Ferro-Alloy Resources Group (LON:FAR) has announced interim results for H1 2021 and despite disruption due to logistics issues, which have now been resolved, the earnings performance improved. V2O5 equivalent was down 9% YoY to 88t in H1 2021 but offset by higher vanadium prices, where the benchmark averaged 21% higher YoY at US$7.7/lb
Ferro-Alloy Resources Group#: 2021 Interim Results
Earnings Results
Ferro-Alloy Resources Group (LON:FAR) has announced interim results for H1 2021 and despite disruption due to logistics issues, which have now been resolved, the earnings performance improved. V2O5 equivalent was down 9% YoY to 88t in H1 2021 but offset by higher vanadium prices, where the benchmark averaged 21% higher YoY at US$7.7/lb, and the addition of 25t of molybdic oxide meant revenue of US$1.5m was up 35% YoY. COGS were down 22% YoY, as H1 2020 was impacted by higher costs of raw materials purchased in late 2019 to US$1.5m. With SG&A flat, the combined impact was that the operating loss narrowed from US$1.6m to US$1m and net income narrowed to a loss of US$1.1m. Capital investment increased to US$1.2m on the back of the US$10.1m investment by Vision Blue Resources (VBR) meaning that end of period cash was US$8.2m, leaving FAR well positioned and fully funded for the Feasibility Study.
Clear Impact of Investment
VBR’s contribution has had an immediate impact with the Feasibility Study for the main Balasausqandiq development project now being expanded to cover phase 1 and phase 2 of the project. Infill drilling will commence in November with met testwork running simultaneously. The FS will be a major catalyst for 2022 and planning for the expanded scope has been a focus since March.
Since VBR’s investment, FAR has been able to execute plant upgrades and broaden and enhance its product mix to cover vanadium pentoxide, ferro-molybdenum and nickel concentrate. Furthermore, the recent patent for electrolyte production also highlights why FAR is our preferred mining exposure to the growth of VFBs as the company is, in our view, the closest of the peer group to producing high quality, high value, electrolyte suitable for batteries.
Recommendation and Target Price
The results announcement demonstrates a significant uptick in project development, progress at the existing operation while VBR’s investment programme provides a clear path to value realisation.
We reiterate our BUY recommendation and target price of £1.80/sh.
Oliver O’Donnell, CFA, Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: oodonnell@vsacapital.com
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