# Ferro-Alloy Resources study reveals potential US$110 million Carbon Black jackpot annually

- Link: https://www.directorstalkinterviews.com/ferro-alloy-resources-study-reveals-potential-us110-million-carbon-black-jackpot-annually/4121180745
- Published: 2024-12-10T14:01:14+00:00
- Author: Ethan Davis

**[Ferro-Alloy Resources Limited](https://www.directorstalkinterviews.com/company/ferro-alloy-resources/far.l)**(
[LON:FAR](https://www.directorstalkinterviews.com/company/ferro-alloy-resources/far.l)),
the vanadium producer and developer of the large Balasausqandiq vanadium deposit
in Southern Kazakhstan, has announced an update on its carbon black substitute (“
CBS”) product following the completion of a new marketing study.

**Summary**

·    A new marketing study by Smithers estimates 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](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
credentials)  

·    The Study follows a test programme undertaken by Smithers’ materials science
and engineering division which, by substituting standard carbon black with the Company’s
CBS product in a typical rubber formulation for passenger vehicle tyre side walls,
demonstrated that the Company’s CBS product can be used in the manufacture of vehicle
tyre sidewalls and other rubber uses

·    Previous test work performed by SGS Canada Inc indicated that the CBS product
can be recovered from the vanadium process plant tailings by simple flotation methods,
giving approximately 220,000 tonnes of CBS product per year and potential gross 
revenue generation in excess of US$110 million per year for Phase 1 of the Balasausqandiq
project

·    The Company estimates that the CBS product can be shipped to either Western
Europe or China economically; markets closer to the project will also be investigated

·    The Company also estimates the combined Scope 1 and Scope 2 emissions, based
on current preliminary desktop research, to be between 0.36 tonnes and 0.6 tonnes
of carbon dioxide equivalent (“CO_(2)e”) per tonne of CBS product produced in comparison
with between two tonnes and five tonnes of CO_(2)e per tonne of standard carbon 
black production, giving a strong marketing advantage and potential future savings
in carbon credits

·    The Company has commenced marketing activities for commercial opportunities
for the CBS product     

**Commenting on the update, Nick Bridgen, CEO of Ferro-Alloy Resources, said:**

_“This marketing study confirms the enormous value of the Company’s CBS revenue 
stream that is now expected to be comparable in size with the Company’s main vanadium
product. With relatively small production costs, it adds hugely to the anticipated
project NPV.”_

_“The Company has since commenced marketing activities for the CBS product and is
assessing the opportunities to secure an offtake agreement for future production.”_

_“Ferro-Alloy’s_ _Balasausqandiq deposit_ _is already expected to be the world’s
lowest cost primary producer of vanadium, and this co-product, recovered from the
tailings from the vanadium operation, will enhance that competitive position even
further.”_

**Background**

As previously announced, the ore-resource at the Balasausqandiq deposit contains
over 8% carbon in a form similar to carbon black. Carbon black is a high value form
of carbon predominantly used as a reinforcing filler in the making of rubber, particularly
for the manufacture of vehicle tyres.

The Company’s CBS product is produced through concentration to a level of around
40% of the carbon contained in the tailings (waste) of the vanadium circuit, followed
by drying and further milling.  

**Marketing study**

The marketing study has been completed by the market reports division of Smithers,
the global consultancy firm with rubber expertise, to estimate a market price for
the product in both tyre and non-tyre markets.

The Study has estimated the price of the Company’s CBS product in the tyre market
to be around US$500 per tonne and between US$550 and US$600 per tonne in the non-
tyre market.  

The Study took into account the successful test work conducted by Smithers’ materials
science and engineering division, the price being determined in relation to other,
similarly performing reinforcing fillers available in the market. It did not factor
in any value for the expected vastly reduced Scope 1 and Scope 2 CO_(2)e emissions(
direct and indirect emissions generated by a company’s own operating activities)
resulting from the production of the CBS product, in comparison with the manufacture
of standard carbon black (see below).

The Company believes that the expected low CO_(2)e emissions generated from the 
production of the CBS product will facilitate favourable marketing and may produce
an additional price advantage (see below).

**Technical studies**

As previously announced on 26 September 2024, significant test work has been completed
to determine the methods for concentrating the carbon in the ore to create the CBS
product, and into the performance of the CBS product compared with standard N660
grade carbon black commonly used to make passenger vehicle tyre sidewalls.

_Production_

Work carried out independently by SGS Canada Inc during the feasibility study programme
has confirmed that a 40% carbon concentrate can be recovered from the tailings of
the vanadium circuit using flotation to concentrate the carbon. A recovery of around
72% of the original carbon content is obtained, producing approximately 220,000 
tonnes of CBS product per year at the revised mining rate of 1.65 million tonnes
of ore per year. This product is then milled and dried in preparation for shipment.

Capital costs are expected to be relatively low, involving a simple flotation plant,
milling, pelletising and drying equipment.  Operating costs are expected to be modest.

_Product technical performance_

After initial test work was carried out at universities in the CIS, a test programme
was conducted in the UK by Smithers’ materials science and engineering division.
In this programme, the Company’s CBS product was substituted at various levels for
standard carbon black in a typical rubber formulation for passenger vehicle tyre
side walls. The results of testing the manufactured rubber confirmed that the CBS
product was performing as a reinforcing filler and, at lower substitution levels,
had no significant diminution in performance and had some advantages. Higher levels
of substitution are likely to be possible in agricultural and truck tyres.

**Logistics**

The Company estimates, based on research conducted on current available global logistics
rates, that the CBS product can be shipped to either Western Europe or China economically.
Closer markets will also be investigated.

**Sustainability  / costing credentials**

The production of standard carbon black is usually made by the incomplete combustion
of oil or gas in an oxygen depleted atmosphere where, typically, the resulting product
amounts to only 40% of the original carbon input. The production of standard carbon
black is, therefore, both expensive and high in CO_(2) emissions.

The Company’s CBS product is made by the concentration of naturally occurring carbon
from the waste produced by the treatment of the Balasausqandiq ore, and not from
the combustion of hydrocarbons, resulting in much lower production costs and significantly
fewer emissions – an important consideration for tyre and other rubber producers.

Based on preliminary desktop research, the Company currently estimates that the 
combined Scope 1 and Scope 2 emissions per tonne of CBS product produced will be
between 0.36 tonnes and 0.6 tonnes of CO_(2)e. By way of comparison, the production
of a tonne of standard carbon black ranges from around two to five tonnes of CO_(
2)e*. 

In the European Union, amendments to the Carbon Border Adjustment Mechanism (“CBAM”),
approved in 2022, indicate the potential inclusion of organic chemicals, including
carbon black, in the future as part of a broader effort to integrate the chemical
sector into CBAM, with a final decision due by the end of 2025 or early 2026.  If
adopted, importers of carbon black will have to buy carbon credits, currently costing
around US$72 per tonne of CO_(2)e emitted, for the emissions embedded in their imports
of carbon black.  This would lead to CBAM costs of between US$144 per tonne and 
US$360 per tonne for importers of standard carbon black depending on the emissions
of the actual producer. The far lower emissions generated from the production of
the Company’s CBS product would attract much lower CBAM costs, giving a further 
potential price advantage,  not taken account of in the Study. Even in the absence
of legislation, market forces are likely to incentivise the use of materials which
have been produced with lower carbon emissions.

**The carbon black market**

The worldwide carbon black market amounts to approximately US$20 billion per annum,
with approximately 70% going into tyre manufacture. Many tyre manufacturers have
stated their aims of reducing the CO_(2)e emissions associated with their products
and some are experimenting with the use of recovered carbon black, produced by pyrolysis
from used tyres which is energy intensive. The sourcing of lower carbon substitutes
for carbon black is an ongoing issue for tyre manufacturers.

Share on: