Ferro-alloy Resources Share Discussion Threads

[sos100] 01/7/2022 08:20

can you post some links where they mentioned Molybdenum in great death?

[jailbird] 01/7/2022 08:06

This laughable considering the exuberant talk of molybdenum being a profitable by product By-product studies are ongoing into the recovery of uranium, molybdenum and potassium alum in accordance with earlier work. Test-work has indicated a low recovery of rare earth minerals into leach and this aspect of the study has been discontinued.

[sos100] 01/7/2022 07:10

RNS looks pretty good, should at some point move back up once peace is restored....

Highlights

-- Drilling programme 50% complete
-- Early results of an 800m section of OB1 show a 75% increase in volume and tonnes
-- Metallurgical recovery into leach of 93% confirmed
-- Acid consumptions of 200 kg per tonne or less indicated.
-- Test results show a 40% carbon product can be recovered at 25% mass recovery
-- Tests show this product can be used as a substitute for carbon black in tyre manufacture

[cyberbub] 30/6/2022 22:08

An encouraging update from the LSE board. I must say I'm surprised at the political changes - but in a good way! Transparency and rule of law are always good for investors.Hopefully Putin will not see another relatively open and democratic country on his border as being another threat to his own brutal dictatorship :-ohttps://www.google.com/amp/s/m.jpost.com/opinion/article-709316/amp

[sage of suffolk] 21/6/2022 10:39

PS
The key of course is for the mine plan/BFS to get X% bigger, with much less than X% equity dilution... I'm confident that Mick Davies will manage to pull in a good debt package with all his contacts and credibility... It will also be very helpful if the small operation can be making decent money soon, as that will help to raise debt against it... If it's making $12M say, that should support $120M of debt on its own, plus VBR's planned equity investment which should support another $100M or so... Not far off what they need to go direct to Stage 2...
have a look at the company website, you'll see that they could be making $400M revenue (£300M) p.a. after Stage 2 construction. (22,500 tons at an $8 average V sale price).

Say £200M conservatively after tax, GA and sustaining capex... This is an enormous resource and super cheap to produce the output

On the current plan there will be 500M shares in issue, giving a likely share price of £4 at a p/e of 10... A simple 5% divi gives 20p per share (at 2x divi coverage)...
Yes, a bit back-of-a-fag-packet but the numbers add up... and I think Sir Mick Davies can deliver it...
This may all change after their updating of the BFS

As long as people are aware that it will probably take 3 years to get there. And in the fullness of time there could be a 20p dividend.

Nothing new in the Proactive interview for existing investors. Money in the bank, new world class chairman, extending already huge resources through drilling, new power connection to the small plant, working on further by-product streams from it.
they stated clearly in the RNS that they intended to do some more drilling to upgrade the resource to JORC standards- this is the reason for the BFS delay. It will all be worth it eventually. And the company now has plenty of money to get the drilling done quickly before next winter

$400M revenues, minimal cash costs, knock off some capital maintenance, central costs, taxes etc, say £250M net profits, p/e of 8, 500M shares = 400p share price. Simplistic yes, but the mine and economics are actually quite simple... And until we know their detailed plan and see the final BFS this estimate will do IMO. I'm working on 500m shares when we are in production, based on the announcement in March and allow a few extra options as you say. Hence reducing NB's optimistic eventual target share price of £10/share to about £6. Personally I am hoping/aiming for about £4 per share. Frankly I'm in this not just for capital growth, but for the eventual divis,

Delay due to bureaucracy. Mick Davies now in the driver's seat and a new impressive NED. Proper power supply connected and about to go live - allowing the small plant to make $10m p.a. profit and providing stability while the main mine is developed.

Looks like a 6-9-month delay on the BFS but for a good reason - to work out how to make it into a much bigger and more profitable mine. Great news for LTHs...

I would add that, apart from speeding up development and construction dramatically, and bringing on board a very credible major investor, another motivation for NB to do the VBR deal is that he was under legal pressure to sell some shares for personal reasons. He knew that the VBR announcement would rocket the share price and mean that he would have to sell less shares personally - as has happened (he sold at 30p rather than 10p). The fact that he and Andrey have large holdings and therefore are motivated to see the share price rise, is another confidence for me in FAR. Andrey still has 60M shares and Nick still has 45M

NB's plan was to get the small plant completed and generating $10M p.a. cashflow, which would have supported the full $100M loan for Stage 1 with minimal further dilution. As it turned out, because they screwed up the IPO and didn't raise enough money, the share price was forced down below 10p and NB's original plan was ruined. So he had to go and find another funder, and to be fair he's done that very successfully. There will be substantial but not excessive (approx 50%) further dilution as a result, which means that the eventual target share price in full Stage 2 drops from £10 down to about £5-6. Personally I am being more conservative and think that the share price will be about £4 when Stage 2 is online, albeit that is possibly 4-5 years away.

Today's market cap of $150M ($200M fully diluted for Phase 1 production) doesn't seem excessive, given the prospects here and potential NPV of over $2bn (subject to BFS confirmation), along with the credibility of Mick Davies' support. Typically miners trade at 20-30% of NPV after construction funding confirmation (which we have essentially got 'in the bag' after VBR's investment agreement), so even double today's share price doesn't seem excessive while we wait for the BFS, probably in Sept IMO.

$20M is due after the BFS is published, as part of the Stage 1 funding package (including debt). I see the BFS being published by Sept / Nov at latest, now they have millions to throw at it. Meanwhile VBR will be putting out feelers for 'heads of terms' on the debt deal, pending BFS. Once it's published then maybe 3-4 months to finalise the package IMO. So I would expect this to be all done and signed off by EOY, or early Q1 next year at latest. They will be wanting to get the Stage 1 plant completed for full operations in the spring of 2023, IMO.

I see the $10M at 25p being proposed as an immediate cash injection after the BFS is published (assuming it's satisfactory), to allow the ordering of long lead time items, without having to wait for the full funding package to be signed off.

The company will be throwing off mountains of cash just from Stage 1, easily enough to support a $200M-ish debt-only package to develop Stage 2.

The basic position with FAR is that there should be no more need for placings. All future equity fundings, and their prices, are known (including $20M at 78p). So assuming all funding is drawn down, there will be approx 480M shares in issue. We also know that raising $70M in debt will be a cakewalk with that equity funding in place, and Mick Davies leading as Chair. Stage 2 will be developed from Stage 1 cashflow.

So all we need to do is work out is how much a company making $400M p.a. in 2025 (Stage 2) will be worth, and then divide by 480M shares to get a long term target share price...

To me the only significant remaining risk is the BFS, if it should show a much less positive economic case than the (Western produced) CPR. It might possibly be 15-20% less positive.

A breather is only a concern for short term traders. We're still only at 15% of NPV (fully diluted) and funding for the mine is virtually nailed on, so we should really be at 25%+ of NPV in my view. I think 60-70p is fair value, but maybe it will take the BFS to get there. Luckily the BFS should be published in about 3-4 months IMO, now the company have money to throw at it.

There will be a lot of news in the coming 6 months:

*Initial financing completed.
*HV power connection completed.
*Arc furnace ordered.
*Mick Davies confirmed as Chairman.
*BFS updates, and publication probably Sept.
*Stage 1 debt finance package agreed, or 'heads of terms' at least.

Pensana Resources (PRE) has a market cap of £320M (was £400M recently). In my view the economic case at Pensana is broadly similar to FAR, in fact FAR is probably a bit better.

* Both have top class management (after Mick Davies has come on board)
* Both have a BFS almost complete.
* Both need relatively modest capex to build their mine.
* Both have large resource bases (I would say FAR's economic case is better due to the co-product credits).
* PRE has indicative debt funding agreements, but no equity deal yet. FAR is the other way round (better IMO as it's clearer).
* PRE is setting up a vertical integration manufacturing unit in the UK. FAR doesn't have that yet, but they have mentioned the possibility.
* Both PRE and FAR have existing transport and power infrastructure on their doorsteps.
* PRE is in a reasonable position to access markets by sea. I think FAR's position is better as it has easy access to both Europe and China (albeit rail is a bit more expensive than sea transport).
* I would say that Angola is a notch above Kazakhstan in political risk.

So given the points above, if FAR were to hit £400M cap like PRE, then even at our committed diluted shares numbers (approx 420M), that would be 95p....

420m shares after recent dilution X 50p = £210M or $270M. Typically good quality junior miners pre-construction but with funding sorted, are valued at around 20% of their NPV, which in the case of FAR is $2bn. 20% of $2bn is $400M (around 73p per share).
As mentioned, execution risk (getting the mine actually built) and political risk (Kazakhstan state corruption, dodgy dealings, resource nationalism etc) remain, in addition to the economic risk which is always present.

In terms of execution risk, I think Mick Davies will make sure the mine gets debt funding and is built successfully. Of course it's never possible to rule out any bad luck, accidents or 'black swan' events.

As for political risk, it certainly exists, but I don't think Kazakhstan is as dubious as some places which still get Western investment. Most governments are desperate for jobs and tax revenues these days, and don't want to get a reputation for poor governance and scare off Western capital. There are a number of good-sized Kazakhstan-based miners already listed on Western exchanges which all seem to be reasonably successful, and not encounter too many problems.

That leaves only the eventual economic case of the mine, which largely depends on the long term V price, and demand for the product. As for that, who knows, but the amazing thing is that with the deposit type and processing route that FAR have, they will make money at *any* credible vanadium price. As long as the mine gets built, they should *never* go bust. That is a massive safety blanket. And even at unfeasibly low V prices (say sub $5) the eventual share price should *still* be multiples of 40p.
To be clear, there is still a moderate level of risk at Ferro-Alloy. Execution risk and political risk remain. But (it seems to me) the financial/funding risk has now been eliminated. And with Mick David on board I would imagine that the execution risk is massively reduced...
I recommend reading the CPR on the company's website. It gave me confidence that the resource was real and that the IRR was genuinely astonishing. A reputable Western consultant wouldn't have put their reputation on the line by engaging in outright dodgy dealings.

The BFS is being done by a separate consultant, which is best practice, like a 'second opinion'. It is the very well regarded SRK doing it, so we can be sure it will be realistic.

Yes it's possible that the final detailed economic case (BFS) might be a bit less positive than the CPR.

if the IRR of 97% in the CPR were to drop to 70 (probably worst case IMO) then it would still be an almost unheard-of IRR. Yes the eventual share price when in production would be lower, but it would still be multiples of 40p.

And let's not forget that in some ways the IRR is now almost irrelevant - because we no longer actually need to attract (equity) investment! BVR have just agreed to invest $30M (at prices up to 78p) to deliver Phase 1, as part of a debt and equity package...
it seems perfectly feasible to go straight to Phase 2. The additional capital required would be $225M (from the CPR), but there should be some efficiency from combining the Phases. In any case, approx an extra $50M in equity would support further debt to deliver a combined Phase 1+2.

I can't see Mick Davies agreeing to let any 3rd party in cheaper than him at 78p, At 90p then $50M (£40M) is less than a 10% dilution, which is trivial. And the investors of the extra $50M would be able to look forward to a 5+ bagger in capital terms, and a potential 20%+ dividend.

I was just logging in to say exactly that but you beat me to it. There are 5 ore bodies, and the current BFS and mine plan are only addressing the first one.

At the rate of output of Phase 2, there are many decades of mine life on this project

They will want to create Phase 1 in a controlled manner and test and make sure the process all works well, before scaling up to Phase 2. Plus doing it in stages means zero further dilution because Phase 2 will be funded entirely from the big profits of Phase 1. LTHs would always want to minimise dilution even if it means an extra year or two to Phase 2. But who knows - it's certainly possible with Mick Davis behind the wheel.

Any instis wanting in, will have to buy in the market, this is a very very significant advantage to the VBR involvement. Usually PIs have to expect that there will be a discounted placing, with all the insider trading and front-running that goes on to force the share price down (eg look at EML's recent placing).

FAR will be producing 5,600 tons of vanadium by 2023, now the equity funding is guaranteed and the debt funding will follow.

Their plan then sees 23,000 tons in Phase 2, from 2025-ish.

*That's* why investors are buying FAR heavily. Because in a few short years it will become one of the world's biggest vanadium producers, and by a long way the cheapest.

Today's modest production at FAR, and production at other companies, are irrelevant.
But if you have the patience to treat FAR as an investment, consider this:

Within 4 years, if Phase 2 is fully operational, then the company could be making $400M+ operating profit each year. Say £200M after all taxes, investment, depreciation etc. Put it on a conservative p/e of 10 (given the low-risk nature and the decades of resources I would think higher but say 10). That's a market cap of £2bn - the company is throwing off so much cash that debt will probably be modest and falling fast. We already know from the funding deal that there will be approx 500M shares in issue.

* £2bn / 500M shares = 400p share price.

* If 50% of profits are distributed as divis (why not, it will be a cash cow!) then that will be £100M / 500M shares = 20p per share and a 5% yield.

But buying at today's share price that's a 50% yield in the fullness of time...

As with any project like this, the 4 key risks are:

Technical
Financial
Political
Execution

The Technical risk was already low. The original project team have developed their plans over a decade. They've created processing flowsheets and patented techniques to extract maximum value from the ore. The ore itself is amazingly accessible as direct outcropping or shallow open pit = very low risk.

The Financial risk is, after Monday's announcement, now essentially gone. The level of dilution is known. The company have already got early acceptance from the Kaz Development Bank for a debt package. This should now just be a formality after the BFS is published.

The Political risk in Kaz is higher than some countries, there is undoubtedly a level of corruption. However I understand that this is falling. In any case the original project team/BOD are well connected in the country, and Mike Davis' contacts will definitely help to keep things running smoothly! And don't forget we already have the Mining Licence for Phase 1, and a tax holiday for several years.

The Execution risk is always there, anything can go wrong building a mine. However with a simple outcropping deposit and all the infrastructure on the doorstep, and now a super credible team from VBR providing guidance, IMO surely Execution risk also has to be pretty low?!

In summary: for anyone willing to hold for a couple of years, IMO this is a low risk / high reward opportunity

I think the BFS might take a bit longer, it sounds like they're wanting to upgrade that (which is a good thing - the more details/options the better), so I personally am not expecting it before mid-summer. But in the meantime they can be working on the debt funding anyway - the BFS will be only the final step to reconfirm and sign off the debt deal. I am hoping the full package will be signed off in Q3 or early Q4.

IMO no more (equity) funds needed for Stage 1. I expect that the $10M at 25p will be the key to opening up a loan for the remainder as debt. A 90% debt funding is unusual, it's more normally 75-80% debt, but the absolutely outstanding economics of this project, combined with a 25% offtake (and probably more to come) means that banks should see it as low risk.

Worst case scenario some of the $25M at 78p could top it up.
It's said that credible junior miners with their mining licence and all their paperwork (but before closing their financing) typically have market caps of 20% of their NPV.

Ferro's NPV is $2bn according to the CPR - with an upper estimate of $3bn. But let's say $2bn. 20% makes $400M = £300M. Divided by say 450M shares = 67p.

And that's before financing. It could quite reasonably be said now that the equity component of the financing is arranged, that the debt portion should be pretty straightforward to confirm.

For FAR newbies, the "80% complete" in the interview today refers to the small existing plant, which produces vanadium from waste concentrates. Nevertheless it provides a useful cashflow to FAR, which is something most junior miners don't have. The small plant has also allowed testing and development over the last few years of the innovative (and now patented!) processes for when the company is mining ore from the adjacent massive Vanadium resources.

It had been intended that the small plant's cashflow would support a debt funding package for the Phase 1 main mine, allowing low levels of dilution to shareholders. However the equity funding announced yesterday makes the small existing plant less relevant. In effect the company have accepted a much bigger dilution than they had originally planned (but still not excessive IMO at about 50%), in order to progress and build the large main mine project as fast as possible. Clearly our new strategic investor wants that too.

Phase 1 of the mining operation (I believe it will be in operation in 2023) will yield $100M in revenue p.a. - and the amazing thing is that due to the valuable by-products in the ore, the actual Vanadium is free (This has been confirmed in the Competent Person's Report). Plus they have a tax holiday until 2026! So I would think they will be making *actual post-tax profits* of $90-100M for the first 3 years. This will fund the construction of Phase 2 directly (no further debt or dilution)

What will the market cap of a debt-free company producing possibly $400M of reliable profits each year be, when Phase 2 is in operation probably in 2025-26?
Rerating under way. Even with the extra 90M shares, the company wouldn't be sold *today* for less than 50p, and that would be a bargain... even if the management would sell - which of course they won't, why would they? They will be targeting multiples of 50p when the full Stage 2 mine is in operation - plus dividends.

As Bridgen says in the latest Proactive interview, they now have more than enough money to to everything they need to do.

I believe FAR will shortly have enough cash to start ordering long lead-time equipment even before the finalisation of a debt funding deal. This should ensure completion of Stage 1 as soon as possible.

If we now assume an eventual 500M shares in issue long-term, the current market cap at 15p is still very undervalued IMO. The company have a colossal, strategically-located, very cheap resource of an in-demand mineral... And now the money and the board expertise to exploit it! f all of the VB investment eventually takes place, it will end up being a roughly 50% dilution from the previous market cap. That's higher than my earlier estimate of 20-30%, but that's life. When the large Stage 2 operation is in production and debt paid off (perhaps 5 years' time)

IMO we will now see the following:

* The existing operation will have its power connection finalised within 6-8 weeks, as per the RNS.
* With the new cash I would expect the BFS to move to completion within 4-5 months hopefully, as visits become allowed again.
* Release of the BFS will trigger the further Vision Blue $9M investment, which will allow long lead-time capital items to be ordered.
* Then finalisation of the debt package, by Q4 IMO.
* Then full steam ahead for my earlier prediction of first production from Stage 1 in 2023.

Vision Blue clearly aim to get up to 29.9% eventually. After the various fundraisings, Bridgen's and Kuznetsov's holdings will be diluted, but I think they will still just about hold 25%+ between them - enough to prevent a takeover at an unreasonable price in future.

[jailbird] 21/6/2022 08:49

Even with my cautious that I have repeated over many many months, I did not expect this to be this low again.

Must be 9p subscription coming

[cyberbub] 18/6/2022 10:30

775k shares is what has dropped us yes clearly.

But the MMs don't hold shares (certainly not in a stock like FAR anyway), so someone bought those shares on the same day.

Looks like possible capitulation from a holder, or (as usual) someone over-leveraged on the stock, or being forced to sell to satisfy an over-leveraged position elsewhere. That's what happens when the wider market falls, it's a vicious circle, falls trigger more falls, stop losses etc - has no relevance to the underlying value of the share.

[ttlance] 17/6/2022 17:24

This isn't looking good, big seller today at 13:22:35 BST (£108,500 @ 14p)

[ttlance] 16/6/2022 15:38

Cyber - I just don't think the current plant will be profitable, as the cost of the concentrate they buy in tracks the vanadium price less a discount. I know they are starting to process nickel tailings but I don't think this will be enough to tip the company into profit

[cyberbub] 12/6/2022 12:52

Further positive aspects are putting in a younger new FD, who Davies will certainly have 'vetted'. Getting the pilot plant now fully connected to the grid and a 3rd furnace installed. Putting more drill rigs in to make up for delays. EtcSo while there are clearly some headwinds in the Ukraine invasion causing economic and political upheaval in Russia (and as you say the rouble has recently strengthened... for now), the company is not showing signs of anyone (least of all VBR) abandoning the project!

[cyberbub] 12/6/2022 12:35

I think Bridgen's done a decent job under the circs, but am aware that he apparently didn't do very well at HMB. Quite possibly he may not see the company through to production. Especially given his age, he may well be happy to get the FS completed and then let Mick Davies put in a new CEO to take over the fundraising and construction, while NB sails off into the sunset still holding his 60M shares. Happy days all round.

Davies initially raised $60M for VBR but has raised more since. I don't think he would baulk at putting another $2.5M in at a 50% discount to the current share price .. If it's required of course!

TTlance, I don't understand your comment about the small plant definitely losing money as they still rely on secondary concentrate? Why would that guarantee a loss, in your view? They can't use primary material from Bala yet, they haven't got a mining operation set up for anything other than sample size - they don't have the several million it would take to set up, and it would be pointless anyway.

We should have news soon on the drilling results and the carbon black feasibility IMO.

[thomas11] 12/6/2022 09:21

NB is definitely a liability, I remember the mistakes he made at Hambledon mining where he was CEO prior to FAR he was clueless and lost shareholders a lot of money. I also have only invested here due to MD coming on board. I hope MD replaces NB with Mr. Peet Nienaber who he brought in as NED and has all the experience needed to replace NB.

I don’t believe NB will take FAR to production, simply not capable in my opinion. Leave him to play with his toy processing plant.

[jailbird] 11/6/2022 21:50

TT,Yes I mean positive comments made by NB have to taken with a pinch of salt because as you have read up , much fails to be delivered on time On a side note anyone noticed that VBR have also made a strategic investment in CUSN, Cornish metals

[ttlance] 11/6/2022 14:20

JB - This is what concerns me. I have read all prior RNS updates going back to 2019 and they contain a lot of positive comments but not once has anything been delivered on time. The most concerning thing is the profitability of the pilot plant (which people seem to be ignoring) but it's the performance of this plant that will dictate further dilution and confidence in the company's ability to achieve their targets. It's clear that this is loss making and continues to be so, as long as the company is continuing to purchase secondary concentrate. The strengthening Tenge and Ruble is also going to impact FAR's profitability as most of their costs are denominated in these currencies. Can you clarify your third sentence reference 'No value'?

[jailbird] 11/6/2022 13:34

TT,

NB is known to overstate and under deliver. If VB was not invested here, I would not even monitor this Co.

No way this Co will achieve meaningful cashflow to find FS, and we assume it will be delivered on time next year of course.

@Cyber, the Co stated or NB said has no value any more, so you have to take these statements with a pinch of salt....

Regarding VB, I am convinced will sell their stake once they do not see this moving quick enough. If we have a recession next year, it will time to sell everything.
Be interesting to see if they support another $2.5m @9p again

[ttlance] 11/6/2022 12:51

Cyber - These figures are from S&P Global, just to clarify they have: 2022: T/O $10.8m FCF $4.2m and 2023: T/O $14.8m FCF -£131.1 (Negative). What is interesting is that NB has detailed in the below interview that FCF for 2022 is forecast at $10m, based on this, T/O will need to be in excess of $25m which I'm certain the company is not going to achieve, considering 2021 T/O was $4.7m, so still very confusing in terms of the message coming out from FAR.

[cyberbub] 29/5/2022 11:14

Where did you see the forecast figures you mention?

[cyberbub] 29/5/2022 11:10

Lance, they've said in the results that the HV connection is in place and the 3rd kiln is already commissioned and entering operation.All the company has to do is cover its $2.4M admin costs, plus a bit more to pay for the remaining FS activities. In fact it could cover most/all of that in 2022 from its remaining 2021 cash of $2.8M...Note that the company has a negative trade balance of around $0.6M, but also has $2.1M in inventory, so a net positive of $1.5M there too.They said in the results that the company will be significantly profitable in 2022.VB also have the right to invest another $2.5M at 9p. If that's needed, let them do it IMO. It's only another 20M shares, < 5% dilution.NAI

[ttlance] 17/5/2022 15:50

I've delved into the forecast for 2022 and turnover is $15.7 with free cash flow forecast at $4.2. I don't think this is achievable as they had forecast 2021 being profitable.

[jailbird] 17/5/2022 15:41

TTThe main increase in revenues were in the last quarter .Previous quarters were loss making , this why the loss was larger than expected I definitely see an improvement but not significantly enough to help with cash needed 100% sure VB will support with subscription investment again Maybe another $3m -5m if you look at costs over last year

[ttlance] 17/5/2022 15:20

It doesn't add up, the plant isn't profitable as FAR recorded a loss of $2.8m for 2021 (and that was with rising V prices in 2021). The concern I have is that NB has continued to paint this rosy picture of increased output but he has continually underdelivered when it comes to operational performance. The financial position is very weak with the balance sheet requiring extra capital from somewhere, as I don't hold much faith in seeing any operational improvement in the coming 6 months.

[jailbird] 17/5/2022 15:11

The delay in DFS study to H1 next year has added the need for further cash much sooner Share price falling away with market sentiment as maybe it knows what's coming with cash neededDid not expect sub 20s again but I see 15-25p range until next year

[jailbird] 17/5/2022 15:07

Just read the results again , especially bottom half Still risks here .The Ukraine has created transport issues with alternative routes being looked at . This pilot plant will not make any significant cash-flow in H1 is my reading from the results Definitely more dilution via subscriptions , will not debt but Vidion blue again Vision Blue has the option to make further investments, under the terms of the Investment Agreement, at varying share prices,