VSA Morning Miner, 29/11/21
Ferro Alloy Resources (Ferro-Alloy Resources Ltd (LSE:FAR))
Ferro Alloy Resources (Ferro-Alloy Resources Ltd (LSE:FAR)) has provided an update on the Bankable Feasibility Study which has been a key workstream since Vision Blue Resources (VBR) investment earlier this year. As a result of the successful work undertaken so far the company has taken the decision to expand the scope of the BFS to cover phase 2 as well which would increase capacity from 1mntpa to 4mntpa taking V2O5 output from 5.6ktpa to 22.4ktpa. The full results are due late 2022.
One of the major requirements for the BFS is to provide sufficient confidence in the mineral resources for mine planning. Although the five known deposits have been drilled to local Kazakh standards, only the first of these has been drilled to JORC compliant standards required for a Western BFS. Furthermore, ore body one at 23mnt is suitable for phase 1 and the other ore bodies need to be drilled to extend the mine life at this confidence level. To do this FAR will undertake both core and RC drilling with the core rigs already on site. The core drilling covers an initial 6,000m which could be upgraded by a further 2,000-4,000m, the RC drilling will commence in February 2022 for an initial 9,000m with up to 5,000m of further drilling. Given the similarities between the other ore bodies, initial drilling on ore body one will be used to inform the programmes for the remaining ore bodies. Drilling is likely to be completed by the end of Q1 2022.
Although the pilot plant proved the metallurgical process which FAR developed for the project and was a key factor in VBR’s investment decision additional confirmatory work has been undertaken in the last few months; this has confirmed the historical results. The company will move onto “locked cycle” testing which is a closer simulation of actual operations and will also be completed in early 2022.
The metallurgical testing will have a significant focus on by-product testing; as well as vanadium, FAR anticipates being able to produce uranium, molybdenum, aluminium, potassium, rare earths and carbon. We have highlighted previously that FAR’s success is not contingent on by-products for its industry leading cost position but is significantly enhanced. Our estimates for unit costs excluding by-products are an average of US$2.3/lb which would still make FAR one of the lowest cost producers; including by-products takes the unit cost to US$-1.16/lb on a by-product basis.
Fully funded for this stage of development the update reminds of the clear pathway to unlocking value at the Balasausqandiq project and the next 6 to 12 months will cover the major workstreams before project financing is completed and construction commences.
We reiterate our Buy recommendation and £1.80/sh. target price.
Oliver O'Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: oodonnell@vsacapital.com
Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: prenken@vsacapital.com
VSA Capital Research | T: +44 (0)20 3005 5000 | E: research@vsacapital.com
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