TIDMFAR
RNS Number : 1281N
Ferro-Alloy Resources Limited
28 September 2021
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
28 September 2021
Ferro-Alloy Resources Limited ('FAR' or the 'Company' or the
'Group')
Interim Results for the six months ended 30 June 2021
Ferro-Alloy Resources Limited (LSE:FAR), the vanadium producer
and developer of the large Balasausqandiq vanadium deposit in
Southern Kazakhstan, announces its unaudited interim results for
the six months ended 30 June 2021 .
Highlights:
-- Improved financial results from existing vanadium processing
operations reflecting higher realised prices offset by lower
production due to Covid-19 related impacts that have now been
largely resolved:
o Vanadium pentoxide prices rose 63% from US$5.2/lb in January
2021 to US$8.5/lb over the period;
o Prices for molybdic oxide and ferro-molybdenum grew 109% and
83% respectively
-- Enhanced financial position to support new Balasausqandiq
vanadium project development with US$8.2m in cash as at 30 June
2021 (2020: US$0.7m)
o Strategic Investment led by Vision Blue Resources Limited,
with US$10.1m invested to date
-- Significant incremental operational progress achieved to
support increased production and enhanced product mix at existing
operation:
o Test programme with Fraunhofer ICT institute launched on
Company's products for electrolyte production
-- Board strengthened with the appointment of Sir Mick Davis,
former Xstrata CEO, as Chairman and Peet Nienaber, former head of
Xstrata Alloys, as a Non-Executive Director
For further information, visit www.ferro-alloy.com or contact:
Ferro-Alloy Resources Nick Bridgen (CEO) info@ferro-alloy.com
Limited
+44 207 408 4090
Shore Capital Jerry Keen/Toby Gibbs
(Corporate Broker) +44 (0)203 005
VSA Capital Andrew Monk/Simon Barton 5000
St Brides Partners
Limited
(Financial PR & IR
Adviser) Catherine Leftley +44 207 236 1177
Summary
During the period we continued to successfully deliver on our
strategy of expanding our existing operations while progressing
plans for the rapid development of the transformative
Balasausqandiq vanadium project in parallel.
The expansion of production capacity to around 1,500 tonnes of
saleable vanadium product per year is proceeding as planned. Some
significant infrastructure upgrades have been completed and others
are continuing and we have completed the installation of equipment
to increase production capacity, convert AMV into vanadium
pentoxide and produce ferro-molybdenum. We expect to achieve the
first sales of ferro-molybdenum, vanadium pentoxide and possibly
ferro-vanadium in the second half of the current year, providing
enhanced revenues.
We have also worked with the Vision Blue team during the period
to refine and expand the Bankable Feasibility Study on the large
scale, low cost Balasausqandiq Project which has the potential to
become the lowest cost producer of vanadium globally. As part of
this process, a drilling programme has been developed to confirm
sufficient reserves on a JORC Indicated basis to feed both Phase 1
and Phase 2 of the planned operations. The results of the Bankable
Feasibility Study are expected during the last quarter of 2022.
The prices of vanadium pentoxide, molybdic oxide and
ferro-molybdenum rose by 63%, 109% and 83% respectively in the
period, underlining our confidence in the long-term prospects for
the Company's products.
The investment climate in Kazakhstan continues to further
improve with the country receiving US$3.9 billion in foreign direct
investment last year driven by growing investment in mining,
transport, financial services, telecommunications and energy.
Balasausqandiq feasibility study
Development of the large Balasausqandiq vanadium deposit
continues in parallel with the Company's Existing Operations.
The Company has expanded the scope of the feasibility study to
include both Phase 1 (1 million tonnes per year of ore treated) and
Stage 2 (a total of 4 million tonnes of ore per year). This
expanded feasibility study is fully funded, including a drilling
programme that has been developed to confirm that reserves on a
JORC Indicated basis are sufficient to feed the expanded Phase 2
production. Drilling is expected to commence in November 2021 and
to be completed in the first half of 2022. The current contract is
for 13,900 metres but with the potential to increase up to 20,000
metres.
The Company has supplied SGS (Lakefield) with 600 kg of sample
for technological testing. The work is supported by
Coffey/Tetratech Group with the purpose of proving the technology
that was developed by the Company at its pilot plant operations. A
further 450 kg of samples for variability testing have been
selected and are being prepared for despatch.
Existing Operations
New products
Until late in 2020, the Group's only vanadium product was
ammonium metavanadate (AMV), an internationally traded product from
which vanadium pentoxide is made by heating to dissociate the
ammonia for collection and recycling. AMV is usually sold at a
discount from published vanadium pentoxide prices. Conversion of
this AMV to vanadium pentoxide has now commenced, improving the
Company's ability to obtain more favourable prices in future.
During the period under review we started the conversion of our
calcium molybdate by-product into ferro-molybdenum, a higher value
product, using the alumothermic process, with production of up to
five tonnes of ferro-molybdenum expected each month depending on
the type and molybdenum grade of the raw-materials treated.
The Company is now selling 100% of its residues from operations
as low-grade nickel concentrates meaning no waste products from
operations are retained on site.
Electrolyte for vanadium flow-batteries (VFBs)
After the end of the period, the Company signed an agreement
with Fraunhofer ICT Institute in Germany, which carries out
investigations on various vanadium electrolyte compositions and
battery performance, to explore the Company's product's suitability
for industrial electrolyte production for vanadium flow-batteries.
Samples have been shipped and work has commenced.
In addition, in September 2020, we reported that the Company's
specialists had developed a new process for the production of
electrolyte for VFBs directly from ammonium metavanadate, a more
economical process. A Kazakhstan patent for the technology has
recently been received.
Powerline
Connection to the high-voltage line was completed on schedule
and on budget in June 2021. A delay by the suppliers of the
automated control and metering system required by the line's owners
has pushed back the planned switching-on into October.
Infrastructure
A new laboratory with upgraded equipment has been built adjacent
to the process plant which will help to meet customer requirements.
The Company has also constructed a new warehouse for vanadium
concentrates and finished goods.
Production
During the period ended 30 June 2021, production of vanadium
pentoxide (V2O5) amounted to 88.2 tonnes, 9% below the
corresponding period in 2020. The decline was caused by
interruptions in the supply of vanadium concentrates caused by
Covid-19 restrictions and a worldwide shortage of containers. From
June 2021, supplies have started flowing normally and more than
usual stocks have now been received to allow production to return
to normal. 25.3 tonnes of calcium molybdate was produced in the
period, compared with none in the first half of 2020 as production
only started in the second half of 2020.
Production of Change from Production of
Quarter (2021) Vanadium Pentoxide 2020 Molybdic Oxide
(tonnes of vanadium (tonnes of molybdic
pentoxide contained oxide contained
in AMV*) in calcium molybdate)
Q1 57.4 +20% 21.9
--------------------- ------------ -----------------------
Q2 30.8 -37% 3.2
--------------------- ------------ -----------------------
H1 2021 88.2 -9% 25.3
--------------------- ------------ -----------------------
* AMV: ammonium metavanadate
Outlook for the Existing Operation
Raw-materials supplies have returned to normal pre-covid levels,
and consequently production in H2 is expected to be substantially
higher than H1. Some bottlenecks have been experienced during the
ramp-up of production which started in June and July 2021 and these
are being addressed with a programme of improvements that are
expected to unfold over the next three months.
Looking further ahead, the Company is procuring an electric arc
furnace which can further double production capacity. This 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, a
higher value product than the low grade concentrate currently being
sold.
Revenues during H2 2021 are expected to increase not only by the
expected ramp-up of throughput but also by the sales of the new
products, ferro-molybdenum, vanadium pentoxide, nickel concentrate
and possibly ferro-vanadium as described above.
Corporate
Further to the Subscription Agreement signed in March 2021 with
Vision Blue Resources, a total of US$10.1m has been invested to
date, made up of US$4.2m of Convertible Loan Notes and the
remainder as equity. The Convertible Loan Notes will be converted
into equity at the price originally agreed in March 2021 of 9 pence
per share when to do so will not trigger the requirement for the
Company to issue a new prospectus.
The proceeds of the funding package will be used to complete the
expansion of the existing processing facilities and complete the
Balasausqandiq feasibility study.
Under the terms of the investment agreement, Vision Blue
Resources have options to invest a further US$2.5m at 9 pence per
share, US$10m at 25 pence per share and US$20m at 78 pence per
share at various milestones.
This strategic relationship with Vision Blue Resources included
the appointment of Sir Mick Davis as Chairman, and subsequently Mr.
Peet Nienaber as a Non-Executive Director. The experience,
knowledge and contacts of both individuals will continue to play an
important role as the Company develops.
Since the start of 2021 the Company has raised US$475,829 from
the issue of 242 bonds, with 58 issued in February and a further
184 issued on 12 March 2021. All the bonds have been issued on the
Astana Stock Exchange ("AIX") with a nominal value of US$2,000
each, have a coupon of 5.8% payable twice-yearly, are unsecured and
are repayable on 17 March 2023.
Product prices
In 2021 the published price for vanadium pentoxide rose from
US$5.2/lb in January 2021 to US$8.5/lb over the period and is
currently around US$8.8/lb.
Prices for molybdic oxide and ferro-molybdenum grew strongly
during first half of 2021. Molybdic oxide increased from US$9.25/lb
at the beginning of 2021 to US$20.00 now. Ferro-molybdenum followed
a similar trend with an increase from US$22.9/kg in the beginning
of 2021 up to US$44 now.
COVID-19
Although the major effects of Covid-19 on the delivery of
raw-materials appear to be over, some minor disruptions are
continuing. Quarantine requirements and transport restrictions
continue to be imposed periodically and restrictions on foreigners
coming to Kazakhstan are continuing, making it difficult to bring
international specialists to site for the commissioning of new
equipment or other studies.
The Company requires all employees arriving on site to have
either a PCR test or a vaccination passport. By the beginning of
September 2021, 95% of the site workforce had been vaccinated and
no cases of illness have been detected.
The level of cases in Kazakhstan reduced in recent weeks to
around 2,000 cases per day. According to official sources, the
current level of vaccination is around 7.3 million people out of a
population of 19 million, or around 38%.
Earnings and cash flow
The Group generated total revenues of US$1.5m for the period
compared to US$1.1m for the first six months of 2020, reflecting
the higher market prices. However, the delayed delivery of vanadium
concentrates has curtailed production.
The cost of sales reduced to US$1.5m from US$1.9m for the first
six months of 2020, reflecting primarily the cost of concentrate
that was treated during the first half of 2020 comparing to new
concentrate costs in the first half of 2021.
Administrative expenses amounted to US$0.8m, (H1 2020:
US$0.8m).
The Group made a reduced net loss before and after tax of US$1.
1 m (H1 2020: loss of US$1.7m) reflecting the greater gross income
received during the first half of 2021 (US$0.056) compared with a
gross loss in the first half of 2020 (US$0.8m).
Net cash outflows from operating activities totalled US$1.3m,
(H1 2020: cash outflow US$0.7m). Investment activities and capital
expenditure increased significantly, with net cash outflows from
investing activities totalling US$1.6m (H1 2020: US$0.074m).
Investment was made mainly in the Balasausqandiq feasibility study.
Net cash inflows from financing activities totalled US$ 10.1 m (H1
2020: US$0.7m) being the proceeds, net of commissions, from equity
and convertible loan notes raised with Vision Blue Resources and
bonds issues.
Balance sheet review
Non-current assets totalled US$6.4m at 30 June 2021 (2020:
US$5.1m), reflecting investment in the feasibility study and
investment into completion of the construction of the high-voltage
line.
Current assets excluding cash balances totalled US$1.6m compared
with US$0.9m at 31 December 2020. Higher trade and other
receivables and prepayments were offset by lower inventory
levels.
The Group had cash of US$8.2m at 30 June 2021 (2020:
US$0.7m).
Description of principal risks, uncertainties and how they are
managed
(a) 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 risk of this operation is the
price of its product, vanadium. The price of vanadium pentoxide is
volatile and rose from historic lows at the beginning of 2016 to a
near-record high of nearly US$30/lb near the end of 2018.
Currently, the price of vanadium pentoxide is at around US$8.8/lb
which is a little less than the inflation-adjusted ten-year average
to date. Most forecasters anticipate that vanadium will be in
deficit in the short to medium term, resulting in some recovery in
current prices, and will return to the long-run marginal cost of
production in the longer term which may be substantially higher.
The Company acquires raw materials at a cost that is related to the
price of vanadium so there is a natural hedge but there is a risk
of changes in vanadium prices between the time of acquisition of
the raw materials and sale of the product which cannot be entirely
avoided.
The processing operation is also dependent on the continuing
availability of raw materials which are subject to competition from
other processors. The Company is mitigating this risk by
positioning itself to treat a wide variety of potential
raw-materials and maintaining low treatment costs, whilst
extracting the maximum value from by-product constituents.
The level of profitability of the current processing operation
is also dependent on production levels being sufficient to generate
profits to cover fixed overheads. The level of production could be
impacted by unanticipated production difficulties, power outages
and raw-material delivery limitations. The Company aims to keep a
stockpile of raw-materials and has installed a larger capacity
generator to maintain production during outages.
The Company is currently carrying out various expansion projects
which will lower the average cost of production and as part of this
project, has connected to a larger capacity and more reliable power
supply which is expected to start delivering power shortly. A
substantial part of this expansion has already been completed .
There remains a risk that the Covid-19 crisis worsens in
Kazakhstan. This could cause further disruption to supply-lines,
staffing and subcontractors as has already occurred, but it is also
possible that a case might arise on site requiring a temporary
shutdown of operations. In addition, Covid-19 may impact the
availability of finance or the terms which are available. Whilst it
is not possible to guard against this, the Company continues to
take all recommended precautions, including a very high level of
vaccination amongst employees, and will aim to maintain higher than
normal stores of essential supplies on site. In terms of funding,
cash flows are monitored on a continuous basis to enable the
Company to take proactive measures to safeguard liquidity.
(b) Financing risk :
The Company is in stronger financing position relative to the
prior year. In March of 2021 the Company signed an investment
agreement with Vision Blue Resources. Under the terms of this
agreement, investment of US$10.1m has already been made which is
expected to be sufficient to finance the completion of the
expansion of the existing plant and the feasibility study.
(c) Climate change risk :
Although no specific risks to the Company's operations have been
identified, the Company's operations could be subject to extreme
weather conditions and the prices of its products may be subject to
changes in the world's economy caused by climate change. Kazakhstan
is planning to publish a document entitled "A concept of low carbon
development by 2050" which is not yet publicly available.
(d) 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.
(e) Balasausqandiq project:
The Balasausqandiq project is a much larger contributor to the
Group's value than current operations and its value 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.
Responsibility statements
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
a) the Condensed set of Interim Financial Statements has been
prepared in accordance with IAS 34 'Interim Financial
Reporting';
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year);
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein); and
d) the condensed set of interim financial statements, which has
been prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.4R.
This Half Yearly Report has been approved by the Board and
signed on its behalf by:
James Turian
Director
27.09.2021
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
Note $000 $000
------------- -------------------------
Revenue from customers (pricing
at shipment) 2 1,520 1,172
Other revenue (adjustments
to price after delivery and
fair value changes) 2 27 (44)
Total revenue 2 1,547 1,12 8
Cost of sales 3 (1,491) (1,903)
------------- -------------------------
Gross income 56 (775 )
Other income 8 -
Administrative expenses 4 (849) (766)
Distribution expenses (218) ( 55 )
Other expenses (2) (2)
------------- -------------------------
Loss from operating activities (1,005) (1, 5 98 )
------------- -------------------------
Net finance costs 6 (78) (1 11 )
------------- -------------------------
Loss before income tax (1,083) (1,709)
============= =========================
Income tax - (1)
Loss for the period (1,083) (1,710)
Other comprehensive income
(loss)
Items that may be reclassified
subsequently to profit or
loss
Exchange differences arising
on translation of foreign
operations 145 (275)
------------- -------------------------
Total comprehensive (loss)
income for the period (938) (1,985)
============= =========================
Loss per share (basic and
diluted), US$ 14 (0.003) (0.005)
------------- -------------------------
These consolidated financial statements were approved by
directors on 31 August 2021 and signed by:
_____________________________
James Turian
Director
Unaudited
31 December
3 0 June 2021 2020
Note $000 $000
--------------- ------------
ASSETS
Non-current assets
Property, plant and equipment 7 2,705 2,8 0 0
Exploration and evaluation
assets 8 1,158 813
Intangible assets 9 21 21
Prepayments 12 2,489 1,467
Total non-current assets 6,373 5,101
--------------- ------------
Current assets
Inventories 10 480 694
Trade and other receivables 1 1 68 5 205
Prepayments 12 393 52
Cash and cash equivalents 13 8,158 707
Total current assets 9,716 1,658
--------------- ------------
Total assets 16,089 6,759
=============== ============
EQUITY AND LIABILITIES
Equity
Share capital 14 41,252 35,606
Convertible loan notes 14 4,019 -
Additional paid-in capital 397 397
Foreign currency translation
reserve (3,3 1 7) (3,462)
Accumulated losses (29,644) (28,56 1 )
--------------- ------------
Total equity 12,707 3,980
--------------- ------------
Non-current liabilities
Loans and borrowings 15 896 412
Provisions 46 47
Total non-current liabilities 942 459
--------------- ------------
Current liabilities
Loans and borrowings 15 523 524
Trade and other payables 16 1,917 1,736
Payables at FVTPL 17 - 60
--------------- ------------
Total current liabilities 2,440 2,320
--------------- ------------
Total liabilities 3,382 2,77 9
--------------- ------------
Total equity and liabilities 16,089 6,759
=============== ============
Additional Foreign currency
Share Convertible paid in capital translation Accumulated
capital loan notes $000 reserve losses Total
$000 $000 $000 $000 $000
-------- ----------- ---------------- ---------------- ------------------ --------
Balance at 1
January 2020 33,965 - 397 (2,934) (24,617) 6,811
( 1 ,710
Loss for the year - - - - (1,710) )
Other comprehensive
expense
Exchange
differences
arising on
translation
of foreign
operations - - - (275) - (275)
-------- ----------- ---------------- ---------------- ------------------ --------
Total comprehensive
income (loss) for
the
year - - - (275) (1,710) (1,985)
-------- ----------- ---------------- ---------------- ------------------ --------
Transactions with
owners, recorded
directly
in equity
Shares issued, net
of issue costs 410 - - - - 410
Balance at 30 June (26,32 7
2020 34,375 - 397 (3,209) ) 5,236
======== =========== ================ ================ ================== ========
Balance at 1
January 2021 35,606 - 397 (3,462) (28,561) 3,980
Loss for the year - - - - (1,083) (1,083 )
Other comprehensive
income
Exchange
differences
arising on
translation
of foreign
operations - - - 1 45 - 1 45
-------- ----------- ---------------- ---------------- ------------------ --------
Total comprehensive
income (loss) for
the
year - - - 1 45 (1,083) (9 3 8)
-------- ----------- ---------------- ---------------- ------------------ --------
Transactions with
owners, recorded
directly
in equity
Shares issued, net
of issue costs
(note
14) 5,646 - - - - 5,646
Convertible loan
notes - 4,019 4,019
Balance at 30 June
2021 41,252 4,019 397 (3,3 1 7) (29,644) 12,707
======== =========== ================ ================ ================== ========
Condensed unaudited Consolidated Statement of Changes in
Equity
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Cash flows from operating activities
Loss for the period (1,083) (1,710)
Adjustments for:
Depreciation and amortisation 3, 4 207 244
Income tax - 1
Net finance costs 6 78 1 11
Cash from operating activities before changes
in working capital (798) (1,354)
Change in inventories 205 1,073
Change in trade and other receivables (519) ( 430 )
Change in prepayments (341) (508)
Change in trade and other payables 214 534
Change in payables at FVTPL (60) (3)
------------- -------------
Net cash from operating activities (1,299) (687)
------------- -------------
Cash flows from investing activities
Acquisition of property, plant and equipment 7 (1,229) ( 74 )
Acquisition of exploration and evaluation
assets 8 (320) -
Acquisition of intangible assets 9 (1) -
Net cash used in investing activities (1,550) (74)
------------- -------------
Cash flows from financing activities
Proceeds from issue of share capital 14 5,900 442
Transaction costs on shares subscription 14 (254) ( 32 )
Proceeds from issue of convertible loan
notes 14 4,019 -
Proceeds from borrowings 15 476 300
Interests paid 15 (30) -
Net cash from financing activities 10,111 710
------------- -------------
Net increase in cash and cash equivalents 7,262 (5 1 )
Cash and cash equivalents at the beginning
of year 13 707 648
------------- -------------
Effect of movements in exchange rates on
cash and cash equivalents 189 (171)
------------- -------------
Cash and cash equivalents at the end of
the period 8,158 426
============= =============
Unaudited notes to the Financial Statements for the 6 months period ended 30 June 2021
1 Basis of preparation
These Condensed Unaudited Financial Statements have been
prepared in accordance with IAS34 Interim Financial Reporting. The
same accounting policies and basis of preparation have been
followed as in the annual financial statements of the Group which
were published on 28 June 2021.
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 COVID-19 pandemic and considered reverse stress test
scenarios to assess the potential impact on liquidity in line with
recent guidance.
On 8 February and 12 March 2021 the Company issued the bonds for
consideration totalling US$476 thousand with a three-year maturity
term, bearing interest of 7.0%, payable twice-yearly. In June 2021
one investor that has purchased 50 bonds with early redemption date
has decided to hold the bonds until end of the period. As a result
there are currently 206 bonds issued that have early redemption
option. None of the investors that purchased bonds in June 2020
have exercised their rights for early redemption . Out of 206 bonds
with early redemption option, 155 bonds for the total amount of
US$310 thousand have early redemption right in September 2021. The
Directors have reviewed the scenario of investor exercising their
rights and took this into consideration.
The Company signed an investment agreement with Vision Blue
Resources and their co-investors on 15 March 2021. In pursuit of
this agreement, the Company issued 24,741,021 ordinary shares for
cash at a price of 9 pence per share to raise US$3.1m to finance
the further expansion of the existing process plant and completion
of the bankable feasibility study. The Initial Investment by Vision
Blue has been completed in June 2021 bringing total investment to
US$3.1m. Further investments of US$7m have been made in June 2021
with a target to accelerate expanded bankable feasibility study
with added Stage 2 of Balasausqandiq project.
A further US$2.5m may be invested at Vision Blue's option two
months after the feasibility study for the development of Phase 1
of the Balasausqandiq project is released.
These funds are expected to l be sufficient to bring the
existing processing factory to the level of 1500 tonnes of V2O5
production per year, generating forecast cash flow of up to US$10m
per year. In addition, the investments will be used for finalising
the Western Bankable Feasibility Study. Although the remaining
funds to be invested remains at the option of Vision Blue Resources
and therefore cannot be guaranteed, in view of the current share
price which is substantially in excess of the agreed exercise
price, the Directors are confident that the further investments
will be made.
The agreement also provides for further investments at higher
share prices to be made at the option of Vision Blue Resources to
finance the construction of the Phase 1 project, but these further
options are likely to come beyond the time under consideration for
current Going Concern purposes.
The current cash position and forecast operational cash flow in
the base case scenario shows that the Company is in stable
financing position. There is further potential for volatility in
commodity prices, supply chain disruption, mine site workforce
rotations and travel to the mine site if the pandemic escalates. In
case of a reduction in vanadium pentoxide prices from current
levels to US$3.4/lb and calcium molybdate prices to US$8.86/lb
additional funding would be required in July 2022. Under this
scenario the company will consider various financing options such
as issuing bonds or further equity.
After review of these forecasts and scenarios the Directors have
a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future based
on the recent funds raised and operational cash flow generation of
the processing operations, at forecast prices. In the event of
further impacts from COVID-19 the Directors anticipate being able
to raise funds if required given the value contained in the Group's
assets and the expansion plans. Accordingly, the Directors continue
to adopt the going concern basis in preparing the consolidated
financial statements.
Use of estimates and judgments
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
Given the remaining low in vanadium pentoxide prices in the
period, the Directors have tested the processing operations
PP&E for impairment at 30 June 2020. In doing, so, net present
value cash flow forecasts were prepared using the fair value less
cost to develop method which required estimates including vanadium
pentoxide prices, production including the impact of ongoing and
planned expansion together with costs and discount rate. Key
estimates included:
-- Production volumes of 48 tonnes per month of vanadium
pentoxide from pyrometallurgical line and 86 tonnes per month of
vanadium pentoxide from electrometallurgical line from 2022 with
flat production thereafter.
-- Average prices of US$9.5/lb in 2021 and thereafter,
reflecting management estimates having consideration of market
commentary less a discount, and lower than the US$7.50/lb used by
the Company as a long-term assumption for other planning
purposes.
-- Further capital development costs of US$7.6m.
-- Discount rate of 10% post tax in real terms.
Based on the key assumptions set out above, the recoverable
amount of PP&E (US$48m) exceeds its carrying amount (US$2.7m)
by US$46m and therefore PP&E were not impaired.
Fair value of trade receivables and payables classified at fair
value less profit and loss (note 11, 16 and 17)
The consideration receivable in respect of certain AMV and
calcium molybdate sales for which performance obligations have been
satisfied at the end of the period 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 following arrival at the port of final destination. 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 end
of the period, 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 at 30 June 2021 less applicable deductions for AMV and
calcium molybdate; b) foreign exchange rates; c) risk free rates
and d) carry costs when material.
As at 30 June 2021 the Group recorded trade receivables of
US$0.346m (2020: US$Nil). As at 30 June 2021 the Group recognised a
payable at FVTPL of US$Nil (2020: US$0.056m).
These Condensed Unaudited Financial Statements have not been
audited or reviewed by the Group Auditor.
2 Revenue
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Revenue from sales of vanadium
products 1,436 1,170
Revenue from sales of molybdate
calcium 74
Sales of gravel and waste rock 10 2
Total revenue from customers under
IFRS 15 1,520 1,172
------------- -------------
Other revenue - change in fair
value of customer contract 27 (44)
============= =============
Total revenue 1,547 1,128
============= =============
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 transfers to the buyer.
Typically, 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 based on the historical average
market prices during a quotation period and an adjusting payment or
receipt will be made to the initially received revenue. 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
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Materials 977 1,261
Wages, salaries and related taxes 258 340
Depreciation 19 4 231
Electricity 43 67
Other 19 4
------------- -------------
1,491 1,903
============= =============
4 Administrative expenses
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Wages, salaries and related taxes 449 437
Professional services 155 211
Listing & reorganisation expenses 44 6
Audit 4 3
Materials 45 25
Depreciation and amortization 13 13
Insurance 20 -
Bank fees 42 5
Business trip expenses 9 10
Security 7 7
Communication and information services 5 4
Other 56 43
------------- -------------
849 766
============= =============
5 Personnel costs
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Wages, salaries and related taxes 758 624
-------------
758 624
============= =============
During 6m 2021 personnel costs of US$232 thousand (2020: US$180
thousand) have been charged to cost of sales, US$448 thousand
(2020: US$437 thousand) to administrative expenses and US$78
thousand (2020: US$7 thousand) were charged to cost of inventories
which were not yet sold as at the end of the 6 months period.
6 Finance costs
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Net foreign exchange (income) costs 41 101
Interest expense on financial liabilities
(bonds) 37 10
Net finance costs/(income) 78 111
============= =============
7 Property, plant and equipment
Land and Plant and Construction
buildings equipment Vehicles Computers Other 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 3 6 99 1,560 5,618
========== ========== ======== ========= ===== ============ =======
Balance at 1 January 2021 1,529 1,853 541 36 99 1,560 5,618
Additions - 4 - 2 10 158 174
Transfers 495 743 7 - - (1,245) -
Disposals - - (22) - - - (22)
Foreign currency translation
difference (30) (38) (8) (1) (2) (16) (95)
---------- ---------- -------- --------- ----- ------------ -------
Balance at 30 June 2021 1,994 2,562 518 3 7 107 457 5,675
========== ========== ======== ========= ===== ============ =======
Depreciation
Balance at 1 January 2020 639 1 , 645 330 17 39 - 2 , 670
Depreciation for the period 51 294 42 7 12 - 4 0 6
Foreign currency translation
difference (61) (160) (3 2 ) (2) (3) - (258)
---------- ---------- -------- --------- ----- ------------ -------
Balance at 31 December 2020 629 1 , 779 34 0 22 48 - 2 , 818
========== ========== ======== ========= ===== ============ =======
Balance at 1 January 2021 629 1 , 779 340 22 48 - 2 , 818
Depreciation for the period 37 161 17 3 5 - 223
Disposals - - (22) - - - (22)
Foreign currency translation
difference (11) (31) (5) - (1) - (48)
---------- ---------- -------- --------- ----- ------------ -------
Balance at 30 June 2021 655 1 , 909 33 0 25 52 - 2 , 971
========== ========== ======== ========= ===== ============ =======
Carrying amounts
At 1 January 2020 1,048 369 2 57 22 65 1,445 3,2 06
========== ========== ======== ========= ===== ============ =======
At 31 December 2020 900 74 201 14 51 1,560 2,800
========== ========== ======== ========= ===== ============ =======
At 30 June 2021 1,339 653 188 12 55 457 2,705
========== ========== ======== ========= ===== ============ =======
During 2021, depreciation expense of US$193 thousand (2020:
US$380 thousand) has been charged to cost of sales, excluding cost
of finished goods that were not sold at year-end, US$12,000 (2020:
US$25,000) - to administrative expenses, and US$17,000 has been
charged to cost of finished goods that were not sold at the end of
the period (2020: US$1,000). Construction in progress relates to
upgrades to the processing plant associated with the expansion of
the facility.
8 Exploration and evaluation assets
The Group's exploration and evaluation assets relate to
Balasausqandiq deposit. During the 6 months period ended 30 June
2021 the Group capitalised the expenses for the feasibility study
as exploration and evaluation assets (in 2020: nil). As at 30 June
2021, the carrying value of exploration and evaluation assets was
US$0.865 m (at 30 June 2020: US$0. 56 m).
Unaudited
Unaudited six-month
six-month period ended
period ended 30 June
30 June 2021 2020
$000 $000
------------- -------------
Balance at 1 January 813 59
Additions (feasibility study) 320 -
Foreign currency translation difference 26 (3)
Balance at 30 June 1,158 56
============= =============
9 Intangible assets
Mineral Computer
rights Patents 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) - ( 1 2)
-------- -------- ---------- -------
Balance at 31 December
2020 9 1 32 3 126
======== ======== ========== =======
Balance at 1 January
2021 91 32 3 126
Additions - 1 - 1
Foreign currency translation
difference (9) (3) - ( 1 2)
-------- -------- ---------- -------
Balance at 30 June
2021 9 1 32 3 126
======== ======== ========== =======
Amortisation
Balance at 1 January
2020 100 10 3 1 1 3
Amortisation for the
year - 1 - 1
Foreign currency translation
difference (9) - - (9)
-------- -------- ---------- -------
Balance at 31 December
2020 9 1 11 3 1 05
======== ======== ========== =======
Balance at 1 January
2021 91 11 3 105
Amortisation for the
year - 1 - 1
Foreign currency translation
difference (9) - - (9)
-------- -------- ---------- -------
Balance at 30 June
2021 9 1 11 3 1 05
======== ======== ========== =======
Carrying amounts
At 1 January 2020 - 24 - 2 4
======== ======== ========== =======
At 31 December 2020 - 2 1 - 21
======== ======== ========== =======
At 30 June 2021 - 21 - 21
======== ======== ========== =======
During the six months ended 30 June 2021 and 2020, amortisation
of intangible assets was charged to administrative expenses.
10 Inventories
Unaudited
31 December
30 June 2021 2020
$000 $000
-------------- -----------
Raw materials and consumables 389 434
Finished goods 83 75
Work in progress 8 185
480 694
============== ===========
During the six months ended 30 June 2021, inventories expensed
to profit and loss amounted to US$994,000 (six months period ended
30 June 2020: US$1,286,000).
11 Trade and other receivables
Unaudited 31 December
Current 30 June 2021 2020
$000 $000
------------- -----------
Trade receivables from third
parties 346 18
Due from employees 24 10
VAT receivable 345 205
Other receivables 6 8
------------- -----------
721 241
Expected credit loss provision
for receivables (36) (36)
-------------
685 205
============= ===========
12 Prepayments
Unaudited
31 December
30 June 2021 2020
$000 $000
-------------- -----------
Non-current
Prepayments for equipment 2,489 1,467
2,489 1,467
============== ===========
Current
Prepayments for goods and services 393 52
-------------- -----------
393 52
============== ===========
The prepayments for equipment are related mainly to high-voltage
powerline connection. For more details see Report on
production.
The current prepayments are related mainly to purchase of raw
materials for processing.
13 Cash and cash equivalents
Unaudited
31 December
30 June 2021 2020
$000 $000
-------------- -----------
Cash at current bank accounts 8,143 688
Cash at bank deposits 14 14
Petty cash 1 5
Cash and cash equivalents 8,158 707
============== ===========
14 Equity
(a) Share capital
Number of shares unless otherwise stated Ordinary shares
Unaudited 31 December
30 June 2021 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 period 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.
During six months ended at 30 June 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 GBP4,238,000 (US$5,900,000 minus US$254,000 of
commission ).
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 of the Company 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. The directors do not
envisage any circumstances under which they would need to issue
further shares prior to the final date of conversion on 4 January
2022.
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 permanent as equity.
Accumulated losses: Cumulative net losses.
(b) Dividends
N o dividends were declared for the year ended 30 June 2021.
(c) (Loss) earnings per share (basic and diluted)
The calculation of basic and diluted (loss) / earnings per share
has been based on the following 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 the same.
(i) Loss attributable to ordinary shareholders (basic and diluted)
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Loss for the year, attributable
to owners of the Company (1,083) (1,710)
------------- -------------
Loss attributable to ordinary shareholders (1,083) (1,710)
============= =============
(ii) Weighted-average number of ordinary shares (basic and diluted)
Unaudited Unaudited
six-month six-month
period ended period ended
Shares 30 June 2021 30 June 2020
------------- -------------
Issued ordinary shares at 1 January
(after subdivision) 330,589,052 312,978,848
Effect of shares issued (weighted) 4,531,663 1,265,811
Weighted-average number of ordinary
shares at
30 June 335,120,715 314,244,659
============= =============
Earnings (loss) per share of common
stock attributable to the Company
(basic and diluted) (0.003) (0.005)
------------- -------------
15 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 or discount 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. Some of the investors (that
own 206 bonds) have the right to receive early repayment after a
minimum period of 12 months from the purchase date.
Unaudited
31 December
30 June 2021 2020
$000 $000
-------------- -----------
Non-current liabilities
Bonds payable 896 412
-------------- -----------
896 412
============== ===========
Current liabilities
Bonds payable (early repayment
rights) 512 512
Interest payable 11 12
--- ---
523 524
=== ===
Terms and conditions of outstanding bonds in 6 months period
ended at 30 June 2021 were as follows:
Effective
interest Nominal Actual Coupon Coupon
US$ Currency rate amount amount rate paid Interest
--------- --------- ------- ------- ------ ------ --------
Bonds payable US$ 7.5% 506 503 5.8% 15 15
Bonds payable US$ 7.0% 886 876 5.8% 15 21
Bonds payable US$ 5.8% 20 21 5.8% - 1
------- ------
1,412 1,400 30 37
======= ======= ====== ========
During 6 months period ended at 30 June 2021 the Group sold
bonds to subscribers and received cash from subscribers in the
total amount of US$475,830 (2020: US$924,000).
Details of tranches of the bonds
Actual Earliest
Bond price Number Nominal Actual repayment Maturity
Tranche date denomination per bond of bonds amount amount date date
------------- ------------- --------- --------- ------- ------- ---------- ----------
08.02.2021 2,000 1,999 58 116,000 115,940 17.03.2023 17.03.2023
17.03.2021 2,000 1,956 52 104,000 101,708 17.03.2023 17.03.2023
17.03.2021 2,000 1,956 30 60,000 58,678 01.10.2021 17.03.2023
17.03.2021 2,000 1,956 102 204,000 199,504 09.10.2021 17.03.2023
Total 484,000 475,830
======= =======
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions
overleaf.
Loans and borrowings Unaudited
six-month
period
ended 2020
30 June
2021 $000
$000
------------ -------
At 1 January 936 -
Cash flows:
-Interest paid (30) (19)
-Proceeds from loans and borrowings 476 924
------------ -------
Total 1.382 905
Non-cash flows
* Interest accruing in period 37 33
* Bond discount/premium - (2)
At 30 June/31 December 1,419 936
============ =======
16 Trade and other payables
Unaudited
31 December
30 June 2021 2020
$000 $000
-------------- -----------
Trade payables 1,016 1,035
Debt to directors/key management
(Note 20) 745 522
Debt to employees 65 57
Other taxes 91 122
1,917 1,736
============== ===========
17 Payables at FVPL
Unaudited
31 December
30 June 2021 2020
$000 $000
-------------- -----------
Payables at FVPL - 60
- 60
============== ===========
18 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 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.
19 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
2021
Processing Subsoil Corporate Total
$000 $000 $000 $000
---------- ------- --------- -------
Revenue 1,547 - - 1,547
Cost of sales (1,491) - - (1,491)
Other income 8 - - 8
Administrative expenses (247) (25) (576) (849)
Distribution & other
expenses (220) - - (220)
Finance costs ( 8 ) - (70) ( 78 )
Profit before tax (411) (25) (646 ) (1,083)
========== ======= ========= =======
Unaudited six-month
period ended 30 June
2020
Processing Subsoil Corporate Total
$000 $000 $000 $000
---------- ------- --------- -------
Revenue 1,128 - - 1,128
Cost of sales (1,903) - - (1,903)
Administrative expenses (176) (49) (540) (765)
Distribution & other
expenses (57) - - (57)
Finance costs (19) - (92) (111)
---------- ------- --------- -------
(1, 709
Profit before tax (1,027) (49) (632) )
========== ======= ========= =======
Included in revenue arising from processing are revenues of
US$1,5m (2019: US$1.1m) which arose from sales to one of the
largest Group customer and one new customer. No other single
customer contributes 10 per cent or more to the Group's
revenue.
The sales to two largest customers were (in US$) during the
first half 2021:
Sideralloys SA (Switzerland) 0.5m (39%) (2020: nil)
MTALX (UK) 0.6 (43%) (2020: nil)
20 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):
Unaudited Unaudited
six-month six-month
period ended period ended
30 June 2021 30 June 2020
$000 $000
------------- -------------
Wages, salaries and related
taxes 200 209
------------- -------------
Refer to note 16 amount of wages and salaries that are
outstanding at 30 June 2021 equal to US$0.7m.
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 or visit 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.
END
IR SEWFMWEFSEDU
(END) Dow Jones Newswires
September 28, 2021 01:59 ET (05:59 GMT)
Ferro-alloy Resources (LSE:FAR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ferro-alloy Resources (LSE:FAR)
Historical Stock Chart
From Apr 2023 to Apr 2024
