Ferro-Alloy owns the Balasausqandiq vanadium project in Kazakhstan.
This project, unlike nearly all of its peers, is a vanadium-bearing black shale ore rather than a titano-vanadiferous magnetite. This ore does not require expensive concentrating and pre-roasting, reducing capital and operating costs significantly.
As it stands, VSA expects initial capex of US$101mln to get the project up to a production level that will eventually run as high as 23,500 tonnes per year of vanadium pentoxide.
The net present value is set at US$1.4bn.
“Further differentiating itself from the vanadium pre construction peer group, FAR has the significant advantage of existing production, having adapted and expanded its pilot plant to treat third party material,” said VSA.
“FAR recently confirmed a tripling in capacity to 480 tonnes per year with a planned further increase to 1,500 tonnes per year during 2020. Despite a profitable 2018, this aspect of the business suffered in 2019 due to falling vanadium prices and constrained capacity.”
Vanadium prices have now stabilised though.
“We expect an earnings recovery through 2020 leading to positive EBITDA in 2021 of US$4mln, providing modest cashflow to support the group during the main project development,” added VSA.
“Our risked DCF valuation, based on conservative pricing, indicates significant upside potential. With a clear plan to finance the main project we believe there are multiple catalysts for a rerating in the short to medium term, underpinned by an improving earnings outlook for the existing secondary processing business. We are initiating coverage with a buy recommendation and target price of 171p per share.”