited (LSE:FAR), the vanadium producer and developer
of the large Balasausqandiq vanadium deposit in Southern Kazakhstan, is
pleased to announce its interim results for the six months ended 30 June 2023.
Overview
Feasibility Study
· Feasibility study ongoing with completion of Stage 1 of the study
expected in April 2024 and Stage 2 later in 2024:
o Ore resource for ore-body 1 was revised upwards during the period by SRK
Consulting (Kazakhstan) to 32.9m tonnes at a mean grade of 0.62%, giving an
increase of 35.4% in the resource and 23% in contained V(2)O(5).
o Drilling of ore-bodies 2, 3 and 4 has been completed with the exception of
an area which is difficult to access. The Company is awaiting assays for these
ore-bodies which are expected to provide the feed for the larger Stage 2
development of the deposit.
o Metallurgical test-work is nearing completion.
Operations
· Final planned improvements completed at the Existing Operation (where
the Group processes secondary materials and recovers the contained vanadium,
molybdenum and nickel for sale to third parties) including:
o The conversion of the fuel used for the various roasting ovens from diesel
to natural gas.
o A further press filter and tanks to allow a second pulpation process to
give a further recovery of vanadium.
o A further press filter and tanks to allow for recrystallisation of
ammonium metavanadate, an essential step in producing a high purity product as
required for electrolyte purposes.
o Improved molybdenum processes to increase recovery to around 90% depending
on the raw-material treated.
o Various additional equipment to contain production emissions.
· Following poor availability of concentrate supply in Q1, Q2
achieved best production by the Group to date in terms of both tonnes of
concentrates treated and tonnes of metal recovered across all product lines,
however, H1 production constrained by a lack of raw materials caused by
continuing defaults of certain of the Group's suppliers.
· The Group has subsequently made changes to suppliers and has
secured future deliveries to allow full production from mid-late September
2023.
Financial
· Total revenues of US$3.3m for the period (H1 2022: US$3.9m)
reflecting the reduced volumes of raw materials delivered to the existing
plant for processing during the first quarter of the year.
· Overall loss for the period of US$1.5m (2022: loss of US$0.7m).
Corporate
· Post period, launched the first tranche of a new Kazakhstan exempt
offer bond programme in July 2023. The proceeds of the Programme will be used
to strengthen the Company's balance sheet and provide working capital,
allowing the acceleration of the project's development as far as possible.
Commenting on the interim financial results, Nick Bridgen, CEO of Ferro-Alloy
Resources said:
"I am pleased to report the good progress with the feasibility study. With the
completion of the expansion of the existing process plant, and the improved
raw-material supply position, I look forward to much better operational
performance from the fourth quarter of this year onwards."
- Ends -
For further information, visit www.ferro-alloy.com or contact:
Ferro-Alloy Resources Limited Nick Bridgen (CEO) / William Callewaert (CFO) info@ferro-alloy.com
Shore Capital Toby Gibbs/Lucy Bowden +44 207 408 4090
(Joint Corporate Broker)
Liberum Capital Limited Scott Mathieson/Kane Collings +44 20 3100 2000
(Joint Corporate Broker)
St Brides Partners Limited Catherine Leftley/Ana Ribeiro +44 207 236 1177
(Financial PR & IR Adviser)
Operations Review
Balasausqandiq feasibility study
The Company is currently undertaking a comprehensive bankable feasibility
study on the Balasausqandiq project, with completion of Stage 1 of the study
expected in April 2024 and Stage 2 later in the year. Although a full mineral
resource estimate has only been completed for ore-body 1 ("OB1"), indications
are that Balasausqandiq will be one of the largest vanadium operations in the
world.
The ore resource for OB1 was revised upwards during the period by SRK
Consulting (Kazakhstan) Limited, the author of the feasibility study, to 32.9m
tonnes at a mean grade of 0.62%, giving an increase of 35.4% in the resource
and 23% in contained V(2)O(5).
The drilling of ore-bodies 2, 3 and 4 has been completed with the exception of
an area which is difficult to access. This is planned to be drilled closer to
the time of mining when access has been developed. The Company is awaiting
assays for these ore-bodies which are expected to provide the feed for the
larger Stage 2 development of the deposit.
The metallurgical test-work is nearing completion. The Company's metallurgical
process was previously tested in a pilot plant and the process parameters are
now being rigorously tested in independent laboratory conditions by SGS Canada
Inc under the direction of Tetra Tech Limited, who are carrying out the
metallurgical section of the feasibility study.
Other parts of the study are also nearing completion and the overall study for
Stage 1 is expected to be announced in April 2024, as noted above.
The existing operation
The existing operation was developed from the original 15,000 tonnes per year
ore-treatment test plant which was used to develop and pilot the proposed
treatment process of the Balasausqandiq ore. The plant was subsequently
adapted to treat purchased concentrates. The most common raw material is the
loaded catalysts used in refineries to remove the metal impurities from crude
oil. The Group buys these secondary materials and recovers the contained
vanadium, molybdenum and nickel for sale to third parties.
During the first half of 2023, the final planned improvements were made to the
plant, including:
1. The conversion of the fuel used for the various roasting ovens from
diesel to natural gas;
2. A further press filter and tanks to allow a second pulpation
process to give a further recovery of vanadium, taking the average overall
recovery of vanadium from catalysts treated to over 90%;
3. A further press filter and tanks to allow for recrystallisation of
ammonium metavanadate ("AMV"), an essential step in producing a high purity
product as required for electrolyte purposes;
4. Improved molybdenum processes to increase recovery to around 90%
depending on the raw material treated; and
5. Various additional equipment to contain production emissions.
The Group received grant funding from the Kazakhstan National Scientific
Council to develop the process and install equipment for the production of
various oxides of vanadium suitable for use in electrolyte for vanadium redox
flow batteries. The development work is in association with the
Physical-Technical Institute of Almaty (part of the Satbayev University) who
are building a laboratory in which a battery will be installed and electrolyte
produced from the Group's oxides for test purposes.
Production
The second quarter of the year achieved the best production by the Group to
date in terms of both tonnes of concentrates treated and tonnes of metal
recovered across all product lines.
By comparison, production for the first quarter of the year was severely
constrained by the availability of concentrate supply to the existing plant
and is reflected in the corresponding production figures.
2023 2022 2023 2022 2023 2022
Quarter Tonnes of vanadium pentoxide* Tonnes of vanadium pentoxide* Tonnes of molybdenum** Tonnes of molybdenum** Tonnes of nickel*** Tonnes of nickel***
Q1 31.3 81.1 6.5 11.3 9.7 25.1
Q2 141.4 91.7 14.1 10.4 50.8 32.2
H1 172.7 172.8 20.6 21.7 60.5 57.3
* contained in AMV
** contained in ferro-molybdenum
*** contained in nickel concentrate
Outlook
The first half of 2023's output was constrained by a lack of raw materials,
caused by continuing defaults of certain of the Group's suppliers. The Group
responded by signing several new long-term and spot supply contracts but
further delays to delivery were experienced. In response, the Group has made
yet further changes to its suppliers and signed new contracts to secure future
deliveries. The indications are that more material is being offered to the
Group, allowing the Group to select the more reliable counterparties. Despite
these setbacks, sufficient volumes of raw materials have been purchased and
are en route to the Group's plant site to allow full production from mid to
late September. Winter transport delays may impact on winter deliveries,
albeit to a lesser extent than previously experienced.
Corporate
The Company's previously issued and outstanding bonds, amounting to US$1.1m at
31 December 2022, were redeemed at maturity during March 2023.
Subsequently, the Company launched a new Kazakhstan US$20m exempt offer bond
programme ("the Programme") in July 2023. Cash proceeds generated by the
Programme will be used, in general, to strengthen the Company's balance sheet
and provide working capital for the existing operation.
The key features of the Programme are as follows:
- the Programme can comprise of one or more tranches of bonds,
each listed on the Astana International Exchange ("AIX");
- the total nominal value of all tranches issued under Programme
will not exceed US$20m;
- only accredited investors resident in Kazakhstan will be
eligible to invest in the Programme;
- bonds issued under the Programme will be denominated in either
US dollars or Kazakhstan tenge;
- all bonds issued will rank as unsecured debt obligations of the
Company;
- the applicable coupon rate, duration, issue price and other
relevant terms of any bonds issued under the Programme will be defined and
determined by the terms and conditions of each tranche of bonds issued; and
- the Programme is governed by the laws and regulations of the
Astana International Finance Centre and is valid until 31 July 2033.
Following the launch of the Programme, the Company listed the first tranche of
bonds on the AIX on 27 July 2023 with the ability to raise an initial US$3
million. As at the date of this report, the first tranche of bonds has been
materially sold and the cash proceeds received.
The Company is preparing to list a second tranche of bonds on the AIX during
the course of September / October with the ability to raise a further US$5
million. The cash proceeds from the second tranche will be deployed to
accelerate the development of the project, including front-end engineering.
Product prices in the period
Vanadium pentoxide
At the start of 2023, the price of vanadium pentoxide was around US$9.30/lb,
rising slightly to between US$10.00/lb and US$10.50/lb for the period January
to March inclusive, after which the price dropped to US$6.85/lb during June
before recovering to around US$7.50/lb at the period end.
Ferro-molybdenum
At the start of 2023, the price of ferro-molybdenum was around US$79/kg rising
sharply to a period high of US$101/kg in February before gradually falling to
a period low of US$42/kg in April, after which prices stabilised at around
US$50/kg for the balance of the period.
Earnings and cash flow
The Group generated total revenues of US$3.3m for the period (H1 2022:
US$3.9m). The reduction in revenue reflects the reduced volumes of raw
materials delivered to the existing plant for processing during the first
quarter of the year.
The cost of sales for the period under review was US$3.6m in line with the
first six months of 2022 (US$3.5m).
Administrative expenses for the period were US$1.3m (2022: US$1.2m).
The Group made a loss before and after tax of US$1.5m (2022: loss of US$0.7m).
Net cash outflows used in operating activities were US$1m (2022: cash outflow
of US$0.5m). Net cash used in investing activities during the period was
US$2.3m, an increase of US$0.6m in comparison to the prior period, reflecting
the Group's continued investment in the Balasausqandiq feasibility study and
planned upgrades to the plant at the existing processing operation. Net cash
used in financing activities increased by US$1.1m between the periods due to
the maturity and repayment of the Company's outstanding bonds in issue during
March 2023.
Balance sheet review
At the period end, non-current assets totalled US$11.9m (2022: US$8.0m)
reflecting the continued capitalisation of expenses incurred by the Group on
the development of the Balasausqandiq feasibility study (as an exploration and
evaluation asset) and capital additions made to the plant at the existing
processing operation.
Current assets, excluding cash balances, totalled US$5.0m at the period end
compared to US$4.8m for the prior period.
The Group held an aggregate cash balance of US$0.6m at the period end (2022:
US$0.5m). As at the date of this report, the Group held an aggregate cash
balance of US$1.8m.
The Group did not hold any significant or material non-current liabilities at
the period end.
With respect to current liabilities, the reduction in the overall balance from
US$4.2m at 30 June 2022 to US$3.0m at the period end can be attributed, in the
main, to the repayment of the Company's outstanding bonds.
Environmental, social and governance
Both the existing operation and the planned process plant for Balasausqandiq
will have a strongly positive environmental impact. The vanadium from
production will benefit energy storage in both vanadium redox flow batteries,
the front-running technology for fixed ground long-term energy storage, but
also potentially in certain technologies for mobile batteries used in electric
vehicles.
Furthermore, in both operations we are aiming to leave little or no residues
from processing operations, since all the components of the ore are
potentially useful. The CO(2) emissions created by our production at
Balasausqandiq are expected to be a fraction of most other producers which
generally require concentration and high-temperature roasting to liberate the
vanadium. The carbon concentrate which we plan to market as a replacement for
carbon black is produced without burning hydrocarbons, as is the usual
production process.
Description of principal risks, uncertainties and how they are managed
(a) Current processing operations
Current processing operations make up a small part of the Company's expected
future value but are expected to 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), availability of vanadium bearing concentrates and the
efficiency of recovery of products from those concentrates.
The Group is constantly reviewing the market opportunities for supplies of
vanadium bearing concentrates. The Group aims to extract all the useful
components of the raw materials so that no residues remain on site and so
maximum value is obtained from each tonne treated. By this means, we aim to
be one of the most efficient and lowest cost secondary vanadium treatment
plants so that our competitive position reduces the danger of high prices for
raw materials making the operation uneconomic.
(b) Balasausqandiq project
The Balasausqandiq project is a much larger contributor to the Company's value
than the current processing operation and is primarily dependent on long-term
vanadium prices.
The project is dependent on raising finance to meet projected capital costs
(see below) and the successful construction and commissioning of the project's
proposed mine processing facilities. It is not unusual for new mining projects
to experience unforeseen problems, incur unexpected costs and be exposed to
delays during construction, commissioning, and initial production, all of
which could have a material adverse effect on the Company's operations and
financial position. The Company has taken steps to mitigate such potential
adverse effects by engaging globally recognised engineers and consultants to
assist with the development and design of the key elements of the project in
addition to the Group's own highly qualified workforce.
(c) Geopolitical situation
The Directors remain vigilant of the situation created by the ongoing invasion
of Ukraine by Russia. The continued main risk of the conflict is to the
Group's transport routes, many of which involve transit through Russia. Whilst
these are currently operating without issue, sanctions have been made against
Russian and Belorussian vehicles transiting through Europe (but not against
vehicles registered in other jurisdictions in the region such as Kazakhstan).
There is a risk that further sanctions might prevent transit through Russia.
The Company continues to review 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 Sea. Routes to China are
working normally.
With respect to the global sanctions imposed on certain Russian entities and
individuals, the Group monitors the implications of those sanctions on the
Group's trading activities on an ongoing basis.
(d) Financing risk
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 Stage 1 feasibility study.
The existing operation is fully developed and operating well and, subject to
the uncertainty over vanadium bearing concentrate availability, prices and
costs, is forecast to make profits going forward.
In March of 2021 the Company signed an investment agreement with Vision Blue
Resources Limited ("Vision Blue"). Under the terms of this agreement and in
addition to Vision Blue's participation in the 2022 equity fundraise,
investments totalling US$14.3m 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 also has further options to subscribe up to
US$30m at higher prices to partially finance the construction of the
Balasausqandiq project.
The favourable financial and other characteristics of the project determined
by studies so far completed give the Directors confidence that the outcome of
the Stage 1 feasibility study will be successful. Initial discussions with
potential providers of debt finance have been encouraging.
(e) Climate change risk
The Group has not identified any particular climate change related scenarios
that would likely have a significant impact on the Balasausqandiq project or
the existing operation. The existing operation already functions in an
environment that is subject to extreme weather conditions and is, therefore,
considered to have a strong resilience to existing and future climate-related
scenarios.
(f) 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.
(g) Commodity price risk
As already noted above, the success of the Company is dependent upon the
long-term prices of the products to be produced by the planned mine processing
facilities. As a result of there being no formally established trading markets
for the Company's principal products from the project, there is a risk that
price fluctuations and volatility for these products may have an adverse
impact on the Company's future financial performance
Condensed unaudited Statement of Profit or Loss and Other Comprehensive Income
for the six months ended 30 June 2023
Note Unaudited Unaudited six-month period ended 30 June 2022 $000 Audited year
six-month
ended
period ended
31 December 2022
30 June 2023 $000
$000
Revenue from customers (pricing at shipment) 2 3,410 4,327 6,773
Other revenue (adjustments to price after delivery and fair value 2 (96) (417) (502)
changes)
Total revenue 2 3,314 3,910 6,271
Cost of sales 3 (3,565) (3,541) (7,516)
Gross (loss) / profit (251) 369 (1,245)
Other income 4 13 12 77
Administrative expenses 5 (1,337) (1,154) (2,545)
Distribution expenses (66) (52) (265)
Other expenses 6 (47) - (426)
Loss from operating activities (1,688) (825) (4,404)
Net finance income 8 158 131 118
Loss before income tax (1,530) (694) (4,286)
- - -
Income tax
Loss for the period (1,530) (694) (4,286)
Other comprehensive income / (loss)
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations 496 (834) (541)
Total comprehensive loss for the period (1,034) (1,528) (4,827)
Loss per share (basic and diluted) 16 (0.003) (0.002) (0.011)
These condensed unaudited financial statements were approved by the directors
on 8 September 2023 and signed by:
_____________________________
William Callewaert
Director
Condensed unaudited Statement of Financial Position
for the six months ended 30 June 2023
Note Unaudited Unaudited Audited 31 December 2022
30 June 2023
30 June 2022 $000
$000 $000
ASSETS
Non-current assets
Property, plant and equipment 9 6,072 4,624 5,434
Exploration and evaluation assets 10 5,581 2,819 4,208
Intangible assets 11 20 19 19
Prepayments 14 185 575 1,273
Total non-current assets 11,858 8,037 10,934
Current assets
Inventories 12 2,015 2,422 1,628
Trade and other receivables 13 1,892 1,356 1,151
Prepayments 14 1,115 1,043 911
Cash and cash equivalents 15 606 542 4,331
Total current assets 5,628 5,363 8,021
Total assets 17,486 13,400 18,955
EQUITY AND LIABILITIES
Equity
Share capital 16 50,827 41,252 50,827
Convertible loan notes 16 4,019 4,019 4,019
Additional paid-in capital 397 397 397
Share-based payment reserve 5 - 5
Foreign currency translation reserve (3,665) (4,454) (4,161)
Accumulated losses (37,204) (32,082) (35,674)
Total equity 14,379 9,132 15,413
Non-current liabilities
Provisions 33 45 33
Total non-current liabilities 33 45 33
Current liabilities
Loans and borrowings 17 - 1,390 1,108
Trade and other payables 18 3,074 2,404 2,383
Payables at FVTPL 19 - 405 -
Interest payable 17 - 24 18
Total current liabilities 3,074 4,223 3,509
Total liabilities 3,107 4,268 3,542
Total equity and liabilities 17,486 13,400 18,955
Condensed unaudited Statement of Changes in Equity
for the six months ended 30 June 2023
Share Convertible Additional paid in capital Share-based Foreign currency translation reserve Accumulated Total
capital
loan notes
$000
payment
$000
losses
$000
$000
$000
reserve
$000
$000
Balance at 1 January 2022 41,252 4,019 397 - (3,620) (31,388) 10,660
Loss for the year - - - - - (4,286) (4,286)
Other comprehensive expenses
Exchange differences arising on translation of foreign operations - - - - (541) - (541)
Total comprehensive loss for the year - - - - (541) (4,286) (4,827)
Transactions with owners, recorded directly in equity
Shares issued, net of issue costs 9,575 - - - - - 9,575
Other transactions recognised directly in equity - - - 5 - - 5
Balance at 30 June 2022 41,252 4,019 397 - (4,454) (32,082) 9,132
Balance at 31 December 2022 50,827 4,019 397 5 (4,161) (35,674) 15,413
Balance at 1 January 2023 50,827 4,019 397 5 (4,161) (35,674) 15,413
Loss for the period - - - - - (1,530) (1,530)
Other comprehensive expenses
Exchange differences arising on translation of foreign operations - - - - 496 - 496
Total comprehensive loss for the period - - - - 496 (1,530) (1,034)
Transactions with owners, recorded directly in equity
Shares issued, net of issue costs - - - - - - -
Other transactions recognised directly in equity - - - - - - -
Balance at 30 June 2023 50,827 4,019 397 5 (3,665) (37,204) 14,379
Condensed unaudited Statement of Cash Flows for the six months ended 30 June Unaudited Unaudited Audited
2023
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Cash flows from operating activities Note
Loss for the period (1,530) (694) (4,286)
Adjustments for:
Depreciation and amortisation 3, 5 210 269 505
Write-off of property, plant and equipment - - 54
Write-down of inventory to net realisable value - - 160
Share-based payment expense - - 5
Net finance gains 8 (158) (131) (118)
Cash used in operating activities before changes in working capital (1,478) (556) (3,680)
Change in inventories (387) (516) 312
Change in trade and other receivables (741) (1,256) (1,035)
Change in prepayments 884 (137) (584)
Change in trade and other payables 683 1,583 1,555
Change in receivables / payables at FVTPL - 419 -
Net cash used in operating activities (1,039) (463) (3,432)
Cash flows from investing activities
Acquisition of property, plant and equipment 9 (773) (361) (1,466)
Acquisition of exploration and evaluation assets 10 (1,481) (1,385) (2,871)
Acquisition of intangible assets 11 (1) (1) (1)
Proceeds on fixed asset disposal - - 36
Net cash used in investing activities (2,255) (1,747) (4,302)
Cash flows from financing activities
Proceeds from issue of share capital 16 - - 10,000
Transaction costs on shares subscription 16 - - (425)
Repayment of borrowings 17 (1,112) - (300)
Interest paid 17 (32) (41) (82)
Net cash used in financing activities (1,144) (41) 9,193
Net (decrease) / increase in cash and cash equivalents (4,438) (2,251) 1,459
Cash and cash equivalents at the beginning of the period 15 4,331 2,810 2,810
Effect of movements in exchange rates on cash and cash equivalents 713 (17) 62
Cash and cash equivalents at the end of the period 606 542 4,331
Notes to the Condensed unaudited Financial Statements for the six months ended 30 June 2023
1 (a) Basis of preparation
These Condensed unaudited Financial Statements have been prepared in
accordance with IAS34 'Interim Financial Reporting' and International
Financial Reporting Standards as adopted by the European Union ("IFRS") on a
going concern basis.
The same accounting policies and basis of preparation have been followed as
adopted in the annual financial statements of the Group which were published
on 27 April 2023.
(b) Going concern
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 Group has the plant facilities and capacity in place to operate profitably
and although the amount of those profits available to fund the Stage 1
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.
(c) 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 existing operation's property, plant and
equipment ("PP&E") for impairment (Note 9) at 30 June 2023. In doing so,
net present value cash flow forecasts were prepared using the value in use
method which required key estimates including vanadium pentoxide,
ferro-molybdenum and nickel prices, production including the impact of ongoing
PP&E maintenance costs and an appropriate discount rate. Key estimates
included:
· Production volumes of 64 tonnes per month of vanadium pentoxide (as
AMV), 6 tonnes of molybdenum (as ferro-molybdenum) and 41 tonnes of nickel (as
nickel concentrate).
· Average prices of vanadium pentoxide of US$7.5/lb, ferro-molybdenum
of US$50/kg and nickel of US$20/kg in 2023 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$31.8m) exceeds its carrying amount (US$6.1m) by US$25.7m and, therefore,
PP&E has not been impaired.
Inventories (Note 12)
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 the period end
less applicable discounts. The estimates are based on market data and
historical trends.
Exploration and evaluation assets (Note 10)
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 Use Agreement ("SUA"). Judgement was required in determining that a
current application for deferral of obligations under the SUA will be granted
and management anticipate such approvals being provided given their
understanding of the Kazakh market and plans for the asset.
(d) Unaudited status
These Condensed unaudited Financial Statements have not been audited or
reviewed by the Group's auditor.
2 Revenue
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Sales of vanadium products 2,340 3,343 5,163
Sales of ferro-molybdenum 955 897 1,509
Sales of nickel products 109 87 86
Service revenue 6 - 15
Total revenue from customers under IFRS 15 3,410 4,327 6,773
Other revenue (adjustments to price after delivery and fair value changes) (96) (417) (502)
Total revenue 3,314 3,910 6,271
Vanadium products
Under certain sales contracts the single performance obligation is the
delivery of products 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 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 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.
3 Cost of sales
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Materials 2,651 2,738 5,863
Wages, salaries and related taxes 538 451 937
Depreciation 190 254 406
Electricity 42 74 111
Other 144 24 199
3,565 3,541 7,516
4 Other income
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Currency conversion gain 8 8 41
Other (sales of equipment) 5 4 36
13 12 77
5 Administrative expenses
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Wages, salaries and related taxes 867 633 1,619
Professional services 61 163 263
Taxes other than income tax - - 15
Listing and reorganisation expenses 97 13 162
Audit 126 57 111
Materials 24 43 37
Rent 17 18 53
Depreciation and amortisation 20 15 99
Insurance 2 2 44
Bank fees 12 15 23
Travel expenses 13 10 16
Security - 7 -
Communication and information services 8 6 12
Other 90 172 91
1,337 1,154 2,545
6 Other expenses
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Currency conversion loss 27 - 204
Write-down of inventory to net realisable value - - 160
Write-down of obsolete assets - - 54
Share-based payment expense - - 5
Other 20 - 3
47 - 426
7 Personnel costs
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Wages, salaries and related taxes 1,610 1,083 2,569
1,610 1,083 2,569
Personnel costs of US$495,000 (2022: US$421,000) have been charged to cost of sales, US$867,000 (2022: US$633,000) to administrative expenses and US$248,000 (2022: US$29,000) were charged to cost of inventories which were not yet sold as at the end of the period.
8 Finance costs
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Net foreign exchange gain (175) (172) (195)
Interest expense on financial liabilities (bonds) 17 41 77
Net finance income (158) (131) (118)
9 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 2022 2,060 2,639 509 39 102 2,632 7,981
Additions 35 85 - 1 11 229 361
Disposals - - (17) - - - (17)
Foreign currency translation difference (150) (194) (36) (3) (8) (196) (587)
Balance at 30 June 2022 1,945 2,530 456 37 105 2,665 7,738
Balance at 31 December 2022 1,959 2,723 458 43 174 3,448 8,805
Additions - 254 - 1 8 510 773
Transfers 255 46 - - - (301) -
Disposals - (4) - - (5) - (9)
Foreign currency translation difference 35 51 10 - 3 64 163
Balance at 30 June 2023 2,249 3,070 468 44 180 3,721 9,732
Depreciation
Balance at 1 January 2022 688 2,028 327 28 47 - 3,118
Depreciation for the period 34 186 17 3 5 - 245
Disposals - - (17) - - - (17)
Foreign currency translation difference (51) (152) (23) (2) (4) - (232)
Balance at 30 June 2022 671 2,062 304 29 48 - 3,114
Balance at 31 December 2022 708 2,256 322 28 57 - 3,371
Balance at 1 January 2023 708 2,256 322 28 57 - 3,371
Depreciation for the period 45 165 16 2 7 - 235
Disposals - (4) - - (5) - (9)
Foreign currency translation difference 12 41 7 1 2 - 63
Balance at 30 June 2023 765 2,458 345 31 61 - 3,660
Carrying amounts
At 1 January 2022 1,372 611 182 11 55 2,632 4,863
At 30 June 2022 1,274 468 152 8 57 2,665 4,624
At 31 December 2022 1,251 467 136 15 117 3,448 5,434
At 30 June 2023 1,484 612 123 13 119 3,721 6,072
Depreciation expense of US$190,000 (2022: US$254,000) has been charged to cost
of sales, excluding cost of finished goods that were not sold at the period
end, US$20,000 (2022: US$15,000) to administrative expenses, and US$67,000 has
been charged to cost of finished goods that were not sold at the end of the
period (2022: US$21,000).
Construction in progress relates to upgrades to the processing plant
associated with the expansion of the facility.
10 Exploration and evaluation assets
The Group's exploration and evaluation assets ("E&EA") relate to the
Balasausqandiq deposit. During the six month period ended 30 June 2023, the
Group capitalised the cost of geotechnical drilling work, technical design,
sample assaying and project management costs, all relating to the Company's
Stage 1 feasibility study. As at 30 June 2023, the carrying value of
exploration and evaluation assets was US$5.6m (2022: US$2.8m).
Unaudited Unaudited Audited
six-month
six-month
year ended
period ended
period ended
31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
Balance at 1 January 4,208 1,434 1,434
Additions (Stage 1feasibility study) 1,481 1,653 2,871
Foreign currency translation difference (108) (268) (97)
Balance at 30 June / 31 December 5,581 2,819 4,208
11 Intangible assets
Mineral rights Patents Computer software Total
$000
$000
$000
$000
Cost
Balance at 1 January 2022 88 33 3 124
Additions - 1 - 1
Foreign currency translation difference (6) (3) - (9)
Balance at 30 June 2022 82 31 3 116
Balance at 31 December 2022 83 32 3 118
Balance at 1 January 2023 83 32 3 118
Additions - 1 - 1
Foreign currency translation difference 1 1 - 2
Balance at 30 June 2023 84 34 3 121
Amortisation
Balance at 1 January 2022 88 12 3 103
Amortisation for the year - 1 - 1
Foreign currency translation difference (6) (1) - (7)
Balance at 30 June 2022 82 12 3 97
Balance at 31 December 2022 83 13 3 99
Balance at 1 January 2023 83 13 3 99
Amortisation for the year - 1 - 1
Foreign currency translation difference 1 - - 1
Balance at 30 June 2023 84 14 3 101
Carrying amounts
At 1 January 2022 - 21 - 21
At 30 June 2022 - 19 - 19
At 31 December 2022 - 19 - 19
At 30 June 2023 - 20 - 20
During the six months ended 30 June 2023 and 2022, amortisation of intangible
assets was charged to administrative expenses.
12 Inventories
Unaudited Audited 31 December 2022
30 June 2023
$000
$000
Unaudited 30 June 2022 $000
Raw materials and consumables 1,422 2,223 1,379
Finished goods 584 192 216
Work in progress 9 7 33
2,015 2,422 1,628
During the six months ended 30 June 2023, inventories expensed to profit and
loss amounted to US$2.7m (six month period ended 30 June 2022:US$2.8m).
13 Trade and other receivables
Current Unaudited Unaudited Audited 31 December 2022
30 June 2023 30 June 2022
$000
$000 $000
Trade receivables from third parties 920 351 65
Due from employees 55 44 50
VAT receivable 920 976 1,062
Other receivables 64 20 10
1,959 1,391 1,187
Expected credit loss provision for receivables (67) (35) (36)
1,892 1,356 1,151
The expected credit loss provision for receivable 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.
14 Prepayments
Unaudited Unaudited Audited 31 December 2022
30 June 2023 30 June 2022
$000
$000
$000
Non-current
Prepayments 185 575 1,273
185 575 1,273
Current
Prepayments for goods and services 1,115 1,043 911
1,115 1,043 911
15 Cash and cash equivalents
Unaudited Unaudited Audited 31 December 2022
30 June 2023 30 June 2022
$000
$000
$000
Cash at current bank accounts 592 529 1,010
Cash at bank deposits 13 13 3,321
Petty cash 1 - -
Cash and cash equivalents 606 542 4,331
16 Equity
(a) Share capital
Number of shares unless otherwise
stated
Ordinary shares
Unaudited Unaudited Audited 31 December 2022
30 June 2023 30 June 2022
Par value - - -
Outstanding at beginning of period / year 449,702,150 377,676,799 377,676,799
Shares issued - - 72,025,351
Outstanding at end of period / year 449,702,150 377,676,799 449,702,150
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.
The Company did not issue any ordinary shares during the period (2022: no
ordinary shares issued during the period).
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 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 and avoidance of the
possibility of triggering a requirement for the issue of a prospectus.
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.
Share-based payment: Share options issued during the period.
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 six months ended 30 June 2023 (2022: US$
Nil).
(c) Loss per share (basic and diluted)
The calculation of 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)
Unaudited Unaudited Audited year ended
six-month
six-month
31 December 2022
period ended
period ended
$000
30 June 2023
30 June 2022
$000
$000
Loss for the period, attributable to owners of the Company (1,530) (694) (4,286)
Loss attributable to ordinary shareholders (1,530) (694) (4,286)
(ii) Weighted-average number of ordinary shares (basic and
diluted)
Shares Unaudited Unaudited Audited year ended
six-month
six-month
31 December 2022
period ended
period ended
30 June 2023
30 June 2022
Issued ordinary shares at 1 January (after subdivision) 449,702,150 377,676,799 377,676,799
Effect of shares issued (weighted) - - 21,410,276
Weighted-average number of ordinary shares at period / year end 449,702,150 377,676,799 399,087,075
Loss per share of common stock attributable to the Company: (0.003) (0.002) (0.011)
(Basic and diluted / US$)
17 Loans and borrowings
In prior periods, the Company had issued unsecured three year term corporate
bonds with varying effective interest rates that were listed on the AIX.
All of the Company's issued bonds in circulation at 1 January 2023 were
redeemed by the Company on 24 March 2023.
Current liabilities
Bonds payable (early repayment rights) - 1,390 1,108
Interest payable - 24 18
- 1,414 1,126
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions below.
Unaudited Unaudited
six-month
six-month
period ended
period ended Audited year ended 31 December 2022
30 June 2023
30 June 2022
$000
$000
$000
At 1 January 1,127 1,427 1,427
Cash flows:
-Interest paid (32) (41) (82)
-Repayment of loans and borrowings (1,112) - (300)
Total (17) 1,386 1,045
Non-cash flows
- Interest accruing in the period 17 41 82
At 30 June / 31 December - 1,427 1,127
18 Trade and other payables
Unaudited Unaudited Audited 31 December 2022
30 June 2023 30 June 2022
$000
$000
$000
Trade payables 2,550 2,130 1,889
Debt to directors/key management (Note 22) 11 75 214
Debt to employees 154 73 99
Other taxes 225 116 171
Advances received 134 10 10
3,074 2,404 2,383
19 Payables at FVTPL
Unaudited Unaudited Audited 31 December 2022
30 June 2023 30 June 2022
$000
$000
$000
Payables at FVTPL - 405 -
- 405 -
20 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 contingencies
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 for 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.
21 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.
Unaudited six-month period ended 30 June 2023
Processing Subsoil Corporate Total
$000
$000
$000
$000
Revenue 3,314 - - 3,314
Cost of sales (3,565) - - (3,565)
Other income 8 - 5 13
Administrative expenses (402) (24) (911) (1,337)
Distribution & other expenses (113) - - (113)
Finance costs (40) - 198 158
Loss before tax (798) (24) (708) (1,530)
Unaudited six-month period ended 30 June 2022
Processing Subsoil Corporate Total
$000
$000
$000
$000
Revenue 3,910 - - 3,910
Cost of sales (3,541) - - (3,541)
Other income 12 - - 12
Administrative expenses (466) (29) (659) (1,154)
Distribution & other expenses (52) - - (52)
Finance costs 596 - (465) 131
Loss before tax 459 (29) (1,124) (694)
Audited year ended 31 December 2022
Processing Subsoil Corporate Total
$000
$000
$000
$000
Revenue 6,271 - - 6,271
Cost of sales (7,516) - - (7,516)
Other income 73 - 4 77
Administrative expenses (763) (24) (1,758) (2,545)
Distribution & other expenses (691) - - (691)
Finance costs 531 - (413) 118
Loss before tax (2,095) (24) (2,167) (4,286)
Included in revenue arising from processing are revenues of US$3.1m (2022:
US$3.7m) which arose from sales to three of the Group' largest customers. No
other single customer contributes 10 per cent or more to the Group's revenue.
All of the Group's assets are attributable to the Group's processing
operations.
Sales to the Group's largest customers during the six months ended 30 June
2023 were as follows:
Customer A US$ 1.5m (46%) (2022:US$ 1.9m)
Customer B US$ 1.5m (47%) (2022: US$1.1m)
Customer C US$ 0.1m (4%) (2022: US$ 0.7m)
22 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 7):
Unaudited Unaudited Audited year ended 31 December 2022 $000
six-month
six-month
period ended
period ended
30 June 2023
30 June 2022
$000
$000
Wages, salaries and related taxes 474 360 986
The amount of wages and salaries outstanding at 30 June 2023 is equal to
US$11,000 (2022: US$75,000).
Other
The Company is party to a sub-let agreement between Turian Sports Horses
Limited as head lessee and NH Limited as landlord for the rental of office
space in Guernsey. Turian Sports Horses Limited is wholly owned by James
Turian, one of the Company's directors and NH Limited is owned by James Turian
and Sharon Turian, equally. Sums paid to NH Limited during the six months
ended 30 June 2023 were US$10,667 (2022: US$7,445).
23 Subsequent events
On 27 July 2023, the Company launched a phased Kazakhstan US$20 million exempt
offer bond programme valid until 31 July 2033.
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