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MINING | Ferro-Alloy Resources Group


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FERRO-ALLOY RESOURCES GROUP Developing the world’s lowest cost vanadium deposit in Kazakhstan


MINING | Ferro-Alloy Resources Group

Ferro-Alloy Resources Group (FAR) is developing the giant Balasausqandiq vanadium deposit in Southern Kazakhstan and listed on the London Stock Exchange (LSE) in March 2019. The company had previously listed on the Kazakhstan Stock Exchange in 2017 as a precursor to floating on a major international bourse, due to a legal requirement which stipulates that companies with a majority of their assets in Kazakhstan must, when placing shares abroad, place at least 20% of the shares on the domestic market. Why did FAR choose the London market? CEO Nicholas Bridgen views London as a strong exchange with good liquidity and a convenient choice. “We are registered in Guernsey and have many British shareholders so there are obvious advantages to being listed in London. The LSE uses the CREST settlement system and London has a daytime overlap with Kazakhstan so communications are easier,” he says. The London IPO raised £5.2 million which will be used to further develop and expand production at Balasausqandiq, with FAR already in production at the site through a small-scale treatment plant which processes secondary vanadium materials.


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MINING | Ferro-Alloy Resources Group

However, the major focus going forward

The US$10 million expansion project is

will be the development of the large-scale

already underway and it provides a quick

Balasausqandiq vanadium deposit, along

and easy way to generate cash flow ahead

with the construction of a new standalone

of the big project, according to Bridgen. The

processing plant.

expansion will allow the plant to treat a wider range of vanadium-containing feedstocks and

“The bulk of the London capital raise will go towards the expansion of the existing

to produce higher-value products.

operation. To some extent you may think that

Eyes on the prize

is counter-intuitive as 95% of our value is in

Nonetheless, the real prize for FAR centres

the main project,” Bridgen suggests.

on the successful development of the Balasausqandiq deposit, which has the

“But, although most of the money from the

potential to be one of the world’s largest and

float is for the small project, about half of it is

lowest cost sources of vanadium.

on things which will be necessary for the big project as well, so in a sense we are starting

The scale of the deposit has previously been

the big project now.”

assessed using the local GKZ system, which estimated a reserve of around 70 million


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“The scale of the deposit is huge. All of our orebodies outcrop to surface so if we start further exploration and drilling there may be an awful lot more” Nicholas Bridgen, CEO Ferro-Alloy Resources Group

tonnes (Mt) of ore without going to full depth

However, the deposit is world class not

on most of the orebodies.

because of its size, but mainly due to the unique nature of its mineralisation compared

However, under the more commonly used

with most other vanadium deposits. The

JORC basis the resource for one orebody

majority of the world’s vanadium is found in

(OB1) was estimated at 24.3 Mt. The

vanadiferous titanomagnetite (VTM) deposits.

remaining four orebodies are classified under JORC as exploration targets which, taking the

Containing high levels of iron oxide, ore

centre of the estimated range, would give a

from VTM deposits must be subjected to

total resource of around 126 Mt.

a complex treatment route to produce the vanadium product. The usual process

“The scale is huge. We’ve only really scratched

involves making a magnetite concentrate

the surface of it with drilling and exploration

before roasting the material at a temperature

so far. All of our orebodies outcrop to surface

of around 1,100 °C.

so if we start further exploration and drilling there may be an awful lot more,” Bridgen

“That is an expensive process in terms of

exclaims.

both capital and operating costs. For capital


MINING | Ferro-Alloy Resources Group

Ferro-Alloy Resources Group listing ceremony at the London Stock Exchange, March 2019 costs you need a concentrator plant and then

capital and operating costs by around 60%,

a roasting plant, which involves bringing in a

which should make FAR the lowest cost

huge amount of power further contributing

vanadium producer in the world.

to operating costs. After all those steps, the metallurgical recovery is typically only around

“We have an orebody that is amenable to a

75%.”

treatment process which is in a different class from all other vanadium deposits. That is

Fortunately for FAR, the Balasausqandiq deposit is sedimentary and contains no iron,

what’s special about us,” Bridgen proclaims.

which means the ore can be treated directly

Sweetening the deal

with sulphuric acid in an autoclave to make a

In addition, the project’s value is further

solution without the need for a concentrator

sweetened by the presence of by-

or a roaster.

products including carbon-silica, uranium/ molybdenum and potassium alum. These

Overall recovery is expected to be over 90% and acid consumption is low. This reduces

by-products will allow FAR to utilise 100% of


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the ore for saleable products, meaning the

business environment following the break-up

company will produce no tailings from the

of the Soviet Union 27 years ago, dismantling

process plant.

red tape, reducing bureaucratic procedures and making it easier to do business.

“The by-products more than pay for the whole of the operation including mining and

FAR’s CEO adds further weight to the view

treatment. I’ve often commented that if there

of Kazakhstan as an attractive investment

were no vanadium at all in the deposit, it

destination, reporting that his company

would still be economic. Based on our long-

has experienced no difficulties operating in

term price assumptions, we expect a third of

the central Asian nation, and has received

our revenue will come from by-products.”

a significant degree of government support over the years.

Operating in Kazakhstan may once have been considered a risky choice by many Western

The company has a tax incentive agreement

investors, but this is no longer the case since

with the government, whereby it will pay 0%

the government moved steadily to reform its

income tax on its processing operations until


MINING | Ferro-Alloy Resources Group

2026 and has a property tax exemption until

grow strongly as a result of higher strength

2024. While Kazakhstan continues to face

steels being mandated for construction

legacy issues from the authoritarian Soviet

purposes, but the real upward demand

era, the political situation is described as

pressure may come from the burgeoning

stable by FAR.

energy storage industry.

“I think they have a system of government

Vanadium Flow Batteries (VFBs) have been

that suits the state of development of the

developed to support renewable energy

country and has enabled them to reform at a

facilities through storing large quantities of

very fast pace. From a business point of view

energy produced by solar and wind farms.

it’s ideal.”

The growth potential of this industry is demonstrated by a recent Adriot Market

In addition, FAR is set to benefit from

Research forecast, which stated that the VFB

excellent regional infrastructure, including

market would surpass a CAGR of 59.7% from

sophisticated road and rail networks linking

2018-25.

to markets in China, Russia and Europe and ample sources of power and water nearby.

Doubling down on demand

According to Bridgen, FAR is one of a select few primary vanadium producers that is well prepared for this potentially huge demand increase from the VFB industry.

The global steel market accounts for the lion’s share of vanadium demand, with some

“One of the good attributes of our ore and

estimates suggesting that steel applications

the process we use is that we naturally

account for over 90% of total consumption.

produce a very high purity product. It would

Demand from the steel sector is expected to

take a little more work to reach a purity


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required by the battery industry, but it’s

With the London listing ticked off the agenda

much easier to reach that standard starting

and detailed plans in place for the smaller

with our product than from the typical

and main projects at Balasausqandiq, FAR is

magnetite-derived product.”

at the beginning of an exciting period which could culminate in the transformation of the

From here, a lot will hinge on how the VFB

global vanadium market.

market develops in terms of FAR’s customers for its battery grade vanadium product.

“We certainly can ramp up our production

The company is talking to various battery

quicker and far cheaper than anybody else.

manufacturers and although at this stage the

We will go from being relatively unheard of

channels to market remain unclear, Bridgen

to a middle-sized producer over the next

is confident that FAR will play a crucial role

two years, and over the next three to four

from the supply side.

we will become one of the world’s largest producers.”

“A battery industry could potentially double demand for vanadium and it’s hard to see where that will come from apart from us, because only we can turn on the taps quickly and cheaply and produce a large amount of vanadium at a price that keeps the vanadium battery market competitive.”

KASE: GG_FERR LSE:FAR

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Published by Anderson Murray Media Ltd

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