Interview with Nicholas Bridgen, CEO of Ferro-Alloy Resources Group (LON:FAR).

The Ferro-Alloy Resources Group (FAR) is a vanadium development company. Their primary focus is the 'giant' Balasausqandiq vanadium deposit in Kyzylordinskaya oblast of Southern Kazakhstan. The deposit is claimed by Bridgen to be amenable to a much simpler, cheaper processing treatment than other deposits. In fact, Bridgen thinks FAR can be the lowest-cost producer in the world, and could still maintain a reasonable margin even in an environment of low spot prices.

Even for the most optimistic shareholder, they will have been left disappointed by the share price performance of FAR. Starting the year at £0.56, the price has fallen to £0.15 today. FAR's market cap is £47M. Excess supply and low spot demand from the steel industry pulled down ferrovanadium alloy prices in Europe and the US to a two-year low in the first week of October 2019. This has clearly been a key factor behind this decline, but could the management team have done anything differently?

Bridgen argues the macro story of vanadium will lead to price discovery, but he is keen to dispel the common assumption that vanadium redox flow batteries (VFRBs) will be economically viable in the near future. In fact, companies with inferior Vanadium projects that base their model of primary demand for VFRBs are "deluding themselves." We appreciate Bridgen's pragmatism.

Bridgen claims to have an experienced team behind him, but the two key things here are scale and margins; this is what is supposed to make FAR stand out. +90% of the world's vanadium production and 70% of the world's supply comes from a material called magnetite. It is low-grade iron ore, so creates more cost because of additional shipping and processing expenses. Bridgen is very critical of the flowsheet followed by his vanadium juniors. They all have to go through a complex process of concentration, roasting to 1,100 degrees celsius, then a regrind before the material is ready to be leached. FAR's material is ready to be leached right from the off.

As far as a mining jurisdiction, Kazakhstan has now become a 'well-run country,' that is 'above all the other stans in terms of its government.' While Kazakhstan isn't necessarily an ideal jurisdiction, Bridgen appears confident it is an area FAR can flourish in.

There is a significant overhang at FAR, and investors will want more justification than the vanadium price. The company listed at around £0.70 after all. Bridge insists FAR is in control of progressing the project, and dilution; these are the key to driving the price back up. Investors will be sceptical and will want to see this reflected in the market before having any confidence.

The next step will be a larger Feasibility Study. How will FAR finance this? Bridgen wouldn't tell us how much cash FAR has on hand, but did say they need to raise capital this year, sooner rather than later. FAR is debt-free and option free, so it seems debt may be an area Bridgen looks at. Will they go to market?

The reality here is the quality of the asset and the vanadium macro story can only help FAR so much. Investors want to see active decision making. They want to see their money spent wisely. Bridgen and his team have an awful lot of work on their hands if they want to get FAR back on track, and back delivering for shareholders.

Company page: http://www.ferro-alloy.com/ 

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