VSA Capital Market Movers – Ferro-Alloy Resources Group

18237500 - businessman hand pointing to investment as concept

Ferro-Alloy Resources Group#: 2020 Full Year Results

Progression Despite COVID

Ferro-Alloy Resources Group (LON:FAR) recently reported 2020 results where benchmark V2O5 prices averaged 39% lower YoY at US$6.47/lb and the company increased production by 56% YoY to 237t. Although COVID-19 related disruption prevented the company from operating at capacity, this was significantly expanded through the year which meant that revenue was up 33% to US$2.4m. However, spending on raw materials and plant improvements which were largely expensed meant that losses persisted with net income of US$3.9m. The company finished the period with US$0.7m in cash, and strategic investment post period end has enabled the power connection to be completed and additional raw materials to be procured, meaning we expect tangible improvements this year.

Transformational Investment

Along with the results, Vision Blue Resources (VBR) announced an additional US$7m in funding to advance FAR’s development. This will mostly enable a more in depth feasibility study to be carried out (due mid-2022) on the flagship large scale black shale deposit, which was the main attraction for VBR due to its potential for industry leading capital and operating cost metrics. With much of the work already underway, the investment will enable drilling to upgrade resource confidence and this greater certainty will likely derisk project execution and financing, all underpinned by VBR’s financial support and technical expertise. Our analysis of the prior study projected initial capex of US$101m, annual output of 5.6ktpa V2O5 rising to 23.5ktpa, cash costs of US$2.30/lb excluding by-products and negative US$-1.2/lb on an inclusive basis resulting in an NPV10 of US$1.4bn.

Recommendation and Target Price

Our revised DCF valuation now reflects lower risk factors and also full dilution owing to the planned, stepped VBR investment programme. This should not only provide investors with confidence but a clear pathway to derisking of the company and a share price rerating.

We reiterate our BUY recommendation and increase our target price to GBP1.80/sh.

Oliver O’Donnell, CFA, Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: [email protected]

VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com

This email is intended solely for the named recipient. It may contain privileged and/or confidential information. If you are not one of the intended recipients, please notify the sender immediately, and destroy this email: any disclosure, copying to any person or any action taken or omitted to be taken in reliance on this e-mail, is prohibited and may be unlawful. Any views expressed in this message are those of the individual sender, except where specifically stated to be the view of VSA Capital Limited, its subsidiaries or associates. Whilst all efforts are made to safeguard inbound and outbound emails, VSA Capital Limited and its subsidiaries or associates cannot guarantee that attachments are virus-free or compatible with your systems and do not accept any liability in respect of viruses or computer problems experienced.

VSA Capital Limited will use your personal information to administer your account in order to provide any products and services you have requested from us. Your personal information will be kept secure and will not be shared with any other party unless you provide consent to that effect.

VSA Capital Limited is Authorised and Regulated by the Financial Conduct Authority and is a member of the London Stock Exchange.

The Company is registered in England with company number 2405923 at New Liverpool House, 15-17 Eldon Street, London EC2M 7LD.

Please consider the environment before printing this e-mail

unsubscribe from this list update subscription preferences


Please enter your comment!
Please enter your name here