Final Results For The Year Ended 31 December 2020
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 2020.
Overview
Increased production of vanadium pentoxide by 56% to 237 tonnes
Revenue increased to US$2.4m (2019:US$1.8m)
Commissioning and expansion of pyrometallurgical process line which is designed to treat a different type of concentrate from that which was previously treated creating new revenue stream
Connection to adjacent high voltage power line complete with first power expected late July 2021
Technological developments:
Conversion of ammonium metavanadate to vanadium pentoxide and trial production of vanadium pentoxide powder commenced; product is suitable for chemical uses and often attracts higher prices than standard vanadium pentoxide depending on the purity
Commercial production of calcium molybdate started in October 2020 with 20 tonnes of calcium molybdate (CaMoO4), containing 12 tonnes of molybdic oxide (MoO3) produced by the end of the year; a highly profitable process as provides additional recovery as a by-product from the same raw-materials
Developed technology to produce electolyte for vanadium flow batteries directly from ammonium metavanadate
Scope of Feasibility Study upgrade on the Balasausqandiq vanadium project now expanded to include Phase 1 and Phase 2 which will facilitate a focussed development of the resource and more properly reflect the Company’s value and potential. Publication of the expanded
Feasibility Study expected mid-2022
Covid-19 restrictions particularly affected raw-material supplies, restricted production and prevented full use of the increased capacity
Prices of vanadium pentoxide currently c.US$8/lb
Post-Period
Strategic long term investment by Vision Blue Resources in March 2021 with investment to date totalling $3.1m
Further options available to Vision Blue to invest an additional $9.5 million at an agreed price of £0.09 per share, plus a further $30 million at higher prices to finance construction of Phase 1 of the Balasausqandiq vanadium project
Strengthening of board with the appointment of Sir Mick Davis as non-executive chairman and Peet Nienaber as non-executive director
Further US$476,000 raised in 2021 to date by the issue of bonds on AIX
Nick Bridgen, CEO, commented:
“2020 saw Ferro-Alloy continuing to make strong progress towards our main goal of developing the world-leading Balasausqandiq project. Progress has been made with the feasibility study and infrastructure improvements despite the ongoing Covid-19 pandemic which restricted deliveries of raw materials and prevented us from utilising fully the new capacity that we’ve added. Nevertheless,
we saw a significant increase in production of vanadium pentoxide in the year and I anticipate future production to improve strongly now that raw materials have started to be delivered reliably and accumulate on site.
“In March 2021, we welcomed Vision Blue Resources as a strategic investor in the Company. Vision Blue share our view that Balasausqandiq is a truly extraordinary project with the potential to become the leading vanadium asset in the world. The strategic relationship established is significant with investment of $12.6m envisaged plus options to invest a further $30m at higher prices. We
have received the Initial Investment of $3.1m and we expect Vision Blue to exercise their option to invest the next $7m imminently.
“We welcomed Sir Mick Davis to our board as non-executive chairman and Peet Nienaber and as non-executive director. Their collective experience, knowledge and relationships in the mining industry will be hugely beneficial to us.
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 which is expected to result in annualised production capacity of around 1,500 tonnes of contained
vanadium pentoxide plus significant by-product molybdenum.
The strategy of the Company is to develop both the Project and the Existing Operation in parallel.
Although they are located on the same site and use some of the same infrastructure, they are separate operations.
CEO’s report on operations for the year to 31 December 2020 and 2021 to date
Despite the challenges resulting from the Covid-19 pandemic and consequent economic turmoil, the Company has made significant progress towards the expansion of the existing operation and, most importantly, continued the work to put Balasausqandiq into production including the feasibility study and infrastructure development.
In March 2021 the Company entered into an Investment Agreement with Vision Blue Resources under which Vision Blue has invested $3.1m in equity and has an option to invest a further $9.5m at the agreement price of £0.09 per share plus up to a further $30m at higher prices to finance construction of Phase 1 of the Balasausqandiq vanadium project.
Production
During the year ended 31 December 2020, production of vanadium pentoxide (V2O5) amounted to 237 tonnes, some 56% above 2019. Whilst this is a very solid increase, without the disruptions experienced due to the Covid-19 pandemic and previously reported interruptions to power supply, production would have been significantly higher.
AMV: ammonium metavanadate
The focus of the Existing Operation during 2020 was the commissioning and expansion of the new pyrometallurgical process line which is designed to treat a different type of concentrate from that which was previously treated.
In February, the second roasting oven was installed and the pyrometallurgical line completed. Over the course of the first half of the year this new process became the most important contributor to the production, bringing the total capacity of the combined plant to some 80 tonnes per month depending on the grades of concentrates treated, six times more than 2019 production. Actual
production has lagged significantly behind this level as a result of both Covid-19 restrictions, which have affected both the Company and its suppliers, power supply issues which are being resolved by the commissioning of the new power line, and a mix of raw-materials including some lower grades.
It is expected that the connection to the adjacent high-voltage power-line will take place during July 2021, further details of which are set out below.
The impact of Covid-19 has been seen particularly in the more technically difficult hydrometallurgical production process which has been temporarily halted several times, primarily as a result of the inability to bring specialist staff to site. This has resulted in some five months of lost production from this part of the operation. The Company has prioritised the pyrometallurgical operations, not only because it is technically simpler, but also because the prices paid for the raw materials flex with the vanadium price so margins are less affected by low prices than for the hydrometallurgical line where the price is fixed.
The Covid-19 travel bans also made installation, commissioning and fault rectification much more difficult. The Company has, using substantially its own workforce, completed commissioning work on two of the three new press filters which would normally have required site visits from the suppliers, and completed the installation of the oven to convert ammonium metavanadate to vanadium pentoxide.
Production in the fourth quarter was disappointing, with little contribution from the hydrometallurgical line and restricted deliveries from the Company’s main high-grade concentrate supplier, attributed to the effects of the Covid-19 restrictions on their operation.
Production outlook
Although the progression to higher production slowed towards the end of 2020, the equipment is now in place to achieve significantly higher production, assisted by the near-term connection to the high-voltage power-line and as the global vaccination programme starts to lessen the restrictions caused by the Covid-19 pandemic.
Supplies of raw materials continued to be restricted below contracted levels throughout the first half of 2021, attributed by suppliers to Covid-19 related restrictions and container shortages. The delayed supplies have now started to arrive and enough material is on site and in transit for over four months of production at the planned level. Contracts are in place for regular monthly deliveries which should enable the Company to maintain sufficient stocks of raw materials to avoid shortages in future.
Looking further ahead, the Company is planning to procure an electric arc furnace which can double production capacity again. This furnace has been designed, contracts agreed and will take some six months to build. The furnace will be used to produce ferro-vanadium directly from raw-material concentrates without first producing vanadium pentoxide, and it will also be used for the production of by-product ferro-nickel, utilising the nickel content of our raw-materials which is currently sold at very low prices as a low-grade concentrate.
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