Ferro-Alloy Resources Limited (LON:FAR), the vanadium producer and developer of the large Balasausqandiq vanadium project in Southern Kazakhstan, has announced significant progress following the completion of the Project’s Feasibility Study.
Highlights
· Terms agreed for front-end engineering and design (FEED) with China National Chemical Engineering Sixth Construction Co., Ltd (CC6)
· CC6 have provided an indicative construction cost estimate of US$261m (excluding the relatively minor costs of the equipment relating to uranium and molybdenum sorption), that cuts the funding required to get into production to US$311.9m, a 40% reduction compared to the Feasibility Study
· Corresponding enhanced Project internal rate of return (IRR) of 31% (unlevered, post-tax) and net present value (NPV) of US$931.6m
· CC6 has received a US$221.8m non-binding conditional loan offer from the Bank of Communication (Hubei) Branch (BOC Bank), equating to 85% of the CC6 scope of work
· Potential access to Sinosure, the Chinese insurance and export credit scheme, substantially lowering financing costs
Nick Bridgen, CEO of Ferro-Alloy Resources, said:
“As previously indicated, we have identified substantial capital cost savings that demonstrate the potential to significantly enhance the Project’s financial returns. In addition CC6, a company that has vast experience in building plants all over the world with particular expertise in vanadium processing technology, has secured an attractive conditional offer of construction financing for the Project with BOC Bank.”
Overview
The Company has agreed terms for the Project’s FEED with CC6. CC6 is one of the largest and most experienced engineering and construction companies in the global vanadium industry.
Furthermore, CC6 has provided an indicative construction cost estimate of US$261m (“EPC Cost Estimate”) for the engineering, procurement and construction (“EPC”) for the Project. In comparison with the equivalent costs included in the Feasibility Study (announced on 13 October 2025) this demonstrates the potential to reduce capital costs by up to US$177m, and would enhance the Project’s IRR to 31% (unlevered, post-tax) and NPV to US$931.6m.
The EPC Cost Estimate received from CC6 excludes the relatively minor costs of the equipment relating to uranium and molybdenum sorption, and certain other costs that are not usually included in an EPC estimate such as first-fill consumables, strategic spare parts and other working capital items. The EPC Cost Estimate is a result of 18 months of continuous engagement between CC6 and the Company. These robust indicative returns highlight the compelling economics of the Project, and the opportunity to reduce capital costs significantly utilising the experience of one of the largest EPC contractors in China.
As part of this initiative, CC6 has received a non-binding conditional offer of finance from the Bank of Communication (Hubei) Branch (“BOC Bank”) to provide up to US$221.8m of loan finance, equating to 85% of the CC6 scope of work for the EPC. Initial discussions have been held with Sinosure, the Chinese state-owned insurance company which commonly provides loan guarantees for overseas engineering and construction contracts. In the event that a Sinosure guarantee is received, the interest rate on the BOC Bank loan is expected to be relatively low, giving a very much enhanced rate of return to equity investors.
Concurrently, the Company is engaging with strategic investors for equity financing and has received interest from several potential providers.
Financial impact
Although the CC6 EPC Cost Estimate is subject to confirmation after the completion of FEED, the financial impact of using the CC6 EPC Cost Estimate, while leaving all other cash flows as quoted in the Feasibility Study announced on 13 October 2025, would result in the following changes:
| Feasibility StudyUS$m | CAPEX incorporating CC6 EPC estimateUS$m | |
| Capital expenditure (including working capital, strategic spares, owner’s costs, insurance etc.) | 490.2 | 313.2 |
| Contingency | 73.5 | 42.4 |
| Pre-production income, less costs | (43.7) | (43.7) |
| Funding required to get into production | 520.0 | 311.9 |
| Net Present Value (after tax, discount rate of 8%) | 748 | 931.6 |
| Project IRR | 22% | 31% |
The above figures do not include the potential optimisations referred to in the announcement of 13 October 2025 except as to capital cost reductions. In particular, they do not include the new carbon black substitute product announced on 27 June 2025, nor the potential Phase 2 expansion based on ore-bodies 2, 3 and 4, expected to increase production by over 300% and to increase the NPV of the overall project proportionately.
Next Steps
· CC6 will undertake the FEED contract for the whole project, with the exception of equipment relating to the uranium and molybdenum sorption which is relatively minor in cost and uses technology well-known to the Company
· The agreed cost of FEED will be US$4.1m for the specification on which the Feasibility Study, announced on 13 October 2025, was based. The estimated period to complete FEED is six months
· Ferro-Alloy Resources and CC6 are currently negotiating to slightly extend the scope of FEED to include those changes necessary to make the oxides of vanadium suitable for making electrolyte for vanadium redox flow batteries, at higher than standard purity, suitable for bulk storage of renewable energy
· The total cost estimated by CC6 for the EPC is US$261m. On this basis, after adding the anticipated cost of items outside the scope of CC6 and essential non-capex expenditure such as working capital, owner’s costs and insurance, the total projected funding requirement for the Project including a 15% contingency could be expected to be around US$356m
· At the conclusion of FEED, CC6 will confirm their EPC Cost Estimate. If this confirmed cost is acceptable to the Company, a binding fixed cost EPC contract will be entered into
· CC6 has received a conditional offer from BOC Bank to provide funding for the Project in the amount of US$221.8m, being 85% of the estimated cost of US$261m, subject to full project funding and receipt of appropriate guarantees
· CC6 and the Company are working with Sinosure, the Chinese state-owned insurance company which commonly provides loan guarantees for overseas engineering and construction contracts to procure the necessary financial guarantees
