Ferro

Ferro-Alloy Resources (LON: FAR) shares are down 14% this morning. FAR shares have fallen on a collection of bad news about the company’s vanadium operations. Some of these seem to be just things that happen - although which might have been predicted with the business based in Kazakhstan. Having worked out there and in similar places we are not great fans of the reliability of the transport or delivery networks. The other problem could be seen as more serious - the vanadium price is moving against the company. And yes, this is more than just a transient issue.

Ferro-Alloy is trying a duel development path. To open up a vanadium extraction deposit in Kazakhstan. Why not? V is a valuable material, has a decent enough market and there’s always the possibility that those large, grid scale, batteries using it will take off into being a real, rather than demonstration, technology. The other leg of the plan is that if you’ve got a vanadium extraction plant then why not bring in wastes from else where to extract the V from them? Sure, this could work, that’s possible. But there seem to be those slips between cup and lip going on.

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Ferro-Alloy Resources share price from Google Finance

One of those slips is transport: “Concentrate supplies already in transit and ready for shipment are sufficient to allow the resumption of full operations from around the beginning of September. However, there is a possibility of further delays in the Southern, trans-Caspian Sea transport routes, caused by Ukraine-related disruption to other import routes and exacerbated by winter conditions in the Caspian Sea. There is, therefore, a possibility of some more limited shortfalls affecting production in Q4 2023. Subject to this, the Company expects the processing and output of the plant for Q4 2023 to be at or close to planned capacity.” This is after one of the people who was supposed to be sending concentrate for processing just decided not to bother. As we say, having worked out there, we’d not rely upon prompt transport in the area. It’s necessary to have a lot more stock at hand in order to be able to run at full volume, full time. The factory, the plant, has to have more working capital that is.

The other issue is more important perhaps: “ The feasibility study into the Balasausqandiq deposit, the main value driver of the Company, is ongoing and reaching the final stages.” OK and “Vanadium prices have remained depressed compared with prices earlier this year, attributed to the economic slow-down in China resulting in net exports of vanadium from China, although this is likely to be offset by significant demand for vanadium for energy storage batteries.” By definition that feasibility study has to be at current market prices. Not what might happen if batteries, but the current market price. So we could see that project value being depressed by those Chinese issues.