Strategic Focus on Carbon Black Substitute

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 (INCLUDING AS IT FORMS PART OF THE LAWS OF ENGLAND AND WALES BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR").

2 December 2024

Ferro-Alloy Resources Limited

("Ferro-Alloy" or the "Group" or the "Company")

Strategic Focus on Carbon Black Substitute Marketing and Sales

Kazakhstan Exempt Offer Bond Programme - Fourth Tranche

Ferro-Alloy Resources Limited (LSE:FAR), the vanadium producer and developer of the large Balasausqandiq vanadium deposit in Southern Kazakhstan, is pleased to announce a strategic update following the successful carbon black substitute ("CBS") product marketing study and the sale of a fourth tranche of the Company's Kazakhstan Exempt Offer Bond Programme (the "Programme") with a nominal value of US$5 million.

Summary

·    In order to pursue the commercial opportunities in CBS revealed by the Smithers Study, the focus of the Company's operating plant will be switched to research and development ("R&D") to complete and optimise the ongoing feasibility study, including the development of markets for the Company's CBS product.

·    The Smithers Study (see announcement dated 21 November 2024) estimated the price of the Company's CBS product at US$500 per tonne in the tyre market and between US$550 - US$600 per tonne in the non-tyre market (excluding any value attributable to the product's strong sustainability credentials).

·    As previously announced on 27 July 2023, the Company launched a new Exempt Offer Bond Programme where all bonds issued under the Programme will be listed on the Astana International Exchange ("AIX") in Kazakhstan.

·    The first three tranches of bonds have already been sold for US$13 million and the Company has now sold a fourth tranche of bonds (the "Fourth Tranche") with a nominal value of US$5 million, issued at par.

·    Under the terms of the Programme, US$2 million of headroom remains for the issue of future tranches by the Company.

Research and Development

The focus of the current production facilities will be moved to R&D that will expedite and optimise the feasibility study and increase marketing opportunities. The main R&D projects will be:

·    Completion and commissioning of the carbon concentrator, directly treating ore from the Balasausqandiq deposit, aimed at finalising the technology and providing materials for the development of markets for the Company's CBS product

·    Development of processes to achieve high-purity vanadium oxides which will open marketing opportunities to access higher market prices for future vanadium production

·    Completion of the process changes and commissioning of the production of special vanadium oxides needed for the production of battery electrolyte

·    Optimisation of leaching technology, including the patented process for the sorption and desorption of low-grade vanadium solutions and enhanced leaching of Balasausqandiq ore to further improve the existing processes already successfully tested in the current feasibility study work

Plant Operations

With the focus now on completion and optimisation of the feasibility study, the process plant operations will be conducted only when suitably profitable raw materials are available. Ongoing operating costs are being reduced to enable the facilities to be operated principally as an expanded R&D centre. Consequently, quarterly production figures will not be published going forwards.

Commenting on the new strategy and the bond sale, Nick Bridgen, CEO of Ferro-Alloy Resources said:

"The successful raising of US$5m by the issue of bonds enables us to refocus all our efforts on expediting and optimising the feasibility study, including the piloting of the carbon black substitute we announced on 21 November. The bulk of the feasibility study is now complete and we expect to be able to announce several updates over the next few months before completion during  the second quarter of 2025."

Fourth Bond Tranche

·    On 29 November 2024, the Company listed and sold the Fourth Tranche issued under the Programme on the AIX.

·    The net proceeds of $4.7 million from the sale of the Fourth Tranche will be used to complete the ongoing feasibility study for the Balasausqandiq project.

·    A summary of the salient terms and conditions of the Fourth Tranche is as follows:

-      ISIN: KZ000003348

-      Specified currency: US Dollars

-      Face value: US$100 (one hundred US dollars)

-      Number of bonds: 50,000 (fifty thousand) units

-      Aggregate principal amount: US$5,000,000 (five million US dollars)

-      Issue date: 29 November 2024

-      Maturity date: 29 November 2027

-      Coupon rate: 13.5% fixed of the nominal value of the bonds issued

-      Frequency of interest payments:  quarterly, 28 February, 29 May, 29 August and 29 November of each year during the circulation period, commencing on 28 February 2025

-      Coupon basis: 30/360

-      Issue price: 100%

-      Put option: within seven calendar days starting from 29 November 2026 the Company shall, at the option of a bondholder, upon the bondholder giving relevant notice to the Company within 30 calendar days starting from 29 September 2026, repurchase such bonds at 100% of their nominal value together with the interest accrued on the date of actual repurchase.  

·    Trading of the Fourth Tranche will commence on 2 December 2024.

ENDS

For further information, visit www.ferro-alloy.com or contact:

Notes to Editors

About Ferro-Alloy Resources Limited:

The Company's operations are all located at the Balasausqandiq deposit in Kyzylordinskoye Oblast in the South of Kazakhstan.

Balasausqandiq is a very large deposit, with vanadium as the principal product together with the carbon black substitute ("CBS") and several by-products. Owing to the nature of the ore, the capital and operating costs are very much lower than for other vanadium projects.    

The most recent mineral resource estimate for ore-body one (of seven) provided an Indicated Mineral Resource of 32.9 million tonnes at a mean grade of 0.62% V₂O₅ equating to 203,364 contained tonnes of vanadium pentoxide ("V₂O₅"). 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 to 5 or the remaining ore-bodies which remain substantially unexplored. 

The grade of carbon in the deposit is over 8%.  The carbon flows through to the tailings from where it is concentrated in a simple low-cost operation into a 40% carbon product, the CBS, that can be used in place of carbon black as a reinforcing filler in the making of rubber.

The Project will be developed in two phases, Phase 1 and Phase 2, with Phase 1 treating 1.65m tonnes per year.

There is an existing concentrate processing operation at the site of the Balasausqandiq deposit. The production facilities were originally created from a 15,000 tonnes per year pilot plant which was then expanded and adapted to recover vanadium, molybdenum and nickel from purchased concentrates.  Alongside this operation there is a well-equipped laboratory and highly skilled technical team who have already developed the technology that is being built into the feasibility study and is further developing and optimising processes needed for future vanadium and carbon operations. The plant will operate only when profitable concentrates are available and, when not operating as a production facility, will operate on an expanded basis as an R&D centre.