TIDMFAR
RNS Number : 2920R
Ferro-Alloy Resources Limited
29 June 2020
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
29 June 2020
Ferro-Alloy Resources Limited
("Ferro-Alloy" or the "Company" or the "Group")
Final Results for the year ended 31 December 2019
Ferro-Alloy Resources Limited (LSE:FAR), the vanadium mining and
processing company with operations based in
Southern Kazakhstan is pleased to announce its final results for the year ended 31 December 2019.
Overview
-- Successfully commenced trading on the London Stock Exchange, raising US$6.9m (GBP5.3m)
-- Significant progress made towards major expansion of the
existing processing operation with new equipment installed,
increasing capacity to 60 tonnes of vanadium pentoxide per
month
-- Installed entirely new pyrometallurgical production process aimed at treating higher grade vanadium-containing secondary materials
-- Upgraded existing hydrometallurgical process with improved product quality
-- 2019 production of vanadium pentoxide increased 21.6% to 152 tonnes (2018: 125 tonnes)
-- Preparatory work completed on second major phase of
expansion, planned to take capacity up to some 1,500 tonnes per
year
-- Work on construction of a link to the high voltage power line
started which will increase reliability and reduce the cost of
power by half
-- Upgrade of the feasibility study continuing on the
Balasausqandiq vanadium project, which has a NPV of $2 billion at a
long-term forecast vanadium pentoxide price of US$7.50/lb
-- Prices of vanadium pentoxide were falling throughout 2019
from an exceptionally high price of nearly $30/lb in 2018 to a more
normal range of US$5-7/lb in early 2020
Post-Period
-- Listed on the Astana International Exchange ('AIX') in Kazakhstan
-- Raised GBP250,000 by the issue of equity
-- Raised $300,000 by the issue of bonds on the AIX
-- Funding will assist with remaining expansion plans and upgrade of feasibility study
-- Covid-19 resulted in various restrictions on travel which
disrupted and curtailed operations in a number of ways, including
slower progress on the feasibility study, delays to the link to an
adjacent high voltage power line, commissioning issues with newly
installed equipment and the shutdown of the hydrometallurgical
process line because of lack of specialist staff on site.
-- Production recommenced on the hydrometallurgical process on 1
June 2020 which, in spite of some continuing Covid-19 restrictions,
has resulted in a significant increase in production to a monthly
rate nearly three times that of the first quarter of 2019.
Nick Bridgen, CEO, commented: " In a year in which we achieved a
listing on the London Stock Exchange, Ferro-Alloy Resources also
made significant progress on the ground"
"During the year, a significant amount of new equipment was
installed. This should increase processing capacity to around 60
tonnes of vanadium pentoxide per month. We should build up to this
level as the new power-link comes online and Covid-19 restrictions
are further relaxed. This was achieved without any significant
stoppage of operations, with vanadium pentoxide production up
nearly 22% year-on-year and now up to a level nearly three times
higher than in the first quarter of 2019.
"As widely reported, the price of vanadium pentoxide fell from
extreme and exceptional highs of around US$30/lb at the end of 2018
to just over US$5/lb at the end of 2019. This fall has produced an
arithmetically inevitable squeeze on margins as raw-materials are
purchased on the basis of much higher prices than the subsequent
sales, and long delivery schedules mean that realised prices are
even lower than those prevailing at the time of shipment. However,
these effects of the downturn should even out in the long run as
prices go up and down. Prices have stabilised somewhat during 2020
to date, and currently sit a little lower than our long term
forecast price of around US$7.50/lb. Both today's market price and
the Company's long-term forecast price provide a very high margin
to the forecast cash cost of production of US$1.54/lb at the
Balasausqandiq vanadium project.
"Balasausqandiq is a truly extraordinary project with, I
believe, unparalleled potential. Due to its unique geology, the
project should be one of the world's largest and lowest cost
vanadium mines, meaning that it will be extremely profitable even
at a significant discount to the current vanadium price. With our
existing operation combined with a defined development plan for the
Balasausqandiq Vanadium Project, Ferro Alloy offers a fantastic
opportunity to gain exposure to the vanadium market where demand
continues to grow, particularly with the increasing usage of
vanadium redox flow batteries for renewable energy storage.
"I am very grateful for the support from existing and new
shareholders, and new bond holders, and with a firm base I look
forward to further progress being made over the coming months."
Annual Report
The Annual Report for the year ended 31 December 2019 will be
available on the Company's website shortly at
www.ferro-alloy.com
For further information, visit www.ferro-alloy.com or
contact:
Ferro-Alloy Resources Limited
Nick Bridgen, Chief Executive Officer info@ferro-alloy.com
Shore Capital (Broker)
Corporate Advisory: Toby Gibbs / Mark Percy / John More Tel: +44 (0)207 408 4090
Corporate Broking: Jerry Keen
VSA Capital (Financial Adviser) Tel: +44 (0)203 005 5000
Andrew Monk / Simon Barton
St Brides Partners Limited (Financial PR & IR Adviser)
Catherine Leftley / Priit Piip Tel: +44 (0)207 236 1177
Further information about Ferro-Alloy Resources Limited
The Company's operations are all located at the Balasausqandiq
Deposit in Kyzylordinskaya Oblast in the South of Kazakhstan.
Currently the Company has two main business activities:
a) the high grade Balasausqandiq Vanadium Project (the "Project"); and
b) an existing profitable vanadium concentrate processing operation (the "Existing Operation")
Balasausqandiq is a very large deposit, with vanadium as the
principal product, together with by-products of carbon, molybdenum,
uranium, rare earth metals, potassium, and aluminium. Owing the
nature of the ore, the capital and operating costs of development
are very much lower than for other projects.
A reserve on the JORC 2012 basis has been estimated only for the
first ore-body (of five) which amounts to 23 million tonnes, not
including the small amounts of near-surface oxidised material which
is in the Inferred resource category. In the system of reserve
estimation used in Kazakhstan the reserves are estimated to be over
70m tonnes in ore-bodies 1 to 5 but this does not include the full
depth of ore-bodies 2-5.
There is an existing concentrate processing operation at the
site, originally created from a 15,000 tonnes (ore) per year pilot
plant which was then adapted to treat low-grade concentrates and is
now in the process of being expanded and further adapted to treat a
wider variety of raw materials.
The development of the Balasausqandiq mine and processing plant
will be in two phases, the first of which will add a further 5,600
tonnes per annum of vanadium pentoxide to production, and then a
further 16,800 tonnes in the second phase, bringing the total
including the existing operation to 23,900. The strategy of the
Company is to develop both the Existing Operation and the Project
in parallel. Although they are located on the same site and use
some of the same infrastructure, they are separate operations.
CEO's report on operations for the year to 31 December 2019 and
2020 to date
Introduction
2019 was an eventful year for the Group. On 28 March 2019
Ferro-Alloy Resources Limited was admitted to listing on the London
Stock Exchange, raising $6.9m before expenses for the purpose of
expanding production from the existing process plant and upgrading
the feasibility study of the Balasausqandiq project to Western
Bankable standards.
In spite of the dual headwinds of a steep fall in the price of
vanadium and the Covid-19 crisis, the Company has made significant
progress, with production now running at a rate nearly three times
higher than in the first quarter of 2019 and capacity for
significantly more as power availability is increased and the
relaxation of Covid-19 government measures in Kazakhstan allow for
full utilisation.
Production
During 2019 a significant amoun t of new equipment was
installed. Although, for various reasons, this capacity has not yet
been fully utilised, the installed processing capacity of the plant
has now increased to around 60 tonnes of vanadium pentoxide per
month, depending on the grade of raw material. Full utilisation of
this capacity is being limited by Covid-19 issues and by the
availability of power which is currently being expanded, so the
full benefit of this increase in capacity has not yet been
realised. This significant increase in capacity was achieved
without any long-term stoppage of operations, with production in
2019 amounting to 152 tonnes, up 21.6% from 125 tonnes in 2018. All
production figures in this report refer to tonnes of vanadium
pentoxide contained in ammonium metavanadate, "AMV".
The increase in capacity has been achieved by the commissioning
of an entirely new pyrometallurgical production process aimed at
treating higher grade vanadium-containing secondary materials which
require an initial roasting step and a different leaching approach.
At the same time, significant improvements have been made to the
existing process line resulting in product quality improving.
The creation of the pyrometallurgical line accounted for the
largest proportion of investments in 2019. The first of two
roasting ovens had been purchased in 2018 and initial testing
guided the installation of a second oven in 2019 and the
installation of new leach equipment and press filters to greatly
improve and expand this operation. Production from this line was
limited during 2019 to around 20 tonnes whilst a single oven was in
operation and the line tested, but the pyrometallugrical line will
account for the bulk of the expansion from 2020 onwards.
Preparatory work has also been completed on the next stage of
expansion, planned to take capacity up to around 1,500 tonnes per
year. A new 1,000 m(2) building has been constructed to house the
decomposition oven to convert the AMV to vanadium pentoxide and an
electric arc furnace which will allow the production directly of
ferro-vanadium.
Work on the construction of a link, with appropriate transformer
capacity, to the adjacent high voltage power line has started. It
was planned to finalise it in the second quarter of 2020 but little
work has been done in the second quarter as a result of the
Covid-19 crisis. In the fourth quarter of 2019 we experienced
significant outages of power due to heavy winter conditions
affecting the existing line which resulted in high costs for
back-up power generation and reduced production. The new high
voltage power line will increase reliability, the cost of power
will reduce by half, and existing plant capacity can be better
utilised.
Production and shipments by quarter in 2019 were:
Quarter Production Shipments
(tonnes of vanadium (tonnes of vanadium
pentoxide contained pentoxide contained
in AMV) in AMV)
Q1 32,093 39,066
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Q2 39,037 40,551
--------------------- ---------------------
Q3 38,253 40,032
--------------------- ---------------------
Q4 43,073 35,701
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Total 152,456 155,350
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The Company's only product during the year was AMV, a precursor
product from which vanadium pentoxide is made by heating in a
dissociation oven. AMV is sold on the basis of the content of
vanadium pentoxide, less a discount to standard vanadium pentoxide.
All production figures are therefore quoted in terms of the content
of vanadium pentoxide.
Covid-19
Kazakhstan has been less affected by Covid-19 than many European
countries but nevertheless, there have been over 3 1,000 detected
cases and, sadly, over 140 people have died. With a population some
28% of that of the UK, this is a relatively small but still serious
outbreak. Kazakhstan was quick to respond and declared a state of
emergency on 16 March 2020. Measures taken to control the spread
have included a complete lock-down of several major cities, the
temporary closure of non-essential businesses and industries, and
an almost complete standstill on international and domestic travel
which is only recently beginning to be relaxed. International
flights are restarting from a limited number of countries but most
categories of visitors are still prohibited from entry.
The protection of the health and safety of our employees is our
paramount concern and the Company has implemented all the measures
recommended and required by the Kazakhstan authorities. So far,
none of our employees has been affected and our operations have
continued. However, the restrictions on travel have disrupted and
curtailed operations in a number of ways which have reduced output
and progress with our projects.
The Company's main operation in Kazakhstan is manned by two
teams of workers, each working for half of the month while residing
on site, followed by half of the month on leave. During the
lock-down it was not possible to rotate staff as usual, or to bring
some professional managers to site from their homes which in many
cases are long distances from the operation. Bringing some
subcontractors and their equipment to site was also impossible.
The Company responded to these challenges by keeping some
personnel on site for longer than their usual rotation but the more
technically difficult production circuit that treats iron
concentrates was closed in March 2020 and only reopened at the
beginning of June 2020 , resulting in a loss of production of
around 30 -33 tons of vanadium pentoxide.
The state of emergency was ended on 11th May 2020 and the
lock-down conditions were relaxed on the 3(rd) of June, with
industrial and construction sectors and most types of services
reopening. The Company brought the new rotation of staff on 1(st)
June 2020 and immediately re-started production from the iron
concentrates with the new team, so that production is now taking
place from both lines.
The overseas supplier of a recently installed major item of new
equipment is currently unable to visit to make commissioning
rectifications which is reducing current output.
Progress on our feasibility study has likewise been slowed.
Visits by specialists to site have not been possible, and although
there is no curtailment of the shipment of samples, the necessary
radiological examination in order to complete transport and import
documentation has not yet been possible. The relevant institute is
now slowly returning to work and we expect the samples to be
shipped shortly.
It is not possible to forecast the course of the Covid-19
outbreak, but Kazakhstan's early intervention and relatively strong
countermeasures have enabled an early relaxation of controls and we
are now returning to more efficient operations.
Production outlook
Production during the first quarter of 2020 amounted to 49.1
tonnes of vanadium pentoxide (in AMV), having been affected by the
closure of the iron-concentrates line and other Covid-19 issues, as
well as winter power outages. The iron-concentrates line was
restarted on 1 June 2020 so both lines are now in production. There
remain some difficulties in bringing appropriate staff and
contractors to site, so some limitations are expected to continue
for some time.
As mentioned above, a major piece of equipment that was recently
installed is not working optimally but the European suppliers are
unable to visit site to make repairs because of Covid-19
restrictions on entry of foreign specialists. The Company has
ordered the necessary parts independently of the manufacturers,
with delivery and installation expected over the next two
months.
Production from iron-concentrates is likely to stabilise at
around 11 or 12 tonnes per month and from the pyrometallurgical
line at an initial restricted rate of 15 - 20 tonnes per month,
rising over time as the new power-line is installed and the ongoing
commissioning repairs and the release from other Covid-19
restrictions allow a better use of the existing capacity. Depending
on the grade of raw material input, we expect to have the potential
to reach over 60 tonnes per month of overall production from both
lines.
As finance permits, the second major phase of expansion to the
existing plant will be re-started, taking the plant potential
capacity to 1,500 tonnes of vanadium pentoxide output per year.
Feasibility study
The Company has selected SRK international to produce the
upgraded feasibility study, and Coffey Geotechnics Limited, a Tetra
Tech group company, to carry out the processing part of the study.
Coffey's work is well underway but Covid-19 has prevented the
sending of samples outside Kazakhstan because it has been
impossible to obtain the required content and safety certificates
from government institutes which have closed. The relevant
institutes have now reopened and the work is in hand.
Vanadium prices
The price of vanadium pentoxide fell from extreme highs of
approaching $30/lb in November 2018 to around US$16/lb by the start
of 2019 and to just over US$5 by the end of 2019. The average was
around US$9 for 2019, down from US$18 in 2018. The unusually high
price in 2018 and early 2019 was caused by production cut-backs
during a long period of low prices combined with increases in
demand, particularly from the implementation by China of new
construction standards which necessitated much higher use of the
types of steels that require vanadium. The very high prices
resulted in some substitution with what was then cheaper niobium,
and some production increases, resulting in an overcorrection which
caused the price to fall below its expected long run level. The
price so far in 2020 has been more stable in the range $5 - $7 and
some forecasters are optimistic that prices will improve as
substitution by niobium is reversed and the high-cost production,
instigated by the exceptionally high prices, proves uneconomic to
sustain.
It is important to note that the high prices of 2018 and early
2019 were exceptional. The Company has been and continues to use a
long-term forecast price of around US$7.50/lb, a little higher than
today's level, but lower than external forecasters and other
vanadium project companies are using. Both the current market price
and our long-term estimate provide an exceptionally high margin to
the Company's forecast cash cost of production of US$1.54,
contained in the Competent Person's Report on our Balasausqandiq
project by GBM.
Covid-19 is likely to affect both world production and supply in
the short term, with no clear price-direction. Longer term, the
implementation of higher standards for construction steel
throughout the world and increasing use of other alloys using
vanadium are likely to increase demand for vanadium from its
traditional markets. The roll-out of vanadium redox flow batteries
for renewable energy storage, which was stalled by the
exceptionally high vanadium price in 2018 and 2019, is now expected
to resume and grow to be a very significant additional market for
vanadium.
Earnings and cash flow
The Group reported revenues of US$1.8m for the period compared
to US$4.2m in 2018, reflecting the considerable fall in vanadium
prices.
Revenue, and the corresponding trade receivable, are recognised
at the time of transfer of control to the customer but, as is
common in the industry, the final pricing determination is often
based on assay and prices after arrival of the goods at the port of
destination. Therefore, revenues recognised at the time of shipment
are subject to adjustment to prices prevailing up to four months
later. Typically, the customer makes a provisional payment based on
volumes, quantities and spot prices at the date of shipment and
makes a final payment once the product has reached its final
destination. As a result, when prices are rising, the final receipt
can exceed the initial revenue recorded and vice versa. Where
prices decrease significantly, this can result in the Company being
in a net payable position if a downward adjustment to the
consideration exceeds the provisional payment received.
Amounts receivable from or payable to customers for sales which
are still subject to final price determination are initially
recorded at the estimated fair value at the time of shipment, with
changes in fair value recorded as other revenue. Changes in this
fair value during the year and, for those sales where the final
determination has not been made, fair values assessed on the basis
of prices prevailing at the year end, reduced revenue by US$0.6m to
US$1.8m (2018: by US$0.3 to US$4.2m). In periods of rising prices
this adjustment would be expected to be positive and in the long
run such pluses and minuses can be expected to even out. The final
price determinations made after the end of 2019 in respect of sales
made before the end of the year were not significantly different
from the fair value assessed at the end of the year.
US$000 2019 2018
Revenue from shipments recorded
at the price at time of dispatch 2,391 4,543
------- ------
Adjustments to revenue after
final price determination
and fair value changes (550) (323)
------- ------
Revenue 1 ,841 4,220
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Cost of sales increased to US$3.2m from US$1.7m in 2019
primarily reflecting the increased volumes (+22% impact) and
increases in the price of the vanadium concentrate purchased at the
high prices prevailing in 2018 and early 2019 (+61% impact). The
largest part of cost of sales is the purchase of raw materials, the
price for which is determined as a percentage of the value of the
content of vanadium at prices prevailing at the time of purchase.
Since such materials are purchased up to several months before
processing, and sales price determination is made several months
after shipment, the prices used as a basis for the calculation of
raw material prices were significantly higher than the price used
as a basis for product sales. This means that the operating margin
was squeezed as prices fell in 2019. Again, during times of rising
prices this effect would be reversed and is likely to even out in
the long term as prices move up and down.
Administrative expenses of US$1. 8 m (2018: US$1.3m) principally
comprised employee costs, listing costs, audit, listing costs and
professional services. The professional costs directly relating to
the listing on the London Stock Exchange amounted to US$0.304m
(2018: US$0.164m).
Net finance cost was US$0. 18 3m (2018: net finance costs
US$0.036m) as a result of the tenge devaluation and sales in USD
and RUR.
The Group made a loss before tax of US$ 3 . 34 m (2018: net
profit before tax of US$2.96m).
Net cash outflows from operating activities totalled US$2.5m
(2018: US$1.3m inflow) principally reflecting the effects of
decreases in vanadium prices as described above and listing
costs.
Net cash outflows from investing activities included US$2.3m
(2018:US$0.9m) of capital expenditure associated with expanding the
processing operation.
Net cash inflows from financing activities comprised
subscriptions for shares amounting to US$6.9m (before costs),
yielding US$6.6 m net of costs, arising from the placing at the
time of the listing of the Companies shares on the London Stock
Exchange on 28 March 2019 .
The Group had cash of US$0.648m at 31 December 2019 (2018:
US$0.892m).
Key performance indicators
The Group is in a period of development and its current
operations, the processing of bought-in secondary
vanadium-containing materials for extraction of vanadium, are
relatively small in comparison with the main objective of the Group
to develop the Balasausqandiq mine and processing facility.
Moreover, the current operations are themselves undergoing a
significant expansion which means that operations are not in a
steady state capable of meaningful inter-period comparisons. The
directors are therefore of the opinion that Key Performance
Indicators may be misleading if not considered in the context of
the development of the operation as a whole for which the
information for shareholders is better given in a descriptive
manner than in tabular form.
Furthermore, the existing processing business of the company is
complex and the business model has been developed to allow maximum
flexibility in the type of raw-materials treated so that market
variations in raw material prices can be moderated by the ability
to select raw materials which may be more profitable to treat
notwithstanding they be of lower grade and result in a lower level
of production. Nevertheless, the directors consider that the main
indicator of performance, although subject to interpretation as
described above, is the level of production. This has been dealt
with in the section "Production" above.
Environmental matters are of paramount importance to the Group.
Up to this date most of the residues from the main raw materials
treated have been used for the construction of evaporation ponds
and the Company has started to sell the waste products from the
high grade raw-materials as a low-grade nickel concentrate. There
are opportunities for the sale of future residues from the
low-grade iron-concentrates as well, so that the aim of the Company
is to have no significant residues remaining on site from the
current operation. No significant mining operations have yet been
carried out but plans are being developed at an early stage to
ensure the highest standards for site rehabilitation at the sites
of future mining.
Balance sheet review
Total non-current assets increased to US$5. 089 m from US$2.773m
principally due to the rise in capital expenditure, together with
an increase in VAT receivable and prepayments for equipment. The
increase in prepayments for equipment is largely related to
prepayments made for construction of the new Power Line
(US$1m).
The increase in VAT receivables is related to an increase in the
import of raw materials resulting from the increase of production,
and to the increase in capital investments in equipment.
Current assets increased from US$1.95m to US$2.47m, principally
reflecting additional inventories due to higher levels of raw
materials and finished goods on site at the year end. The increase
in inventories is related to the increase in production as well as
building raw materials at the end of autumn in order to have
sufficient stock during winter months when transportation is more
complicated.
Current liabilities decreased to US$0.7m from US$1.2m primarily
as the prior year included a US$0.3m payables at fair value through
profit or loss ("FVTPL") as a result of the sharp reduction in
prices between shipments in Q4 2018 and 31 December 2018 which
reduced to US$59,000 for the current period.
Development plan - existing operation
Throughout 2019 the Company has been working towards a major
expansion of the existing processing operation to around 1,500
tonnes per year of production of vanadium pentoxide. Although
significant steps have been taken towards this figure, progress on
the remaining capacity has been delayed, principally by the
Covid-19 situation. Whilst all the essential technologies in
hydrometallurgical and pyrometallurgical lines are now already in
operation, expansion to this level will require finalisation of the
connection to the high voltage power line, installation of the
dissociation oven to convert AMV into vanadium pentoxide and
installation of the electrometallurgical line for the production of
ferro-vanadium.
Balasausqandiq
In parallel with existing operations discussed above, and using
the resulting cash flows, the Company plans to continue development
of the Balasausqandiq vanadium deposit. The western bankable
feasibility study has been initiated with leading consulting
companies in the industry. The current study is for Phase 1 of the
development plan, including construction of a process facility to
treat one million tonnes per year of ore, producing some 5,600
tonnes per year of vanadium pentoxide, plus by-products which are
likely to amount to around a third of revenue. A subsequent
expansion is planned which will increase vanadium pentoxide
production to 22,400 tonnes per year, plus by-products, but this
will not be included in the currently ongoing feasibility
study.
Although the Balasausqandiq mine and processing plant will be
separate and independent from the existing operation, they will
operate from the same site and much of the infrastructure work
which forms part of the current development plan will benefit both
operations.
Corporate
On 28 March 2019 the Company was admitted to listing on the
London Stock Exchange, raising GBP5.2m gross, equivalent to
US$6.9m, or US$6.6m net of issue costs. The Company listed on the
new Astana International Stock Exchange (AIX) on 6 January 2020 and
consequently delisted from the Kazakhstan stock exchange (KASE) on
21 February 2020.
On 6 April 2020 the Company issued 500,000 shares to a provider
of financial services as payment for their services. On 14 May 2020
the Company issued 3,846,154 shares to raise GBP0.25m, and on 5
June 2020 the Company issued unsecured corporate bonds with an
interest rate of 7.5% to raise a further US$0.3m.
Description of principal risks, uncertainties and how they are
managed
(a) Current processing operations:
Current processing operations make up a small part of the
Group's expected future value but provide useful cash flows in the
near term and allow the group to gain valuable experience of the
vanadium industry. The principal risk of this operation is the
price of its product, vanadium. The price of vanadium pentoxide is
volatile and has risen from historic lows at the beginning of 2016
to a near-record high of nearly US$30/lb near the end of 2018.
Currently, the price of vanadium pentoxide is at around US$6/lb
which is a little less than the ten-year average to date. Most
forecasters anticipate that vanadium will be in deficit in the
short to medium term, resulting in some recovery in current prices,
and will return to the long-run marginal cost of production in the
longer term which may be substantially higher. The Company acquires
raw-materials at a cost that is related to the price of vanadium so
there is a natural hedge but there is a risk of changes in vanadium
prices between the time of acquisition of the raw materials and
sale of the product which cannot be entirely avoided.
The processing operation is also dependent on the continuing
availability of raw materials which are subject to competition from
other processors. The Company is mitigating this risk by
positioning itself to treat a wide variety of potential
raw-materials and maintaining low treatment costs.
The level of profitability of the current processing operation
is also dependent on production levels sufficient to generate
profits to cover fixed overheads. The level of production could be
impacted by unanticipated production difficulties, power outages
and raw-material delivery limitations. The Company aims to keep a
stockpile of raw-materials and has installed a larger capacity
generator to maintain production during outages.
The Company is currently carrying out an expansion project which
will lower the average cost of production and as part of this
project, will be connecting to a larger capacity and more reliable
power supply as described above. Although a substantial part of
this expansion has already been completed, the plans include
completion of the link to the adjacent high voltage powerline and
the installation of an electric arc furnace. The full benefits of
the expansion depend upon the raising of sufficient finance and the
successful completion of these projects.
(b) Covid-19:
There remains a risk that the Covid-19 crisis worsens in
Kazakhstan. This could cause further disruption to supply-lines,
staffing and subcontractors as has already occurred, but it is also
possible that a case might arise on site requiring a temporary
shutdown of operations. In addition, Covid-19 may impact the
availability of finance or the terms which are available. Whilst it
is not possible to guard against this, the Company continues to
take all recommended precautions and will aim to maintain higher
than normal stores of essential supplies on site. In terms of
funding, cash flows are monitored on a continuous basis to enable
the Company to take proactive measures to safeguard liquidity.
(c) Risks associated with the developing nature of the Kazakh economy:
According to the World Bank Kazakhstan has transitioned from
lower-middle-income to upper-middle-income status in less than two
decades. Kazakhstan's regulatory environment has similarly
developed and the Company believes that the period of rapid change
and high risk is coming to an end. Nevertheless, the economic and
social regulatory environment continues to develop and there remain
some areas where regulatory risk is greater than in developed
economies.
(d) Balasausqandiq project:
The Balasausqandiq project is a much larger contributor to the
Group's value and is primarily dependent on long term vanadium
prices. The Company's long-term assumption is US$7.50/lb of
vanadium pentoxide, but the forecast low cost of production means
that the project would remain profitable at lower price levels.
The project is also dependent on raising finance to meet capital
costs anticipated to amount to circa US$100m for the first phase.
Raising this money will be dependent on the successful outcome of
the western bankable feasibility study which is ongoing. The
favourable financial and other characteristics of the project
determined by studies so far completed give the directors
confidence that the outcome of the study will be successful.
Initial discussions with the providers of finance, including with
the Development Bank of Kazakhstan for which our project has passed
through initial screening, have been encouraging.
Signed on behalf of the Board of Directors on
27 June 2020
Consolidated Statement of Profit or Loss and Other Comprehensive
Income for the year ended 31 December 2019
2019 2018
$000 $000
------------- ------------------------
Revenue from customers (pricing
at shipment) 2,391 4,543
Other revenue ( adjustments
to price after delivery and
fair value changes) (550) (323)
Total revenue 1,841 4,220
Cost of sales (3,178) (1,688)
------------- ------------------------
(Loss)/gross profit ( 1 , 337 ) 2,532
Impairment reversal - 1,775
Other income 70 10
Administrative expenses (1,841) (1,271)
Distribution expenses ( 42 ) ( 11 )
Other expenses (9) (35)
------------- ------------------------
(Loss)/profit from operating
activities (3,1 5 9 ) 3,000
------------- ------------------------
Net finance income/(costs) (183) (36)
------------- ------------------------
(Loss)/profit before income
tax ( 3 , 342 ) 2,964
============= ========================
Income tax - (1)
(Loss)/profit for the period ( 3 , 342 ) 2,963
Other comprehensive income
(loss)
Items that may be reclassified
subsequently to profit or loss
Exchange differences arising
on translation of foreign operations 31 (293)
------------- ------------------------
Total comprehensive (loss)
income for the period (3,311) 2,670
============= ========================
(Loss)/earnings per share (basic
and diluted), US$ (0.01 1 ) 0.009
------------- ------------------------
Consolidated Statement of Financial Position as at 31 December
2019
31 December 31 December
2019 2018
$000 $000
---------------------- -----------
ASSETS
Non-current assets
Property, plant and equipment 3,2 06 2,203
Exploration and evaluation
assets 59 59
Intangible assets 24 25
Long-term VAT receivable 652 237
Prepayments 1,148 249
Total non-current assets 5,089 2,773
---------------------- -----------
Current assets
Inventories 1,750 929
Trade and other receivables 35 38
Prepayments 38 91
Cash and cash equivalents 648 892
Total current assets 2,47 1 1,950
---------------------- -----------
Total assets 7,560 4,723
====================== ===========
EQUITY AND LIABILITIES
Equity
Share capital 33,965 27,330
Share premium - -
Additional paid-in capital 397 380
Foreign currency translation
reserve ( 2 ,934) (2,965)
Accumulated losses (24,617) (21,275)
---------------------- -----------
Total equity 6,811 3,470
---------------------- -----------
Non-current liabilities
Provisions 64 60
Total non-current liabilities 64 60
---------------------- -----------
Current liabilities
Trade and other payables 6 26 929
Payables at FVTPL 59 264
---------------------- -----------
Total current liabilities 685 1,193
---------------------- -----------
Total liabilities 7 49 1,253
---------------------- -----------
Total equity and liabilities 7,560 4,723
====================== ===========
Consolidated Statement of Changes in Equity for the year ended
31 December 2019
Additional Foreign currency
Share Share paid in capital translation Accumulated
capital premium $000 reserve losses Total
$000 $000 $000 $000 $000
-------- -------- ---------------- ---------------- ------------------ --------
Balance at 1 January
2018 15 26,904 380 (2,672) (24,238) 389
Profit for the year - - - - 2,963 2,963
Other comprehensive
expense
Exchange differences
arising on
translation
of foreign operations - - - (293) - (293)
-------- -------- ---------------- ---------------- ------------------ --------
Total comprehensive
income (loss)
for the year - - - (293) 2,963 2,670
-------- -------- ---------------- ---------------- ------------------ --------
Transactions with
owners, recorded
directly in equity
Shares issued (net of
costs U$6,000) 245 166 - - - 411
Reorganisation of
share capital to
nil par value 27,070 (27,070) - - - -
-------- -------- ---------------- ---------------- ------------------ --------
Balance at 31 December
2018 27,330 - 380 (2,965) (2 1 ,275) 3,470
======== ======== ================ ================ ================== ========
Balance at 1 January
2019 27,330 - 380 (2,965) (21,275) 3,470
Loss for the year - - - - (3,342) (3,342 )
Other comprehensive
income
Exchange differences
arising on
translation
of foreign operations - - - 31 - 31
-------- -------- ---------------- ---------------- ------------------ --------
Total comprehensive
income (loss) ( 3 , 342
for the year - - - 31 ) (3,311)
-------- -------- ---------------- ---------------- ------------------ --------
Transactions with
owners, recorded
directly in equity
Shares issued, net of
issue costs
(note 20) 6,635 - - - - 6,635
Warrants issued - - 17 - - 17
-------- -------- ---------------- ---------------- ------------------ --------
Balance at 31 December
2019 33,965 - 397 ( 2 ,934) (24,6 17 ) 6,811
======== ======== ================ ================ ================== ========
Consolidated Statement of Cash Flows for the year ended 31
December 2019
2019 2018
$000 $000
--------- -------
Cash flows from operating activities
( 3 , 342
(Loss)/profit for the year ) 2,9 6 3
Adjustments for:
Depreciation and amortisation 4 28 46
Reversal of impairment of property,
plant and equipment and intangible
assets - (1,613)
Reversal of impairment of exploration
and evaluation assets - (162)
Loss on write-off of plant, property
and equipment (18) -
Write-down of inventories to net
realisable value and obsolescence 208 11
Expenses on credit loss provisions
and impairment of prepayments - 21
Issuance of call option 17 -
Income tax - 1
Net finance costs / (income) 18 3 36
Cash from operating activities
before changes in working capital (2,524) 1,303
Change in inventories (989) ( 4 51)
Change in trade and other receivables ( 4 4 2 ) ( 241 )
Change in prepayments 5 3 (8 7)
Change in trade and other payables ( 3 69) 320
Change in payables at FVTPL ( 2 0 5 ) 2 64
--------- -------
(4, 4 7 6
Net cash from operating activities ) 1,108
--------- -------
Cash flows from investing activities
Acquisition of property, plant
and equipment (2,337) (886)
Acquisition of intangible assets (1) (2)
Proceeds from disposal of property,
plant and equipment 18
Net cash used in investing activities (2,320) (888)
--------- -------
Cash flows from financing activities
Proceeds from issue of share capital 6,939 417
Transaction costs on shares subscription (304) (6)
Net cash from financing activities 6,635 41 1
--------- -------
Net increase in cash and cash
equivalents ( 161 ) 631
Cash and cash equivalents at the
beginning of year 892 267
--------- -------
Effect of movements in exchange
rates on cash and cash equivalents ( 83 ) (6)
--------- -------
Cash and cash equivalents at the
end of year 648 89 2
========= =======
Notes to the consolidated financial statements for the year
ended 31 December 2019
The financial information for the year ended 31 December 2019
and 31 December 2018 set out in this announcement does not
constitute the Company's statutory financial statements for the
year ended 31 December 2019 but is extracted from the audited
financial statements for those years. The 31 December 2018 accounts
have been delivered to the Registrar of Companies. The statutory
financial statements for 2019 will be delivered to the Registrar of
Companies in due course. The auditors have reported on the
financial statements for the year ended 31 December 2019 and their
report was unqualified but did contain a material uncertainty in
relation to going concern.
1 Basis of preparation
Ferro-Alloy Resources Limited (the "Company") is incorporated in
Guernsey and has its registered address at Noble House, Les
Baissieres, St. Peter Port, Guernsey, GY1 2UE. The consolidated
financial statements for the year ended 31 December 2019 comprise
the Company and the following subsidiaries (together referred to as
the "Group"):
Company's
share in charter
Company Location capital Primary activities
------------------- ---------------- ------------------ ----------------------------
Carries out the treasury
Ferro-Alloy British and finance activities
Products Limited Virgin Islands 100% for the Group
Manages processing
Energy Metals activity and performs
Limited UK 100% management service
Vanadium Products Performs services
LLC Kazakhstan 100% for the Group
Production and sale
Firma Balausa of vanadium and associated
LLC Kazakhstan 100% by-products
Balausa Processing Development of processing
Company LLC Kazakhstan 100% facilities
(a) Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRSs").
(b) Basis of measurement
The consolidated financial statements are prepared on the
historical cost basis except as otherwise noted below.
(c) Functional and presentation currency
The national currency of Kazakhstan is the Kazakhstan tenge
("KZT) which is also the functional currency of the Group's
operating subsidiaries. The functional currency of the Company is
US$.
(d) Going concern
The consolidated financial statements are prepared in accordance
with IFRS on a going concern basis.
The Directors have reviewed the Group's cash flow forecasts for
at least 12 months from the date of approval of the financial
statements, together with sensitivities and mitigating actions. In
addition, the Directors have given specific consideration to the
risks and uncertainties associated with the COVID-19 pandemic and
considered reverse stress test scenarios to assess the potential
impact on liquidity in line with recent guidance.
The Company completed a share placing in May 2020 to raise
GBP250,000 before expenses and most recently raised US$300,000
before expenses through the issue of unsecured corporate bonds
which mature in June 2023, with the right to receive early
repayment after a minimum period of 12 months, and bear a 7.5%
coupon. In addition, the Group's forecasts indicate that at current
vanadium pentoxide prices and the planned production levels
following the relaxation of COVID-19 restrictions in Kazakhstan
that the Group will generate sufficient cash flows to meet
operational costs and maintain liquidity. Whilst the Group plans to
continue its expansion of the existing processing facilities the
required capital expenditure, which is discretionary or can be
deferred without significant penalty, will require additional
funding. Accordingly, the Directors are progressing proposals to
secure such funding.
Notwithstanding that the current cash position and forecast
operational cash flow in the base case and the relatively low
number of COVID-19 cases and fatalities to date in Kazakhstan
compared to other countries, the potential impact on the Group of
the pandemic remains inherently uncertain. There is potential for
further government restrictions if the pandemic escalates in
Kazakhstan, which may again impact the Group's operations including
supply chain disruption, mine site workforce rotations and travel
to the mine site in particular, together with the potential for
volatility in commodity prices. Stress test scenarios indicate that
in the event of a sustained further period of restrictions
impacting production levels or significant reduction in vanadium
pentoxide prices additional funding would be required.
After review of these forecasts the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future based on the
recent funds raised and the operational cash flow generation of the
processing operations, whilst in the event of further impacts from
COVID-19 the Directors anticipate being able to raise funds if
required given the value contained in the Group's assets and the
expansion plans. Accordingly, the Directors continue to adopt the
going concern basis in preparing the consolidated financial
statements. However, at the date of approval of these financial
statements, the potential future impact of COVID-19 and the
resulting requirement for additional funding should such adverse
scenarios materialise indicate the existence of a material
uncertainty which may cast significant doubt about the Group's
ability to continue as a going concern and therefore it may be
unable to realise its assets and discharge its liabilities in the
normal course of business. The financial statements do not include
the adjustments that would result if the Group was unable to
continue as a going concern.
2 Use of estimates and judgements
Preparing the financial statements requires management to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Carrying value of processing operations
Given the decrease in vanadium pentoxide prices in the period,
the Directors have tested the processing operations PP&E for
impairment at 31 December 2019 (note 5). In doing, so, net present
value cash flow forecasts were prepared using the fair value less
cost to develop method which required estimates including vanadium
pentoxide prices, production including the impact of ongoing and
planned expansion to 1,500tpa and convert current AMV production to
vanadium pentoxide and ferro-vanadium, together with costs and
discount rate. Key estimates included:
-- Production volumes of 12 tons per month of vanadium pentoxide
from hydrometallurgical line, 48 tons per month of vanadium
pentoxide from pyrometallurgical line and 68 tons per month of
vanadium pentoxide from electrometallurgical line.
-- Prices of US$5.35/lb in 2020, US$6.75/lb in 2021 and
thereafter, reflecting management estimates having consideration of
market commentary less a discount, and lower than the US$7.50/lb
used by the Company as a long-term assumption for other planning
purposes.
-- Further capital development costs of US$5m.
-- Discount rate of 10% post tax in real terms.
Fair value of trade receivables and payables classified at fair
value less profit and loss (note 17, 24 and 25 of full audited
financial statements)
The consideration receivable in respect of certain AMV sales for
which performance obligations have been satisfied at year end and
for which the Group has received prepayment under the terms of the
sale agreements, remain subject to pricing adjustments with
reference to market prices in the month following arrival at the
port of final destination. Under the Group's accounting policies,
the fair value of the consideration is determined and the remaining
receivable is adjusted to reflect fair value, or, if the final
estimated consideration is lower than the amounts received prior to
the year end, a payable at FVTPL is recorded. In the absence of
forward market prices for the commodity, management estimated the
forward price based on: a) spot market prices for vanadium
pentoxide at 31 December 2019 less applicable deductions for AMV;
b) foreign exchange rates; c) risk free rates and d) carry costs
when material.
As at 31 December 2019 the Group recorded trade receivables at
fair value of US$0.030m (2018: US$0,021m). As at 31 December 2019
the Group recognised a payable at FVTPL of US$0.059m (2018:
US$0.264m).
Inventories (note 7)
The Group holds material inventories which are assessed for
impairment at each reporting date. The assessment of net realisable
value requires consideration of future cost to process and sell and
spot market prices at year end less applicable discounts. The
estimates are based on market data and historical trends.
Reversal of impairment of exploration and evaluation assets in
2018 (note 4 and 6)
The Group historically impaired its exploration and evaluation
assets as a result of a lack of clear plans for future exploration
and development and the vanadium price environment at the time. As
at 31 December 2018, management identified triggers for the
potential reversal of this impairment given the advanced stage of
the proposed listing on the London Stock Exchange, associated plans
for development of its vanadium deposit, the results of an
independent Competent Person's Report which estimates ore resources
of 24m tonnes, a net present value of US$2 billion for the project,
and the improved pricing environment. This assessment required
judgment. The recoverable value of the project is considered to
exceed the carrying value post impairment reversal based on the
Competent Person's Report. In determining the fair value less cost
to develop of the vanadium deposit, significant estimates include
resources and future production, vanadium prices of US$7.50/lb long
term, operating costs, capital development and discount rates.
Given the implied net present value there are no reasonably
possible changes in these estimates that would result in the
recoverable amount being less than the carrying value. Accordingly,
a reversal of impairment was recorded as detailed in note 4.
Reversal of impairment of PP&E in 2018 (note 4 and 5)
The Group historically impaired PP&E associated with its
processing operations given uncertainty regarding the future plans
for the plant and the vanadium pricing environment at the time.
As at 31 December 2018, management identified triggers for
potential reversal of impairment given the advanced stage of the
proposed listing on the London Stock Exchange, associated expansion
of the stand-alone processing operation, the results of an
independent Competent Person's Report which estimated a net present
value on a fair value less cost to develop significantly in excess
of historical cost for the separate processing operation together
with the improved pricing environment. This assessment required
judgment. The recoverable value of the project was considered to
exceed the carrying value post impairment reversal based on the
Competent Person's Report. In determining the fair value less cost
to develop of the processing operation key estimates at 31 December
2018 included:
-- Production volumes of 12 tonnes per month of vanadium
pentoxide (in AMV) at the beginning of 2019 rising to 125 tonnes
per month by mid-2020.
-- Prices of US$13/lb in 2019, US$10/lb in 2020 and US$7.50/lb
thereafter, reflecting management estimates having consideration of
market commentary and risk factors.
-- Capital development costs of US$10m.
-- Discount rate of 10% post tax in real terms.
Given the implied net present value there were no reasonably
possible changes in these estimates that would result in the
recoverable amount being less than the carrying value. Accordingly,
a reversal of impairment was recorded as detailed in note 4.
3 Revenue
2019 2018
$000 $000
------ ------
Revenue from sales of vanadium
products 2,376 4,54 0
Sales of gravel and waste rock 15 3
Total revenue from customers 2,391 4,543
------ ------
Other revenues - change in fair
value of customer contract (550) (323)
====== ======
1,841 4,220
====== ======
Vanadium products
Under certain sales contracts the single performance obligation
is the delivery of AMV to the designated delivery point at which
point possession, title and risk on the product transfers to the
buyer. The buyer makes an initial provisional payment based on
volumes and quantities assessed by the Company and market spot
prices at the date of shipment. The final payment is received once
the product has reached its final destination with adjustments for
quality / quantity and pricing. The final pricing is based on the
historical average market prices during a quotation period based on
the date the product reaches the port of destination and an
adjusting payment or receipt will be made to the initially received
revenue. Where the final payment for a shipment made prior to the
end of an accounting period has not been determined before the end
of that period, the revenue is recognised based on the spot price
that prevails at the end of the accounting period.
Other revenue related to the change in the fair value of amounts
receivable and payable under the sales contracts between the date
of initial recognition and the period end resulting from market
prices are recorded as other revenue. Refer to note 12, 24 and 25
of the full audited financial statements for details of trade
receivables and payables at FVTPL recorded in 2019 and 2018.
4 Other income and reversal of impairment
2019 2018
$000 $000
------ ------
Reversal of impairment - 1,775
Other 70 10
------ ------
70 1,78 5
====== ======
Refer to note 2 for details of the impairment reversals in
2018.
5 Property, plant and equipment
Plant and Construction
Land and buildings equipment Vehicles Computers Other in progress Total
$000 $000 $000 $000 $000 $000 $000
------------------ ---------- -------- --------- ----- ------------ --------
Cost
Balance at 1 January
2018 1,853 2,015 364 13 42 202 4,489
Additions 9 131 1 2 3 1 3 47 350 673
Disposals - ( 27 ) - - (4) (17) (48)
Foreign currency
translation
difference (2 5 1) (283) ( 61 ) (3) (10) ( 61 ) (669)
------------------ ---------- -------- --------- ----- ------------ --------
Balance at 31 December
2018 1, 61 1 1, 8 36 426 2 3 7 5 474 4, 4 45
================== ========== ======== ========= ===== ============ ========
Balance at 1 January
2019 1,611 1,836 426 23 75 474 4,445
Additions 2 183 157 1 5 28 1,053 1,438
Transfers 62 28 - - - (90) -
Disposals - ( 48 ) - - - - (48)
Foreign currency
translation
difference 12 1 5 4 1 1 8 41
------------------ ---------- -------- --------- ----- ------------ --------
Balance at 31 December
2019 1, 6 87 2,01 4 587 3 9 104 1,4 4 5 5,87 6
================== ========== ======== ========= ===== ============ ========
Depreciation
Balance at 1 January
2018 1,8 53 2,01 5 295 13 32 202 4,4 10
Depreciation for the
period - 10 29 1 5 - 4 5
Disposals - (27) - - - - ( 27 )
Reversal of impairment (1,022) (393) - - - (175) (1,590)
Foreign currency
translation
difference (250) ( 2 70) ( 42 ) (2) ( 5 ) ( 2 7) ( 5 96)
------------------ ---------- -------- --------- ----- ------------ --------
Balance at 31 December
2018 581 1 , 335 282 12 3 2 - 2 , 242
================== ========== ======== ========= ===== ============ ========
Balance at 1 January
2019 581 1 , 335 282 12 32 - 2 , 242
Depreciation for the
period 53 312 4 6 6 9 - 426
Transfer - - - - - - -
Disposals - (14) - (1) (2) - (17)
Foreign currency
translation
difference 5 1 2 2 - - - 19
------------------ ---------- -------- --------- ----- ------------ --------
Balance at 31 December
2019 639 1 , 645 3 30 17 39 - 2 , 6 70
================== ========== ======== ========= ===== ============ ========
Carrying amounts
At 1 January 2018 - - 69 - 10 - 79
================== ========== ======== ========= ===== ============ ========
At 31 December 2018 1,030 501 144 11 43 474 2,203
================== ========== ======== ========= ===== ============ ========
At 31 December 2019 1,048 369 2 57 22 65 1,445 3,2 06
================== ========== ======== ========= ===== ============ ========
During 2019 depreciation expense of US$394 thousand (2018: US$24
thousand) has been charged to cost of sales, excluding cost of
finished goods that were not sold at year-end, US$26 thousand
(2018: US$ 15 thousand) - to administrative expenses, and US$6
thousand has been charged to cost of finished goods that were not
sold at the year-end (2018: US$6 thousand). Construction in
progress relates to upgrades to the processing plant associated
with the expansion of the facility.
6 Exploration and evaluation assets
The Group's exploration and evaluation assets relate to
Balasausqandiq deposit. During the year ended 31 December 2019 the
Group did not capitalise any exploration and evaluation assets (in
2018: US$Nil). As at 31 December 2019 the carrying value of
exploration and evaluation assets was US$0.059m (2018: US$0.059m).
In 2018 the Group reversed an impairment of US$0.16m with the
movement for the year net of a change in estimate on provisions for
rehabilitation.
7 Inventories
31 December 31 December
2019 2018
$000 $000
----------- -----------
Raw materials and consumables 1,575 527
Finished goods 172 184
Work in progress - -
Goods in transit 3 218
1,750 929
=========== ===========
8 Prepayments
31 December
2019 31 December 2018
$000 $000
----------- ----------------
Non-current
Prepayments for equipment 1,148 249
----------- ----------------
1,148 249
=========== ================
Current
Prepayments for goods and services 38 91
----------- ----------------
38 91
=========== ================
9 Equity
(a) Share capital and share premium
Number of shares unless otherwise stated Ordinary shares
31 December 31 December
2019 2018
----------- -------------------------
Par value - -
Outstanding at beginning of
year 305,471,087 1,523,732
Shares issued prior to share
split - 1,493
Share reorganisation (split) - 305,045,000
- 426,087
Shares issued 7,507,761 -
-----------
Outstanding at end of year 312,978,848 305,471,087
=========== =========================
Ordinary shares
All shares rank equally. The holders of ordinary shares are
entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company.
In July 2018 the Company's shareholders voted by ordinary
resolution to subdivide each share into 200 new shares of no par
value so that the listed shares will be of a value within the
normal range for listing companies. As a result the share premium
was transferred to share capital in 2018.
On 28 March 2019 the Company was admitted to listing and on the
same day issued the following ordinary shares in a placing carried
out simultaneously on the London Stock Exchange ("LSE") and the
Kazakhstan Stock Exchange ("KASE"):
Price per share, Subscription
Date No of shares $ amount, $
----------- ------------ ---------------- ------------
London Stock Exchange 28.03.2019 7,492,853 0.916384 6,866,331
Kazakhstan Stock
Exchange 28.03.2019 14,908 0.916384 13,661
------------ ------------ ---------------- ------------
7,507,761 6,879,992
============ ================ ============
Costs of US$304 thousand were incurred as transaction fees on
the share issues and were recorded against the share capital.
On 14 May 2020 the Company has allotted 3,846,154 ordinary
shares of no par value by way of a direct subscription into the
Company for cash at a price of 6.5 pence per share, raising a total
of GBP250,000.
Reserves
Share capital: Value of shares issued less costs of issuance.
Prior to the share restructuring share capital related to the
nominal value of shares issued.
Share premium: Amounts subscribed for shares in excess of
nominal value less share issue costs, prior to the share
restructuring. Subsequent to share restructuring no share premium
applies.
Additional paid in capital: Amounts due to shareholders which
were waived.
Foreign currency translation reserve: Foreign currency
differences on retranslation of results from functional to
presentational currency and foreign exchange movements on
intercompany balances considered to represent net investments which
are permanent as equity.
Accumulated losses: Cumulative net losses.
(b) Dividends
No dividends were declared for the year ended 31 December
2019.
(c) (Loss) earnings per share (basic and diluted)
The calculation of basic and diluted (loss) / earnings per share
has been based on the following loss attributable to ordinary
shareholders and weighted-average number of ordinary shares
outstanding.
(i) Loss attributable to ordinary shareholders (basic and diluted)
2019 2018
$000 $000
----------- ------
Loss for the year, attributable
to owners of the Company ( 3 , 342 ) 2,963
----------- ------
Loss attributable to ordinary shareholders ( 3 , 342 ) 2,963
=========== ======
(ii) Weighted-average number of ordinary shares (basic and diluted)
Shares 2019 2018
------------- -----------
Issued ordinary shares at 1 January
(after subdivision) 305,471,0 87 304,746,400
Effect of shares issued (weighted) 5 ,7 18 , 240 366,750
Weighted-average number of ordinary
shares at 31 1 , 18 9,
31 December 327 305,113,150
============= ===========
Earnings (loss) per share of common
stock attributable to the Company
(basic and diluted) (0.01 1 ) 0.009
------------- -----------
On 28 March 2019 the Company issued warrants to its lawyers as
part of the remuneration for services provided in relation to the
Company listing on the London Stock Exchange. See note 10. The
warrants are anti-dilutive given the loss for the year.
10 Share-based payments and warrants
During 2018, the Group had an arrangement whereby the Company's
non-executive directors ("NEDs") and a part-time employee were
remunerated for their services by the issue of the number of the
Company's ordinary shares equal in value, taking the value to be
the latest price at which shares were subscribed for by third
parties, to the agreed remuneration. In 2018, 393 shares were
issued prior to the subdivision of the company's shares, equivalent
to 78,600 shares post subdivision, and 52,174 shares were issued
after the subdivision. The cost of services received from NEDs and
the part-time employee was measured as a product of the number of
shares issued and the fair value of those shares. The fair value of
shares was determined by reference to the consideration received
for share subscriptions from third-party subscribers during the
year being US$75,195 in 2018. This arrangement was not continued in
2019.
As a result, the Group recognised an increase in share capital
of US$ 75 thousand in 2018 as administrative expenses in the
statement of profit or loss and other comprehensive income. There
was no effect in 2019.
On 28 March 2019 the Company issued warrants to its lawyers as
part of the remuneration for services provided in relation to the
Company listing on the London Stock Exchange. The principle terms
of those warrants are that the holder is entitled to acquire shares
in the Company at a fixed price per share at any time during the
three years from the date of issue
Exercisable into number of shares (as issued and currently outstanding): 64,285
Exercise price: GBP0.70 per share
Period of exercise: At any time up to 28 March 2022
The warrants are freely transferable
The warrants were valued at the time of issue by means of the
Black-Scholes valuation model. The volatility was estimated at 50%
based on peer analysis. The risk-free interest rate was estimated
as 2.43%. It was assumed that no dividends would be paid during the
exercise period. On this basis the fair value of the warrants
issued was USD17,323 which was charged to the income statement and
was credited to Additional Paid In Capital.
11 Subsequent events
On 6 January 2020 the Company's shares were admitted to listing
on the Astana International Stock Exchange (AIX).
From 23 January 2020 the Company's shares were delisted from the
Kazakh Stock Exchange (KASE).
On 6 April 2020 the Company issued 500,000 fully paid shares to
a financial service provider in consideration for their retained
services.
On 14 May 2020 the Company issued 3,846,154 ordinary shares for
cash at a price of 6.5 pence per share to raise GBP250,000 to
finance operation processes.
In June 2020 the Company issued unsecured corporate bonds with
an interest rate of 7.5% to raise a further $300,000
-- Investors have subscribed for 150 of the Company's bonds with
a nominal value of US$2,000 each. The bonds are unsecured, have a
three-year term, and bear interest of 7.5%, paid twice-yearly. The
bonds have been listed on AIX with identifier FAR.0323 and ISIN
number KZX000000336.
-- 50 bonds were issued on 5(th) June 2020 with a maturity date
of 5 June 2023, and 100 bonds issued on 11(th) June 2020 with a
maturity date of 11 June 2023. The investors have the right to
receive early repayment after a minimum period of 12 months.
At the date of approval of these consolidated financial
statements, Covid-19 continues to spread internationally,
contributing to a sharp decline in global financial markets and a
significant decrease in global economic activity. On 11 March 2020,
the Covid-19 outbreak was declared a global pandemic by the World
Health Organization and has since then resulted in numerous
governments and companies, including Ferro-Alloy Resources Limited,
introducing a variety of measures to contain the spread of the
virus. The outbreak has also created significant volatility in
financial markets and is considered to have negatively impacted
commodity prices and caused disruption to operations, which is
relevant to financial performance since year end.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FPMJTMTITBTM
(END) Dow Jones Newswires
June 29, 2020 02:00 ET (06:00 GMT)
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