VSA Capital Market Movers – Ferro Alloy Resources


VSA Morning Miner, 22/09/21

Ferro Alloy Resources (LON:FAR)

Ferro Alloy Resources (LON:FAR) has announced the start of higher value product output with the addition of ferro molybdenum and vanadium pentoxide. The company has to date produced a precursor to V2O5; ammonium metavandate which typically trades at a 15% discount to the spot price. This is therefore a significant transition that will enhance margins at the existing operation. The timing of the impact is not yet clear and FAR indicates that with remaining contracts for AMV to be settled the transition will be incremental.

In October last year the company announced the start of commercial production of calcium molybdate, extracted from the same vanadium bearing materials being processed at the existing operations. This too is an intermediate product and trades at a discount, however, today’s announcement shows that the company is now able to produce ferro molybdenum directly meaning the discount to the benchmark can be reduced.

Furthermore, the residual material is a nickel bearing concentrate and the company has now found a route to market for this meaning there is no residual product left on site. The by-product additions of ferro molybdenum and nickel concentrates are by-products which can strengthen the margins of the existing operations which is being ramped up to 1,500tpa V2O5. A major step in this expansion will be the arrival of the electric arc furnace for commissioning in H1 2022. With power now connected the plant can operate efficiently but the EAF is necessary for the step up in capacity.

We reiterate our Buy recommendation and 180p target price.

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

Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: [email protected]

VSA Capital Research | T: +44 (0)20 3005 5000 | E: [email protected]

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