REG - Ferro-Alloy Rsrcs - Trading Update

Ferro-Alloy ResourcesAnnouncement

22/12/2023 07:00

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RNS Number : 6907X  Ferro-Alloy Resources Limited  22 December 2023

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

 

22 December 2023

Ferro-Alloy Resources Limited

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

 

Trading Update

 

Ferro-Alloy Resources Limited (LSE:FAR), the vanadium producer and developer
of the large Balasausqandiq vanadium deposit in Southern Kazakhstan announces
a trading update for Q4 2023.

Background

Whilst the main focus of activity for the Company is the completion of the
feasibility study into the Balasausqandiq vanadium deposit, the existing
operation, where the Group processes purchased concentrates to recover
vanadium and other metals utilising the expanded and upgraded pilot process
plant, provides a regular revenue stream.

The Company's revenue and profitability in the fourth quarter have been lower
than previously expected due to metal prices and production shortfalls.
Further details are set out below.

Metal prices

The existing operation primarily recovers and sells vanadium (as vanadium
pentoxide or ammonium metavanadate), molybdenum (as ferro-molybdenum) and
nickel (as nickel concentrate) from the treated bought-in concentrates.

Market prices for all of the recovered metals have deteriorated significantly
during the quarter, largely due to decreased demand, as identified in the
table below (pricing from 1 September 2023 shown given that some sales in
October 2023 will have been derived from September 2023 market prices).

 

 Metal               Price at 1 September 2023  Price at 15 December 2023  Low for Q4 to date
 Vanadium pentoxide  8.00                       5.50                       5.10

 (US$/lb)
 Ferro-molybdenum    54.50                      42.70                      40.00

 (US$/lb)
 Nickel              20.45                      16.74                      15.87

 (US$/kg)

 

As a result, the Company has experienced a reduction in expected revenues
during the quarter. Furthermore, concentrates were procured earlier in the
year, on the basis of higher metal values and, therefore, trading margins have
been squeezed disproportionately.

Concentrate characteristics

Further to the Company's announcement on 10 October 2023 with respect to
incoming concentrate supplies to the existing operation, the Company has
received significant volumes of concentrates for processing from a variety of
suppliers.

These concentrates come from a range of different sources, have different
metal content and require different processing procedures. The concentrates
procured in recent months have proven to require longer residence times than
previous concentrates and periods of experimentation with new types of
concentrates have resulted in output being reduced.

Outlook

Looking ahead to 2024, the Company will continue to work to maintain
profitability in the current low-price environment by renegotiating
concentrate costs and other contractual terms. The Company is also
experimenting with new types of concentrate which, whilst producing the same
quality of product, could be potentially more profitable.

As already stated, the main focus of the Company's activities will continue to
be the completion of the feasibility study on the Balasausqandiq vanadium
deposit. The completion of Phase 1 of the study was expected to be around
April 2024, but due to increased lead times for certain study workstreams, as
a result of service provider capacity constraints within the industry, it is
likely to be delayed. Revised timing will be announced when the Company has
clarification from its service providers.

Nick Bridgen, CEO, commented: "One of the challenges of the vanadium industry
is the extreme volatility of pricing, where the current low price for vanadium
pentoxide of just over US$5/lb is, unfortunately, beyond our control and is
having a negative impact on all producers. The longer term outlook for
vanadium, regarded as a critical metal by the UK, EU and the US remains highly
encouraging and we continue to make progress towards the completion of the
feasibility study, with results so far supporting the very strong financial
expectations of our previously announced studies."

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)

 

 

About Ferro-Alloy Resources Limited:

The Company's operations are all located at the Balasausqandiq deposit in
Kyzylordinskoye Oblast in the South of Kazakhstan. Currently the Company has
two main business activities:

a) the high grade Balasausqandiq vanadium project (the "Project"); and

b) an existing vanadium concentrate processing operation (the "Existing
Operation")

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

The most recent mineral resource estimate for ore-body one (of seven) provided
an Indicated Mineral Resource of 32.9 million tonnes at a mean grade of 0.62%
V(2)O(5) equating to 203,364 contained tonnes of vanadium pentoxide
("V(2)O(5)"). In the system of reserve estimation used in Kazakhstan the
reserves are estimated to be over 70m tonnes in ore-bodies 1 to 5 but this
does not include the full depth of ore-bodies 2 to 5 or the remaining
ore-bodies which remain substantially unexplored.

The Project will be developed in two stages, Stage 1 and Stage 2, treating 1m
tonnes per year and an additional 3m tonnes per year. Production will be some
5,600 tonnes of V(2)O(5) from Stage 1, rising to 22,400 tonnes V(2)O(5) after
Stage 2 is commissioned.

There is an existing concentrate processing operation at the site of the
Balasausqandiq deposit. The production facilities were originally created from
a 15,000 tonnes per year pilot plant which was then expanded and adapted to
recover vanadium, molybdenum and nickel from purchased concentrates.

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

 

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