VSA Morning Miner, 02/09/20
Ferro Alloy Resources Group (LON:FAR)
Ferro Alloy Resources Group (LON:FAR) has announced the application for a patent for a technology which enables the company to produce a vanadium electrolyte directly from ammonium metavanadate. This is the key component for vanadium flow batteries (VFBs), one of the major battery storage types that is particularly suited to large scale stationary storage. Used in conjunction with or instead of lithium-ion batteries for grid scale storage VFBs have the advantage of being able to be fully charged and discharged repeatedly without reducing the effectiveness of the battery. The electrolyte does not degrade over time and therefore can be recycled while simply increasing the volume of vanadium electrolyte increases the capacity of the battery creating economies of scale. The growth potential of the VFB market is perhaps the largest disruptive force to the vanadium demand outlook; underpinned by growth of the grid connected energy storage market which is expected to grow to 8GW by 2025 implying a 24% CAGR. The ability of VFB manufacturers to gain a significant share of the market is in part dependent on the availability of vanadium electrolyte with many incumbent producers geared to producing steel products which would need conversion. As often with these industrial minerals there is a premium price attached to producing high quality products for specific industrial uses such as vanadium electrolyte for batteries, the fact that FAR is making strong progress is highly positive in our view as it would enable the company to capture a far greater share of the potential value, in our view, in excess of the V2O5 benchmark and in relation to its peers.
The company has also issued US$10k in three year bonds with an interest rate of 5.8%pa.
We reiterate our Buy recommendation and target price of £1.71/sh.
Oliver O'Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: firstname.lastname@example.org
Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: email@example.com
VSA Capital Research | T: +44 (0)20 3005 5000 | E: firstname.lastname@example.org
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