Ferro-Alloy Resources Limited
Annual Report
2022
Ferro-Alloy Resources Limited Annual Report 2022
“A low-cost vanadium
producer emerging in
Kazakhstan...”
Ferro-Alloy Resources Limited is developing the giant Balasausqandiq
vanadium deposit in the Kyzylordinskaya oblast of southern
Kazakhstan. The deposit is a sedimentary deposit, unlike nearly all
other primary vanadium deposits in the world, and is expected to have
far lower capital and operating costs as a result of the lack of need
for pre-concentration and roasting of the ore. Planned output will be
increased in stages to reach a maximum capacity of 24,000 tonnes of
vanadium pentoxide a year.
“The development of Balasausqandiq is going to transform the world
of vanadium. We can meet the rapidly expanding demand from
battery storage as well as for the steel industry faster, at a fraction of
the capital costs per annual tonne, and at a far lower cash production
cost than any existing or planned vanadium producer.”
Nicholas Bridgen, Chief Executive Officer
Contents
STRATEGY
2 Operational review
5 Financial review
7 Feasibility study review
9 Sustainability review
13 Climate change disclosures
16 Principal risks and uncertainties
GOVERNANCE
18 Governance statement
20 Board of directors
22 Senior management team
23 Directors’ report
26 Directors’ responsibility statement
FINANCIAL STATEMENTS
27 Independent auditor’s report
33 Consolidated statement of profit or loss and other
comprehensive income
34 Consolidated statement of financial position
35 Consolidated statement of changes in equity
36 Consolidated statement of cash flows
37 Notes to the consolidated financial statements
66 Company information
Ferro-Alloy Resources Limited Annual Report 2022 1
Ferro-Alloy Resources Limited Annual Report 20222
Operational Review
During 2022 and the first quarter of 2023, the Group made
significant progress with the ongoing feasibility study into
the development of the transformative Balasausqandiq
vanadium deposit as well as the expansion of the existing
operations treating bought-in vanadium concentrates.
Feasibility study
The progress made by the Group on the Stage 1 feasibility
study is covered more fully by the feasibility study review at
page 7.
The highlights of that review are:
• Completion of the drilling programme for Ore-Bodies
1,2,3 and 4;
• Imminent publication of the revised mineral resource
estimate for Ore-Body 1 (“OB1”);
• Mine planning for Stage 1 of the feasibility study to
commence post publication of the OB1 mineral resource
estimate;
• Open pit geotechnical drilling for OB1 has been
completed with mechanical testing pending;
• A full site topography survey has been taken;
• Extraction of vanadium during acid leaching shows high
metallurgical recovery into solution in line with previous
Group test work; and
• Flotation tests show that a >40% carbon concentrate can
be made with good overall carbon recovery. Test work
on the resulting rubber performance shows that partial
substitution of this concentrate for carbon black in the
production of rubber for tyres can be made without loss
of performance.
Existing operation
The existing operation is the result of the conversion and
expansion of the large scale test-plant that was constructed
to pilot and test the metallurgical processes to be used in
the main Balasausqandiq project.
This operation will provide a cash flow to assist with the
substantial ongoing costs of the preparation of the feasibility
study and to contribute to the construction costs of the
Balasausqandiq project mining operations.
A second objective is to retain the high-quality technical and
operating team that developed the metallurgical processes
to be used in the main Balasausqandiq project so that they
are available to assist with the feasibility study, design and
future construction and operation of Stage 1 and Stage 2 of
the Balasausqandiq project. As a result, the Group’s work-
force is experienced and will have a high level of technical and
operational expertise prior to commissioning of the mine. This
significantly de-risks the project.
Plant developments
The original test-plant has been adapted to treat bought-in
vanadium concentrates. During 2022 and the start of 2023,
the plant has been significantly expanded and equipment
added to enable the full recovery of all of the components of
the purchased concentrates so that a great deal more value is
extracted from each tonne treated and, more importantly, no
tailings or other residues are left on-site.
Although the plant is designed to be flexible and able to treat
a variety of raw materials, the most common raw materials
are the spent (charged) catalysts used to remove impurities
from crude oil in refineries. These typically contain vanadium,
molybdenum and nickel, all of which can now be recovered.
Specifically, the Group has completed the following
installations at the plant during the year:
• Added a third roaster to the vanadium pentoxide line to
increase maximum throughput of treatable concentrates;
• Added a fourth roaster to either upgrade the low-grade
nickel residues to high-grade nickel concentrates, or
to provide additional vanadium pentoxide throughput
capacity, depending on market prices and demand;
• Procured the equipment to convert the roasting fuel used
by the plant from diesel to gas (to be commissioned in
May 2023);
• Approximately doubled the maximum recovery of
molybdenum from additional ion-exchange resin;
• Installed three new press filters;
• Commissioned a new dissociation oven to convert
ammonium metavanadate (“AMV”) to vanadium pentoxide;
• Purchased a new product drying oven; and
• Equipped a new ferro-molybdenum department
to provide greater smelting capacity and better
environmental control.
Together, these additions have transformed the operating
capability of the Group by not only increasing throughput
capacity but also maximising the value recovered from each
tonne treated.
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 3
Production
During the year, production of vanadium pentoxide and molybdenum (in ferro-molybdenum) amounted to 305.5 tonnes
(2021: 259.6 tonnes) and 36.0 tonnes (2021: 38.7 tonnes), respectively.
Quarter
Production of
Vanadium
pentoxide
(tonnes of
vanadium
pentoxide
contained
in AMV)
Growth vs
last year
Production of
Molybdenum
(tonnes of
molybdenum
contained in
ferro-molybdenum
and in calcium
molybdate)
Growth vs
last year
Q1 81.1 +41% 11.3 -18%
Q2 91.7 +197% 10.4 +395%
Q3 69.9 - 11.0 -19%
Q4 62.8 -38% 3.3 -65%
2022 total 305.5 +17.7% 36.0 -7%
The plant also produced a nickel concentrate for sale to customers during the year.
Production during 2022 was severely disrupted by a combination of factors that affected deliveries of concentrates available
for processing at the plant.
At the beginning of 2022 both concentrate supplies and transport routes continued to be adversely affected by residual
Covid-19 issues as well as the piecemeal re-opening of the global economy following lockdown. Domestic riots in Kazakhstan
during January caused further, albeit short-term, disruption, and then in February, the Russian invasion of Ukraine resulted in
increased disruption across the Group’s supply and transport networks.
As a result, transportation prices increased dramatically and some of the usual freight routes into Kazakhstan were blocked,
requiring longer and more expensive routing. Similarly, the cost and availability of reagents and, particularly, diesel, were also
impacted by the geo-political disruption. Diesel prices rose significantly over the year and, at times, became unavailable.
In order to mitigate future concentrate supply issues in light of the ongoing regional geo-political disturbance and other
factors, the Group has:
i. increased the number of vanadium concentrate supply contracts and diversified source location in order to minimise the
risk of failure of delivery of concentrates by any one supplier; and
ii. implemented a plan to convert the fuel intake of the roasting ovens used by the plant from diesel to gas which will not only
be cheaper, but also be more reliable and will make use of more widely available gas supplies in the region.
Product prices remained broadly stable during the year:
Start of 2022 Average for the year
Current
(21 April 2023)
Vanadium pentoxide (US$/lb) 8.50 9.19 9.5
Ferro-molybdenum (US$/kg of Mo) 44.00 43.95 53.00
Nickel (US$/kg) 20.72 25.60 24.33
Ferro-Alloy Resources Limited Annual Report 20224
Development of VRFBs
Vanadium VRFBs (vanadium redox flow batteries) are a
means of energy storage particularly suitable for the longer-
duration storage of energy from intermittent renewable
sources in order to make energy available at night and
when there is no wind. VRFBs have certain advantages
over lithium-ion technology, including being scalable, not
degrading over time and not catching fire, which make them
more suitable for bulk energy storage.
The world-wide roll-out of VRFBs appears to have started
and although forecasts vary, the general expectation is
for the demand for vanadium for electrolyte purposes to
expand to become a significant part of overall vanadium
demand.
The Group has been awarded a grant from the Kazakhstan
Science Fund to produce vanadium oxides for the
production of vanadium electrolyte for use in VRFBs. The
grant will be used to buy additional production equipment
and to modify existing equipment to produce vanadium
tri-oxide, a test VRFB and some related equipment for
laboratory use. After a period of testing and development,
the plan is to continue to produce and market vanadium
tri-oxide and, if there is demand in the local region, to supply
electrolyte. The aim is to position the Group to be able to
supply at a large scale into this potentially very large market
when the main Balasausqandiq project is commissioned.
Production outlook
The planned expansion of the existing operation is now
complete. The plant is, therefore, capable of making
significant cash flows to fund the ongoing costs of
completing the Stage 1 feasibility study and contribute to
the funding of the future construction of the Balasausqandiq
facilities.
In order to prevent the recurrence of the concentrate supply
problems of 2022 and early 2023, the Group has signed
additional concentrate supply contracts. Supplies under
previous contracts have resumed and are expected to
continue, so the board of directors (“the Directors” or “the
Board”) are optimistic that the historic supply problems have
now been resolved.
Vanadium prices are strong, and although difficult to
forecast, the Group’s assumption is for them to remain at
current levels of around US$9.5/lb of vanadium pentoxide
and US$24.3/kg of nickel. For the remainder of 2023.
Molybdenum prices have come down from the exceptionally
high levels of early 2023 but are expected to remain at
current levels of around US$53/kg.
With the plant now fully developed and with concentrates
expected to be in good supply, the Group expects the
existing plant to operate profitably, producing a meaningful
positive cash flow, for the remainder of 2023 and beyond.
Operational Review continued
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 5
Financial Review
Earnings
The Group reported increased revenues of US$6.27m for
the year compared to US$4.73m in 2021, reflecting a 33%
increase in sales over the period.
US$’000 2022 2021
Revenue from shipments recorded at
the price at time of dispatch
6,773 4,709
Adjustments to revenue after final price
determination and fair value changes
(502) 22
Total Revenue 6,271 4,731
Revenue is recognised at the time of transfer of control of
the Group’s products to the customer but, as is common in
the industry, the final pricing determination is often based
on assay and prices after arrival of the goods at the final
port of destination. The adjustments to revenue reflect these
final pricing determinations which occur after the relevant
revenue is initially recognised.
Between mid-June and the end of November the market
price of vanadium pentoxide fell from around US$10.50/lb to
c. US$7.50/lb and, therefore, a number of the Group’s sales
contracts entered into before June were subject to a negative
final pricing determination upon arrival at the final port of
destination leading to an overall negative revenue adjustment
of c. US$0.5m for the year. The price of vanadium pentoxide
has subsequently risen to c. US$10/lb after the year end.
Cost of sales increased to US$7.5m from US$4.9m in
2021 primarily reflecting increases in the prices of the raw
materials used in the production process of AMV and other
products. In particular, as a result of the Russian invasion
of Ukraine, a number of the reagents used by the plant and
sourced from the CIS significantly increased in price during
the year, as did the cost of diesel. The prices of reagents
and diesel have both stabilised after the year end, and as
noted in the Operational Review, the Group is taking steps
to convert the fuel supply for the roasting ovens from diesel
to gas which is a significantly cheaper form of fuel and more
widely available in country. The largest part of the cost of
sales is the purchase of raw materials, the price for which is
determined as a percentage of the value of the content of
vanadium at the prices prevailing at the time of purchase.
Administrative expenses of US$2.5m (2021: US$2.5m) were
broadly in line with the prior year other than wages and salary
costs which have increased by approximately US$0.58m as a
result of the recruitment of a number of senior management
employees during the year including a group finance director,
mine project director and Kazakhstan finance director. The
Group has not suffered any non-refundable VAT write-downs
during the year as was the case in 2021 (US$0.5m).
The Group incurred other expenses during the year
of US$0.43m (2021: US$0.011m) comprising currency
conversion losses (representing transactional foreign
exchange differences), an agreed write down of slow moving /
obsolete stocks held at the existing plant and the write-off of
unrepairable factory equipment.
The Group made an overall loss for the year of US$4.29m
(2021: loss of US$2.83m).
Cashflow
Net cash outflows from operating activities, before changes
in working capital, for the year totalled US$3.46m (2021:
US$4.98m) following adjustments for depreciation,
amortisation, inventory write-downs and net finance gains.
Changes in trade and other receivables increased to US$1m
(2021: US$0.4m) as a result of the recognition of a significant
VAT refund due from the Kazakh tax authorities at the year
end (received after the year end). Changes in trade payables
increased to US$1.56m (2021: decrease US$0.85m) in light
of substantial orders of concentrates for processing at the
existing plant, yet to be paid for by the Group.
Net cash outflows from investing activities totalled US$4.3m
(2021: US$2.5m) and included US$1.47m (2021: US$2.2m) of
capital expenditure associated with the planned expansion
of the processing operation’s production facilities (see
Operational Review) and US$2.87m (2021: US$0.33m) of
expenditure on the Stage 1 feasibility study capitalised as an
exploration and evaluation asset (see Note 13).
Net cash inflows from financing activities for the year were
US$9.19m (2021: US$10.06m), representing the proceeds
of the US$10m cash equity fundraise conducted during
the year (2021: US$5.9m) less the costs of the fundraise of
US$0.43m (2021: US$0.24m), repayment of a bondholder
entitled to an early redemption of US$0.3m (2021:
proceeds received of US$0.48m) and interest payable to
the Company’s residual bondholders of US$0.08m (2021:
US$0.08m).
The Group held cash of US$4.33m at 31 December 2022
(2021: US$2.81m).
Ferro-Alloy Resources Limited Annual Report 20226
Financial Review continued
Balance sheet review
Total non-current assets increased to US$10.93m from
US$7.25m principally due to the continued capitalisation of
the feasibility study as an exploration and evaluation asset
and the addition of new equipment at the production plant.
Current assets increased from US$5.7m to US$8m, reflecting
a significant VAT refund due from the Kazakh tax authorities
at the year end and an increase in cash from the finance
raising activities completed during the year, as noted below.
Total non-current liabilities decreased by approximately
US$0.9m during the year from US$0.94m to US$0.03m as
a result of the Company’s outstanding bond liabilities being
reclassified to current liabilities to reflect their maturity in
March 2023.
Current liabilities increased from US$1.34m to US$3.5m as a
result of the outstanding bond reclassification noted above
and the purchase of significant quantities of concentrate for
the existing operation prior to the year end.
Corporate
During September 2022, the Company completed an
equity fundraise by way of a placing, in addition to direct
subscriptions, of ordinary shares of the Company. As a
result, the Company issued 72,025,351 new ordinary shares
for cash at a price of 12 pence per share raising a total of
£8.64m (US$10.0m).
Key performance indicators
The Group is in a period of development and its current
operations, the processing of bought-in secondary
vanadium-containing materials for extraction of vanadium,
are relatively small in comparison with the main objective
of the Group to develop the Balasausqandiq deposit and
processing facility. Moreover, the current operations are
themselves undergoing a significant expansion which
means that operations are not in a steady state capable of
meaningful inter-period comparisons. The Directors are,
therefore, of the opinion that key performance indicators
may be misleading if not considered in the context of the
development of the operation as a whole for which the
information for shareholders is better given in a descriptive
manner than in tabular form.
Furthermore, the existing processing business of the Group
is complex and the business model has been developed
to allow maximum flexibility in the type of raw materials
treated so that market variations in raw material prices can
be moderated by the ability to select raw materials which
may be more profitable to treat notwithstanding they be
of lower grade and result in a lower level of production.
Nevertheless, the Directors consider that the main indicator
of performance, although subject to interpretation as
described above, is the level of production (refer to the
Operational Review at page 2 for further information).
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 7
Feasibility Study Review
The main objective of the Group is to bring into production
the Balasausqandiq deposit and to build a processing plant
to treat one million tonnes of ore per year (Stage 1) mined
from OB1 and later increase to a total of four million tonnes
per year (Stage 2) through the additional mining of Ore
Bodies 2, 3 and 4 (“OB2, 3 and 4”).
An initial feasibility study has been completed under
Kazakhstan standards and is in the process of being
upgraded and expanded to western bankable standards
by the Group’s appointed feasibility study consultants,
SRKConsulting (Kazakhstan) Limited.
Balasausqandiq deposit
The Balasausqandiq deposit is exceptional in a number of
ways. Primarily, it is not a typical vanadiferous magnetite
deposit but a sedimentary deposit and is expected to have
far lower capital and operating costs.
Furthermore:
• The ore is amenable to a whole-ore pressure acid leach
process which gives a far higher metallurgical recovery
than conventional magnetite extraction;
• Pre-concentration of the ore and high temperature
roasting are not required;
• There are potentially valuable by- or co- products within
the ore, principally carbon, which can be easily recovered
without significant additional processing;
• Major infrastructure items of power and road and rail
connections already exist on site or nearby;
• The Balasausqandiq deposit is a very large deposit and is
easily mined from an open pit. Stages 1 and 2 combined
envisage production of 24,000 tonnes per year of
vanadium pentoxide, over 10% of known current world
supply; and
• The Competent Person’s Report of 2018 indicated
exceptional financial characteristics, with an overall net
present value (“NPV”) of US$2 billion, an operating margin
of nearly 80%, and low capital costs.
The development of the deposit is planned to be in two stages,
Stage 1 and Stage 2. Stage 1 will involve the construction and
operation of an initial process plant treating one million tonnes
per year of ore, followed, as soon as commissioning has been
successfully concluded, by a Stage 2 operation for a further
three million tonnes per year. The staging is to allow for the
reduction of engineering scale-up risk and to also allow time
for the development of markets as production increases.
Thestaged development also reduces the amount of capital
that has to be raised for the initial development, with the
second stage to be largely financed by the earnings of the first.
The feasibility study is also being carried out in two stages,
with the results of the first stage scheduled to be announced
in the fourth quarter of 2023 and those for the second stage
in 2024.
Exploration
There are six known ore-bodies in the deposit which have
been named OB1 - 6, and there is some evidence of a
seventh. Of these, only OB1 had previously been explored
sufficiently to declare a resource under the CRIRSCO
approved standards.
The Group’s recent drilling campaign, now completed, has
included 19,720 meters of drilling on OB1, 2, 3, and 4 with a
view to being able to identify CRIRSCO compliant resources
and, eventually, reserves, sufficient to provide feed for two
stages of development, the first involving the processing
of one million tonnes per year of ore, and the second an
additional three million tonnes per year.
OB1
The exploration of OB1 during the year involved infill drilling
and trenching to reduce the section spacing from around
500m to 250m, so as to be able to further define and
upgrade the resource.
Following receipt and analysis of the assaying from the
updated drilling programme, a revised resource estimate for
OB1 is expected by the Company imminently.
OB2, 3 and 4
The drilling of OB2, 3 and 4 has been completed and
receipt of the final assay results and corresponding mineral
resource estimate is expected later in the year. Some 25%
of the planned exploration area has proved to be difficult
and expensive to access and as a result has not been drilled
(albeit the Company does not expect the area of difficult
topography to create difficulties for actual mining).
The new mineral resource estimate for these ore-bodies will
exclude the area of difficult topography in the expectation
that the remaining area will provide sufficient ore to feed the
Stage 2 development.
Ferro-Alloy Resources Limited Annual Report 20228
Feasibility Study Review continued
Open pit geotechnical drilling
Open pit geotechnical drilling for OB1 has been completed
and geotechnical sample collection and mechanical testing
is currently in progress. The results of the drilling and
subsequent mechanical testing programme will be used to
confirm the open pit slope design.
Open pit hydrogeological drilling
Open pit hydrogeological drilling for OB1 has commenced
and is expected to finish on schedule during July 2023. The
results of the drilling will determine potential water inflows
and pore pressures in the pit walls, providing inputs to the
geotechnical and mine planning studies.
Water supply hydrogeological drilling
A geophysical survey of the water supply bore field area
has been completed. The results of the survey will be used
to define the fieldwork and drilling programme required to
define the water extraction bore field required to support
the project’s water needs.
Site topography survey
A full topography survey of the deposit utilising both aerial
drone footage and satellite imagery has been completed to
identify the sites most suitable for the location of the process
plant and planned tailing storage facility.
Processing
Metallurgy
Extraction of vanadium during acid leaching, following initial
pilot and subsequent testing, continues to be above Group
expectations.
Metallurgical testing including ore body variability tests, solid
liquid separation tests and ion exchange testing continues
at SGS Canada Inc (“SGS”) supervised and managed by
TetraTech Limited (“Tetra Tech”).
Testing of the carbon element of the ore has been added to
the scope of work at SGS targeting a minimum 40% carbon
grade product with carbon flotation optimisation work
continuing contemporaneously. Testing of the product for
use in making rubber by substitution for carbon black has
been successfully completed and a further test programme
to produce tyre industry normative data has been
commissioned.
Process design
The process plant design by Tetra Tech is focussed on
employing the results of the SGS laboratory test work to
initially design the comminution, leaching circuit and full
process design criteria for the Stage 1 plant.
Carbon
Test work on the extraction of a carbon concentrate and on
its use as a substitute for carbon black has been included
within the scope of the Stage 1 feasibility study. Flotation
tests show that the necessary >40% concentrate can be
made with good overall carbon recovery. Test work on the
resulting rubber performance shows that partial substitution
of this concentrate for carbon black in the production of
rubber for tyres can be made without loss of performance.
A further programme aimed at facilitating marketing is
planned. Test work on an alternative use for the carbon-rich
tailings for use in the smelting of ferro-silicon is ongoing.
Conclusion
The results of the feasibility study for Stage 1 so far support
or exceed the results indicated in the Company’s 2018
Competent Person’s Report which indicated a project
(combined Stage 1 and Stage 2) NPV of some US$2 billion.
The Company expects the publication of the Stage 1
feasibility study in the fourth quarter this year to significantly
raise awareness of the emergence of this transformational
addition to the global vanadium market.
Discussions with various potential investors and debt
funders have already been initiated but the publication of
the study will be the trigger for the finalisation of these plans.
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 9
Sustainability Review
Our approach
The Company aims to maximise value for its investors and
all stakeholders from the responsible, efficient, and low-
cost production of vanadium and other commodities from
the Balasausqandiq deposit. We seek to re-use or recycle
wherever possible and to minimise the environmental and
social impacts of our operations whilst ensuring the health
and wellbeing of the Group’s workforce.
These objectives have guided the Company’s approach
to the development of the project, where we already
produce vanadium pentoxide, ferro-molybdenum and nickel
concentrates from bought-in raw materials treated in our
expanded pilot plant, and we are carrying out a feasibility
study into the much larger development of the mine and
processing plant for Balasausqandiq itself.
Balasausqandiq is a unique polymetallic vanadium deposit
which also contains a valuable mixture of carbon, uranium,
molybdenum, aluminium, potassium and rare-earth
elements. Vanadium and several of the other elements the
Group already produces will play an important role in the
world’s transition to clean energy and a more sustainable
future.
The Company believes that there is both a commercial
and ethical imperative to maximise the value that can be
extracted from each tonne of raw material which is mined
and processed. The Stage 1 feasibility study underway on the
development of Balasausqandiq is, therefore, considering
the optimum approach that can maximise resource
utilisation by processing all the constituents of the ore to
the point where it becomes a saleable product. The aim is to
avoid any residual waste or discharge from being generated
by the Group’s operations.
Development of appropriate
frameworks
As an exploration and development Group, we have sought
to minimise our environmental impacts whilst ensuring that
all employees can work safely, avoid accidents and reduce
the risk of long-term health hazards. We aim to comply with
all applicable laws, report accurately where required, and
implement appropriate governance standards.
As the Group grows to become a producer of critical
commodities, it will develop an enhanced and comprehensive
approach to address environmental, social, health and safety
issues within an appropriate governance framework. Such
an approach will need to recognise the requirements of all
key stakeholders including local communities, governments,
employees, and investors as well as customers.
To this end, the Company has appointed independent
consultants to undertake an analysis of our existing
principles, controls, procedures, and performance metrics
by comparison to the standards they believe are reasonably
applicable to the Company and its lenders and investors, in
particular, the Equator Principles and the IFC Performance
Standards. Following their initial report, their conclusions and
recommendations are being used to guide our plans for the
development of the project and the direction of the Stage 1
feasibility study.
The Company has also committed to comply with the Financial
Reporting Council’s reporting recommendations contained in
their publication “Streamlined Energy and Carbon Reporting”.
Extracting full value from our production
The Group believes that there is the potential for 100% of
the raw materials it currently treats and 100% of the ore it
will mine to be recovered and sold as useful products and
we ultimately aim to produce little or no residual waste or
discharge from our existing or future operations.
The Group’s principal product, vanadium, has a significant
role in the decarbonisation of the world economy. Small
quantities of vanadium in micro-alloyed steel dramatically
improve the steel’s strength meaning lower volumes of
steel are required to achieve the same goal, for example in
structural steels for building construction. This has significant
environmental benefits along the steel production chain as it
reduces the raw materials required, cuts the energy used in
production and results in lower volumes being transported.
Furthermore, a growing source of demand for vanadium
is for vanadium redox flow batteries that can be used as a
safe and economical way to store electrical energy at grid
scale. Such batteries will be essential if the contribution
of renewable energy to the world’s energy mix is to rise
substantially as we move towards the decarbonisation
targets of the Paris Agreement.
The Group is also already producing and selling both
ferro-molybdenum which is used in steel alloys to increase
strength, hardness, electrical conductivity and resistance to
corrosion and wear and a nickel concentrate which is again
used in the alloying of steel as well as having an important use
in the production of electric vehicle batteries.
Apart from vanadium, the main product to be produced
from the Balasausqandiq operation is a form of carbon,
similar to carbon black, which can be used to make
ferro-silicon or in the production of rubber used in tyres.
The remaining tailings from Balasausqandiq have a number
of potential uses which are being investigated.
Ferro-Alloy Resources Limited Annual Report 202210
Sustainability Review continued
Minimising impacts from production
We believe that the Stage 1 feasibility study for
Balasausqandiq will confirm that any adverse environmental
impacts of our operation are likely to be significantly below
those of our peer group. We believe this can be a source
of competitive differentiation for the Company amongst
customers who are increasingly reviewing supply chain ESG
performance when sourcing vital materials.
Most of the world’s vanadium is made from titano-vanadiferous
magnetite (“TVM”). The primary production of vanadium from
TVM ore requires pre-concentration and then roasting at
approximately 1,100 degrees C to convert the vanadium into
a soluble form to enable recovery. Roasting alone accounts
for over 40% of the energy used by one primary producer
using TVM ore. At Balasausqandiq, the ore is different, and
the proposed process does not require pre-concentration or
roasting, significantly reducing CO
2
emissions.
The proposed production process at Balasausqandiq
involves leaching in sulphuric acid which we expect to make
by processing the sulphur that is currently removed as an
impurity from oil and gas production in Kazakhstan. The
process, which produces no CO
2
, is exothermic and requires
no significant energy input. The waste heat produced will
be used to make steam for the hydrometallurgical process,
further reducing energy requirements and CO
2
emissions.
The production of carbon from the Balasausqandiq ore for
use as carbon black in making rubber is also much more
energy efficient than competitive processes. Carbon black is
usually made by the incomplete combustion of hydrocarbons,
where only some 40% of the original hydrocarbon input is
recovered. The carbon from Balasausqandiq is naturally
occurring and avoids this combustion of hydrocarbons and
the associated emissions of CO
2
.
Social
The Group’s operations utilise land which is unsuitable
for agricultural use and the nearest human habitation
is 16 kilometres away in the village of Aksumbe. There
are no competing land uses or requirement to re-locate
communities as we develop operations. The social impact
of the operations will, therefore, be limited. Existing
infrastructure such as access roads and available grid power
further reduce impact on the local population.
Economic impact on the local community
Nearly all the Group’s employees are Kazakhs, and, with the
exception of specialists, most are hired from the local villages
and the nearby town of Shieli. The Group currently employs
an operating and management team of 200 employees.
Aswe grow and develop, the Group will enhance and
develop its employment policies and procedures.
The Group pays salary taxes for employees including income
tax, social security tax and pension contributions, and VAT
on purchases and in due course will pay corporation tax
and withholding taxes. In addition, under the terms of the
Subsoil Use Agreement for the Balasausqandiq deposit, the
operating company is required, during the period of mining
and based on the subsoil activity, to pay:
• 1% of the annual investment on education in Kazakhstan;
• 1.5% of the annual investment on local development and
infrastructure; and
• 1% of annual profits on research and development.
In addition, the Group has signed an agreement with
the Satbayev Technical University where selected post
graduate students will be given technical work experience
opportunities with respect to the Group’s operations.
Mine closure
The Company has prepared an environmental study in
full compliance with the laws of Kazakhstan and also aims
to meet international standards. As part of this study, a
mine closure plan has been prepared and the Company is
required to contribute 1% of annual mining costs to a mine
closure fund to ensure that funds are available when the
time comes. The Company will aim to back-fill the open pit
with waste rock from mining and contour surplus waste as
mining progresses.
Water
Water is almost fully recycled, and no discharges are made
from the site. In 2022 water consumption was 13,204m
3
(2021: 13,778m
3
).
A hydrogeological study is being carried out which will assess
the availability and likely sufficiency of water for processing
and human needs. Water is currently drawn using
natural pressure from a borehole. Currently, no water is
discharged from operations, although there are losses from
evaporation. Whilst there is not expected to be a shortage,
the Group already recycles as much water as possible and
plans to do the same for the Balasausqandiq project. The
Balasausqandiq project process has been designed to
operate on a low liquid: solid ratio to minimise water usage
and associated reagent use.
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 11
Performance indicators
Health and safety
During the year, the Group had no reported health and safety incidents that lead to time lost, staff requiring medical treatment
or hospitalisation and no fatalities (2021: nil).
Energy and emissions
The table below discloses the Group’s greenhouse gas emissions for 2022, including both emissions resulting from activities for
which the Group is responsible e.g. the combustion of fuel (Scope 1 emissions) and emissions resulting from the purchase of
electricity, heat or steam cooling by the Group for its own use (Scope 2 emissions).
All of the Group’s emissions have been generated outside the United Kingdom and offshore area, as defined by The
Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (“the SECR
Regulations”).
Scope 1 (energy generated on site)
2022 2021
KwH
CO
2
e
(tonnes)
KwH
CO
2
e
(tonnes)
Process plant
Coal for heating/steam 1,828,333 502.4 1,547,166 12.9
Diesel for roasting 9,087,401 2,430.2 3,848,923 7.2
Diesel for other plant 21,532 5.8 17,948 0.03
Other
Coal for heating 1,577,499 433.4 1,139,166 9.3
Diesel (vehicles) 234,940 0.4 191,055 0.4
Benzine (vehicles) 22,341 0.8 416,138 0.7
Total scope 1 12,772,046 3,373.0 7,160,396 30.5
Scope 2 (purchased electricity)
2022 2021
KwH
CO
2
e
(tonnes)
KwH
CO
2
e
(tonnes)
Process plant
Whole plant 1,190,180 *– 898,780 *–
Total scope 2 1,190,180 – 898,780 –
Total scope 1 and scope 2 13,962,226 **3,373.0 8,059,176 **30.5
* this information is currently not available in Kazakhstan
** includes Scope 1 only
Ferro-Alloy Resources Limited Annual Report 202212
Energy consumption
The Group has consumed 13,962,226 KwH (2021: 8,059,176 KwH)
of energy during the year.
All of the Groups’s energy consumption has taken place
outside the United Kingdom and offshore area.
Intensity ratio
The Group will determine a suitable intensity ratio once all
relevant data is available.
Energy efficiency
The key energy efficiency adopted by the Group during the
year has been to include energy saving initiatives within the
Group’s processing plant future development planning.
Methodology
The Group has reported the requirements of the SECR
Regulations having adopted the standard methodology
issued by the Kazakhstan Ministry of Ecology.
In disclosing the Group’s emissions output and energy
consumption during the year, the Company has done so on
an equity share approach. Accordingly, given that all of the
Company’s subsidiary undertakings are wholly owned by
the Company, the activities of the entire group are included
within the disclosures made.
Sustainability Review continued
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 13
Climate Change Disclosures
As a responsible corporate entity operating in the natural
resources sector, the Company is committed to the
recognition and disclosure of the potential impacts of climate
change on the Company’s and Group’s business activities.
The Company supports the initiatives and recommendations
of the Task Force on Climate-related Financial Disclosures
(“TCFD”) and has taken steps to develop climate-related
financial disclosures that it considers are consistent and
appropriate with both the recommended disclosures of the
TCFD and the current position of the Company.
The TCFD recommended disclosure framework comprises
four broad categories of disclosure; governance, strategy, risk
management and metrics and targets. Within each category
of recommended disclosure, the TCFD has identified further
specific disclosures that the Company should report on. The
Company has reported on this basis below.
The Company has considered the appropriate level of detail
to be included within the various disclosures having regard
to the nature and size of the Company’s current operations
and the planned future operations following the construction
of the mine processing facilities at the Balasausqandiq
deposit.
The conclusion is that the majority of the specific disclosures
sought by the TCFD recommendations in the context of the
current operation, the purchase and treatment of vanadium-
containing concentrates, are unlikely to be either useful
or meaningful to the reader of these financial statements
but that the disclosures will have far more relevance and
applicability following the commissioning of the main
Balasausqandiq mine processing facilities. The effects of
climate change on that operation are being considered as
part of the Company’s ongoing Stage 1 feasibility study.
Accordingly, the disclosures noted below are provided
generally in the context of the operation of the bought-in
concentrate processing plant until the Stage 1 feasibility
study into the Company’s planned mine and associated
processing facilities has been completed.
The disclosures made below are consistent with the TCFD
recommendations and recommended disclosures.
Governance
1. Oversight of climate-related risks and
opportunities
The Board is ultimately responsible for the oversight of the
risks and opportunities that are presented by the potential
effects of climate change on the Company’s business
activities. The Company’s executive directors maintain day-
to-day responsibility for the recognition and effect of climate
change on the Company’s operations.
In advance of the start of mining operations, the Company
has constituted a sustainability committee, comprising the
chairman, the chief executive officer and a non-executive
director, that will guide and support the actions of the Board
with respect to climate-related matters.
2. Assessment and management of
climate-related risks
The Board in conjunction with the sustainability committee
will consider and set appropriate Company policies that will
govern how the Company’s management will assess and
manage climate-related risks and opportunities in advance
of the commissioning of the mine.
The Company’s executive directors and Group managers will
be responsible for the implementation and monitoring of the
policies set.
The management of the current operation are responsible
for assessing and managing climate-related risks and
opportunities at the existing plant.
Risk Management
3.Identificationandassessmentof
climate-related risks
With respect to the existing operation, the identification and
assessment of climate-related risks and opportunities is
carried out by management on an ad-hoc basis.
As noted above, the Company is progressing a feasibility
study on the Balasausqandiq deposit. Included within the
study will be an environmental and social impact assessment
(“ESIA”) that, once completed, will identify and assess the
climate-related risks of the project and how those risks can
be managed and mitigated.
Ferro-Alloy Resources Limited Annual Report 202214
Climate Change Disclosures continued
4. Processes adopted for managing
climate-related risks
With respect to the bought-in concentrate processing plant,
no specific climate change risks have been identified. The
availability of concentrates is expected to increase in the
coming years as international regulations prohibiting the
burning of low-grade fossil fuels are implemented, requiring
more use of vanadium-containing catalysts for the refining
of oil that comprise the largest part of the Group’s existing
plant feed-stock. If a climate-related risk is identified and
assessed as likely to have an impact on the operations of the
plant, the plant’s management will implement measures to
manage the impact.
In conjunction with the ESIA, an environmental and
social management system (“ESMS”) will be designed and
developed as part of the Stage 1 feasibility study and
adopted in full once the Balasausqandiq mine has been
commissioned. The ESMS will identify the relevant processes
for the management of climate-related risks arising from the
operation of the mine.
5. Integration of climate-related risk
management into the organisation’s overall
risk management
The ESIA noted above is an integral part of the Company’s
Stage 1 feasibility study and, therefore, a key element of the
Balasausqandiq project. Accordingly, the foreseen climate-
related risks of the project (and the management / mitigation
of same) will be incorporated into the Company’s overall risk
management by virtue of the adoption of the monitoring
systems and controls recommended by the ESIA and ESMS.
Strategy
6. Climate-related risks and opportunities
Opportunities
1. Vanadium
The main climate-related opportunity presented to the
Company is the predicted expansion of the global vanadium
market as a result of the transition to a lower-carbon world
economy.
The demand for vanadium is expected to be driven by two
factors – growth of long-term energy storage solutions that
use vanadium as a key component and an increased use of
vanadium in steel making, a high carbon dioxide emitting
industry, where vanadium as an alloy material can improve
the strength of steel and consequently reduce the quantity
of steel needed.
2. Carbon
A secondary climate-related opportunity for the Company
is the carbon material found within the ore of the
Balasausqandiq deposit.
The Company’s expectation is that the carbon within the ore,
once extracted, will be capable of substituting for certain
grades of carbon black used within industries such as car
tyre manufacturing.
Carbon black is usually produced by the incomplete
combustion of hydrocarbons in specific atmospheric
conditions and typically generates significant levels of carbon
dioxide during production. The carbon in the Company’s ore
can be recovered with relatively low-level emissions which
are mostly necessary for the extraction of the principal
vanadium product. Car tyre manufacturers will, therefore, be
able to cut their supplier-related emissions by the use of this
product.
Risks
The climate-related risks of the project will be identified and
evaluated by the Company’s Stage 1 feasibility study in due
course. No significant climate-change risks to the current
operation have been identified.
7. Impact of climate-related risks and
opportunities on business, strategy and
financialplanning
Climate-related risks and opportunities do not materially
impact on the business, strategy and financial planning
for the bought-in concentrate processing plant given the
relatively small size of the operation.
During 2022, one of the Group’s subsidiaries was awarded
government grant funding of KZT300 million for the
development of technology for the production of mixed
vanadium oxides for use in vanadium redox flow batteries
representing an opportunity for the existing plant to identify
potential new sources of revenue through the manufacture
and marketing of these oxides.
The impact on the Balasausqandiq deposit mining
operations will be considered following the construction and
commissioning of the mine.
8. Resilience of the organisation’s strategy
with respect to climate-related scenarios
With respect to the bought-in concentrate processing plant,
the plant’s management have not identified any particular
climate-related scenarios that would likely have a significant
impact on its ongoing operations. The plant already operates
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 15
in an environment that is subject to extreme weather
conditions and is, therefore, considered to have a strong
resilience to existing and future climate-related scenarios.
The resilience to climate-related scenarios for the
Balasausqandiq mining operations will be identified and
evaluated during the construction and commissioning of
themine.
Metrics and Targets
9. Climate related risk / opportunity metrics
Given the small-scale nature of the bought-in concentrate
processing plant, the Company will develop metrics to
assess climate-related risks and opportunities in line with
its strategy and risk management processes once the
Balasausqandiq mining operation has been commissioned.
10. Energy and emissions
Relevant emissions statistics are disclosed within the
Sustainability Review on page 11.
11. Climate-related risk / opportunity
performance targets
Given the small-scale nature of the bought-in concentrate
processing plant, the Company will develop performance
targets to manage climate-related risks and opportunities
in line with its strategy and risk management processes
once the Balasausqandiq mining operation has been
commissioned.
Ferro-Alloy Resources Limited Annual Report 202216
Principal Risks and Uncertainties
Description of principal risks,
uncertainties and how they are
managed
(a) Current processing operations:
Current processing operations make up a small part of
the Company’s expected future value but are expected to
provide useful cash flows in the near term and allow the
Group to gain valuable experience of the vanadium industry.
The principal risks of this operation are the prices of its
products (vanadium, molybdenum and nickel), availability
of vanadium bearing concentrates and the efficiency of
recovery of products from those concentrates.
The Group is constantly reviewing the market opportunities
for supplies of vanadium bearing concentrates and has
sufficient long-term supply contracts in place for ongoing
production. The Group aims to extract all the useful
components of the raw materials so that no residues
remain on site and so that the maximum value is obtained
from each tonne treated. By this means, we aim to be one
of the most efficient and lowest cost secondary vanadium
treatment plants so that our competitive position reduces
the danger of high prices for raw materials making the
operation uneconomic.
(b) Balasausqandiq project:
The Balasausqandiq project is a much larger contributor to
the Company’s value than the current processing operations
and is primarily dependent on long-term vanadium prices.
The project is dependent on raising finance to meet
projected capital costs (see below) and the successful
construction and commissioning of the project’s proposed
mine processing facilities. It is not unusual for new
mining projects to experience unforeseen problems,
incur unexpected costs and be exposed to delays during
construction, commissioning, and initial production,
allof which could have a material adverse effect on the
Company’s operations and financial position. The Company
has taken steps to mitigate such potential adverse effects
by engaging globally recognised engineers and consultants
to assist with the development and design of the key
elements of the project in addition to the Group’s own highly
qualifiedworkforce.
(c) Geopolitical situation:
While the ongoing invasion of Ukraine by Russia is not
directly impacting the Group’s operations, the Directors
remain vigilant of the situation. The continued main risk of
the conflict is to the Group’s transport routes, many of which
involve transit through Russia. Whilst these are currently
operating without issue, sanctions have been made against
Russian and Belorussian vehicles transiting through Europe
(but not against vehicles registered in other jurisdictions
in region such as Kazakhstan). There is a risk that further
sanctions might prevent transit through Russia into Latvia,
through which the majority of the Company’s exports
currently flow. The Company continues to review alternative
transit routes for raw material imports and product exports
through the West of Kazakhstan, either via the Caspian Sea
or overland south of the Caspian Sea. Routes to China are
working normally.
With respect to the global sanctions imposed on certain
Russian entities and individuals, the Group monitors the
implications of those sanctions on the Group’s trading
activities on an ongoing basis.
(d) Financing risk:
The Balasausqandiq project will require substantial funds
to be raised in debt and possibly further equity which will
be dependent upon market conditions at the time and the
successful completion of the Stage 1 feasibility study.
The existing operation is fully developed and operating
well and, subject to the uncertainties over prices and costs,
isforecast to make profits in 2023 and onwards.
In March of 2021 the Company signed an investment
agreement with Vision Blue Resources Limited (“Vision Blue”).
Under the terms of this agreement and in addition to Vision
Blue’s participation in the 2022 equity fundraise, investments
totalling US$15.5m have already been made and Vision
Blue has the right to subscribe a further US$2.5m at the
original deal price of 9 pence per share at any time up to two
months after the announcement of the Stage 1 feasibility
study. Vision Blue also has further options to subscribe up to
US$30m at higher prices to partially finance the construction
of theproject.
The favourable financial and other characteristics of the
project determined by studies so far completed give the
Directors confidence that the outcome of the Stage 1
feasibility study will be successful. Initial discussions with
potential providers of debt finance have been encouraging.
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Ferro-Alloy Resources Limited Annual Report 2022 17
(e) Climate change risk:
Refer to the Sustainability Review on page 9 and the Climate
Change Disclosures on page 13.
(f) Risks associated with the developing
nature of the Kazakh economy:
According to the World Bank, Kazakhstan has transitioned
from lower-middle-income to upper-middle-income status in
less than two decades. Kazakhstan’s regulatory environment
has similarly developed and the Company believes that
the period of rapid change and high risk is coming to an
end. Nevertheless, the economic and social regulatory
environment continues to develop and there remain some
areas where regulatory risk is greater than in developed
economies.
(g) Commodity price risk:
As already noted above, the success of the Company is
dependent upon the long-term prices of the products to
be produced by the planned mine processing facilities. As a
result of there being no formally established trading markets
for the Company’s principal products from the project,
there is a risk that price fluctuations and volatility for these
products may have an adverse impact on the Company’s
future financial performance.
Ferro-Alloy Resources Limited Annual Report 202218
General
As a consequence of the ordinary shares of the Company
being admitted to the standard segment of the Official List
of the London Stock Exchange, the requirements of the UK
Corporate Governance Code, published by the Financial
Reporting Council, do not apply to the Company. The
Guernsey Finance Sector Code of Corporate Governance
does not apply to the Company since the Company is not
regulated by the Guernsey Financial Services Commission.
However, the Board recognises the importance of good
corporate governance and has implemented corporate
governance practices having consideration to the
recommendations and principles of the UK Corporate
Governance Code and Financial Conduct Authority DTR 7.2
in accordance with the listing rules as far as is considered
appropriate by the Board whilst considering the size and
nature of the business.
The Board is responsible for the overall corporate
governance of the consolidated Group, guiding and
monitoring the business and affairs of the Company on
behalf of the shareholders by whom they are elected and to
whom they are accountable.
Composition of the Board
The number of directors as specified in the Articles of
Incorporation of the Company is a minimum of one and up
to a maximum of seven.
Having regard to the Company’s stage of development,
the Directors believe that the size of the current board
comprising seven directors, three of whom are executive and
four are non-executive, is appropriate. The Directors intend
that there will always be at least as many non-executive
directors as there are executive directors.
Board committees
Audit
The Company has created an audit committee that is
responsible for considering all financial reporting matters
and ensuring that they are properly reported and monitored.
It is also responsible for the review and assessment of the
independence of the external auditors and approval of any
non-audit services, review of the external audit strategy and
findings, assessment of whether an internal audit function is
necessary considering the activities and size of the business
and oversight of significant financial reporting matters.
The committee is chaired by James Turian and Christopher
Thomas is a member. Mr Turian has a background in
accounting, trust and management and is a director of a
firm of accountants in Guernsey which the Board considers
to be recent and relevant experience to carry out his
responsibilities as chairman.
Remuneration
The Company has also created a remuneration committee
to consider all matters related to salary and benefits of
senior staff and executive directors. The remuneration of
non-executive directors is a matter for the Board as a whole.
No director will take part in discussions concerning his own
remuneration package. Mr Thomas is the chairman of the
committee and Mr Turian is a member.
Nomination
The Directors are of the opinion that due to the nature and
size of the Company and its current Board, the functions
often carried out by a nomination committee can be more
successfully conducted by the full board of directors and so
no such committee has been created.
Sustainability
The Company has constituted a sustainability committee
comprising the chairman, the chief executive officer and
a non-executive director, that will guide and support the
actions of the Board with respect to sustainability related
matters, particularly once the Company’s Stage 1 feasibility
study has been issued and construction of the mine has
commenced.
Code of conduct
The goal of establishing the Company as a significant
mining and processing company is underpinned by its core
values of honesty, integrity, common sense and respect
for people. The Company desires to be a good corporate
citizen in all the jurisdictions within which it operates, and to
appropriately balance, protect and preserve all stakeholders’
interests. In particular, the Company gives paramount
concern to the safety of its employees and the maintenance
of high environmental standards.
Shareholder communication
The Board aims to ensure that shareholders and investors
have equal access to Company information.
The Company aims to promote effective communication
with shareholders and encourage effective participation
Governance Statement
Ferro-Alloy Resources Limited Annual Report 2022 19
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
at general meetings through a policy of open disclosure
to shareholders, regulatory authorities and the broader
community of all material information with respect to the
Company’s affairs.
Internal control and risk
management systems
The Company’s accounting and finance team is relatively
small and subject to close control by the executive directors.
For this reason, the audit committee and the Board are of
the opinion that it is not yet appropriate for there to be
a separate internal control department or internal audit
function but has implemented various procedures and
internal controls to provide assurance to the Directors that
accounting and financial risks are adequately controlled.
These include:
• The preparation and regular updating of cash flow
forecasts, changes to which are closely monitored by the
executive directors who discuss necessary changes on an
almost daily basis;
• The Company appointed a Group Finance Director
in April 2022 as well as a Kazakhstan based Finance
Director in July 2022 to oversee and control the quality
of financial reporting of the operating companies based
in Kazakhstan and to perform group accounting and
financial management roles;
• Significant contracts require approval by the Directors
and approval must follow a specified approval matrix; and
• All Group payments must be authorised by a director
and payments by the Company require two directors’
signatures on all payments over US$6,000.
Ferro-Alloy Resources Limited Annual Report 202220
Sir Mick Davis
Non-executive Chairman
Sir Mick Davis holds a number
of directorships at private
companies and is a highly
successful mining executive
accredited with building Xstrata
plc into one of the largest mining
companies in the world prior to
its acquisition by Glencore plc.
Before listing Xstrata on the LSE
as CEO he was CFO of Billiton
plc and Chairman of Billiton
Coal which he joined from the
position of Eskom CFO.
During his career in mining he
has raised almost US$40bn
from global capital markets
and successfully completed
over US$120bn of corporate
transactions, including the
creation of the Ingwe Coal
Corporation in South Africa; the
listing of Billiton on the LSE; the
merger of BHP and Billiton; as
well as numerous transactions
at Xstrata culminating in the sale
to Glencore plc.
Sir Mick Davis is a Chartered
Accountant by profession,
and holds an honours degree
in Commerce from Rhodes
University, South Africa and an
Honorary Doctorate from Bar
Ilan University, Israel.
William Callewaert
Chief Financial Officer
William graduated in 2002 from
the University of Durham with
an honours degree in Law after
which he trained as a Chartered
Accountant in audit services
with leading tax, accounting and
business advisory firm, Blick
Rothenberg. Having qualified
in 2006, William’s career
progressed within advisory
services at Grant Thornton,
KPMG and BDO in both the UK
and offshore.
William is responsible for the
overall management of the
Group’s finances, future funding
requirements and general
statutory compliance. William
is a fellow of the Institute of
Chartered Accountants in
England and Wales.
Nicholas Bridgen
Chief Executive Officer
Nick started his career in 1975
as a Chartered Accountant at
Peat Marwick Mitchell & Co (now
KPMG). In 1979, he moved to
the Rio Tinto Group, becoming
senior group accountant in
1981. He then moved to the
Business Evaluation Department
for the Group in 1985 and was
Group Planning Manager for the
RTZ Pillar Group which held the
engineering, building products
and chemical companies. Nick
spent 14 years with Rio Tinto. In
the mid-1990s, he was finance
director at Bakyrchik Gold
Plc. and in 1998, he founded
Hambledon Mining Plc which
acquired the Sekisovskoye gold
project, listing the company
on AIM and taking the project
from exploration, through
construction and into a
producing mine.
Since 2006, Nick has been a
director and more recently,
CEO, of Ferro-Alloy Resources
Limited. In the role of CEO,
Nickis ultimately responsible
for all aspects of the Ferro-Alloy
Resources Group. He holds a
Bachelor’s degree with honours
from Exeter University, is a
Chartered Accountant and has
also studied corporate finance
at the London Business School.
He speaks Russian.
Andrey Kuznetsov
Director of Operations
Andrey started his career
in 1981 as an industrial
engineer at Kirov Engineering
Plant in Almaty. After three
years he became Chief of the
Scientific Department in the
Central Committee of Youth
(Comsomol). In 1987, Andrey
became general director of the
Almaty NTTM “Kontakt” centre.
In 1995-1996, he was the CEO
of the Kazakhstan subsidiary
of Alfa-Bank. Andrey has been
the general director of Firma
Balausa LLC since 2006. He
holds a Specialist’s degree in
electrical engineering from
Bauman Moscow State Technical
University and a PhD in informal
mathematical logic. He has
also studied management at
Coventry University.
As Director of Operations
Andrey is responsible for the
management of operations in
Kazakhstan and execution of the
Company strategy and policies
approved by the Board.
Board of Directors
Ferro-Alloy Resources Limited Annual Report 2022 21
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Christopher Thomas
Non-executive Director
(Chairman of the
remuneration committee
and member of the audit
committee)
Chris has nearly 35years’
experience in the
communications industry. He
has held various high-level
management positions including
CEO of Proximity London
from 2003 to 2006 - one of
the largest direct and digital
agencies in London. In 2006,
Chris was appointed Chairman
& CEO of BBDO and Proximity
in Asia, subsequently adding
the Middle East and Africa to
his responsibilities. He worked
with major multinational
companies across the growth
markets of SE Asia, China, India
and Africa. In May 2015, Chris
moved to New York to take up
the role of CEO of BBDO in the
Americas, with responsibility for
21 agencies in the U.S., Canada
and Latin America. In February
2019 he stepped down from his
Americas role to concentrate on
his entrepreneurial interests. He
also served as a non-executive
director on the board of
Hambledon Mining from 2004
to 2011.
Chris is the chairman of the
remuneration committee which
considers and approves the
remuneration of all senior
executives including that of the
executive directors. He is also a
member of the Company’s audit
committee.
Petrus Nienaber
Non-executive Director
Peet has several decades of
experience in the mining sector,
most notably spending over
24 years with what became
Xstrata plc. At Xstrata he was
initially Head of Operations,
spearheading the earliest days of
the company, including its growth
to be the largest producer
of ferrochrome. Thereafter
he spent 10 years as CEO of
Xstrata Alloys, one of the largest
producers of ferrochrome and
a leading producer of vanadium,
with some 20,000 people under
Peet’s leadership. After retiring
from the position in 2012, Xstrata
Alloys subsequently went on to
be acquired by Glencore plc.
Peet began his career as an
engineer at Iscor Ltd before
spending several years in the
ferroalloys industry at Samancor
and Anglo American Plc.
James Turian
Non-executive Director
(Chairman of the audit
committee and member
of the remuneration
committee)
James started his career in
1986 and has a background
in accounting, trust and
management. James has
previously been involved with
several mining companies
in Perth, Australia, including
assisting Cooper Energy in
their restructuring in the early
2000s. From 2000 to 2011
James owned and operated
a trust company in Guernsey
which he sold to concentrate
on accountancy and currently
is a director of “Accounts For
You Limited”, a Guernsey
accountancy firm. He holds
several other directorships.
James is a Chartered Fellow of
the Securities Institute IAQ and
is a Fellow of the Institute of
Directors.
James is the chairman of the
audit committee where he is
responsible for chairing the
audit committee meetings.
Ferro-Alloy Resources Limited Annual Report 202222
Andrey Kuznetsov
Deputy Director of
Operations
Having graduated from the
Saint-Petersburg State University
with a Masters in Mathematics
and Bachelor in Economics
Andrey started his career as a
management consultant with
boutique consultancy firm,
Strategica. Andrey then joined
Danish company Dinex, in
Russia, as a finance director
for two years before moving to
Denmark to complete an MBA
at the Copenhagen Business
School.
Post MBA, Andrey joined Danish
company ECCO where he spent
almost 8 years in various roles
across Denmark, Netherlands
and Russia. Andrey’s final role
at ECCO was General Manager
East, where he was responsible
for ECCO distribution markets
in Russia, Ukraine, Georgia,
Moldova and Bulgaria.
Andrey joined the Company in
2019 as the finance director
of the Company’s Kazakhstan
subsidiary, Firma Balausa LLC.
In 2022, Andrey was appointed
deputy general director of Firma
Balausa LLC to support the
general director with operations
and the Company’s Stage 1
feasibility study.
Anvar Moldakhanov
Finance Director
Anvar started his career in
accounting as an associate at
PricewaterhouseCoopers in
London during 2001. Since
then, he has held senior finance
positions in various industries
in Kazakhstan, including
mining, media and advertising,
manufacturing, and real estate,
with a successful track record in
both financial management and
mergers and acquisitions.
Anvar holds a Bachelor’s degree
in Economics with honours
from Warwick University as
well as having studied Applied
Mathematics at Novosibirsk
State University. He is a qualified
Chartered management
accountant.
Baurzhan Tleulinov
Project Director
Baurzhan started his career in
natural resources with Bakyrchik
Mining Venture LLC (a subsidiary
of Polymetal International Plc),
a major gold mine in Eastern
Kazakhstan, as an operator
before becoming its deputy
director general.
Subsequent positions include
senior roles at a number of
high-profile CIS companies
including Celtic Resources, Nord
Gold, Central Asia Metals and
Verny Capital.
Baurzhan is a graduate of the
Kazakh National Technical
University.
Senior Management Team
Ferro-Alloy Resources Limited Annual Report 2022 23
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
The Directors present their report and the audited
consolidated financial statements for the year ended
31December 2022.
General
in Guernsey as a non-cellular limited company .
The Company’s principal place of business and registered
office is Noble House, Les Baissieres, St Peter Port,
Principal activity
Review of business
A review of the business during the year is included within
the Operational Review at page 2.
The Group’s business and operations and the results thereof
are reflected in the attached financial statements.
The principal risks and uncertainties facing the Company are
summarised at page 16.
Results and dividend
During the 12 months ended 31 December 2022, the Company
reported a loss of US$4.3m (2021: loss of US$2.8m).
No dividends have been declared or paid in respect of the
years ending 2022 or 2021.
Share capital and funding
The ordinary shares of the Company were listed on the
standard segment of the main market of the London Stock
Exchange on 28 March 2019 and, on a fully fungible basis, on
the Astana International Stock Exchange on 6 January 2020.
Full details of the Company’s share capital, together with
details of the movements in the Company’s issued share
capital during the year, are set out in Note 20 to the
consolidated financial statements on page 53.
Directors
The board of directors is comprised of three executive
directors and four non-executive directors.
Current directors
The directors of the Company who held office during the
year and to the date of this report are as follows:
• Sir Mick Davis
• Nicholas Bridgen
• Andrey Kuznetsov
• William Callewaert (appointed 1 April 2022)
• Christopher Thomas
• Petrus Nienaber
• James Turian
The biographical details of those directors that served during
the year are set out at pages 20 to 21.
Election and re-election of directors
In accordance with the Company’s Articles of Incorporation,
any director who has been appointed by the Board since
the date of the previous annual general meeting or who has
not previously retired at the two preceding annual general
meetings shall stand for election or re-election at the next
general meeting.
At the Company’s annual general meeting held on
10November 2022, all appointed directors were elected or
re-elected to their respective roles.
Attendance at scheduled Company board meetings
Scheduled (5)
Held at short
notice (1)*
Sir Mick Davis
l l l l l l
Nicholas Bridgen
l l l l l l
Andrey Kuznetsov
l l l l l l
William Callewaert
l l l l l l
Christopher Thomas
l l l l l
–
Petrus Nienaber
l l l l l l
James Turian
l l l l l l
* As part of the September 2002 fundraise an unforeseen board
meeting was required to be held at short notice which Christopher
Thomas was unable to attend due to prior commitments.
Directors’ Report
Ferro-Alloy Resources Limited Annual Report 202224
Remuneration
Salary/ fees
($’000)
Benefits
($’000)
Pension
($’000)
Bonus/other
($’000)
Total
($’000)
2021 2022 2021 2022 2021 2022 2021 2022 2021 2022
Sir Mick Davis - - - - - - - - - -
Nicholas Bridgen 240 340 23 36 - - - - 263 376
Andrey Kuznetsov 160 240 - - - - - - 160 240
William Callewaert - 148 - 4 - - - - - 152
Christopher Thomas 36 40 - - - - - - 36 40
Petrus Nienaber 10 40 - - - - - - 10 40
James Turian 36 40 - - - - - - 36 40
Total 482 848 23 40 - - - - 505 888
Director’s interests in the issued share capital of the Company
The interests of the Directors in the Company’s issued share capital at 31 December 2022 and at the date of the signing of this
report are as follows:
31 Dec 2022
Number of
Ordinary Shares
31 Dec 2022
% of
Share Capital
31 Dec 2021
Number of
Ordinary Shares
31 Dec 2021
% of
Share Capital
Sir Mick Davis
*
- -
*
- -
Nicholas Bridgen 53,072,133 11.8 49,738,800 13.2
Andrey Kuznetsov 68,517,333 15.2 68,517,333 18.1
Christopher Thomas
**
6,456,845 1.4 5,748,512 1.5
James Turian 444,712 0.1 444,712 0.1
* Sir Mick Davis is the Chairman of Vision Blue Resources Limited and the beneficiary of a Trust that is a shareholder in Vision Blue Resources Limited
and, therefore, he indirectly has an interest in that company’s investment in Ferro-Alloy Resources Limited arising from the investment agreement in
place between the two entities.
** including shares of Assiduous Group Limited which holds 5,912,133 ordinary shares. Assiduous Group Limited is an investment vehicle in which
Christopher Thomas is the sole shareholder and director.
Director’s interests in share options of the Company
On 29 June 2022, the Company granted share options over 250,000 ordinary shares in the Company to William Callewaert,
Chief Financial Officer. The share options, which form part of his service agreement dated 23 December 2021 where it was
contractually agreed to issue the share options 90 days after his commencement as Chief Financial Officer of the Company,
being 1 April 2022, are exercisable on the third anniversary from the date of grant and are exercisable for a period of two
years following the exercise date. The share options have an exercise price of 13.1 pence being the closing mid-market price of
the Company’s ordinary shares as quoted on the main market of the London Stock Exchange on the last business day before
the date of grant.
Substantial Shareholdings
A list of shareholders who beneficially hold more than 5% of the Company’s shares at 31 December 2022 is as follows:
Name of shareholder Number of Ordinary Shares Percentage of voting rights
Vision Blue Resources Limited 77,551,695
*
17.3%
Andrey Kuznetsov 68,517,333 15.2%
Nicholas Bridgen 53,072,133 11.8%
* Vision Blue Resources Limited also hold convertible loan notes which are due to be converted into an additional 33,520,088 shares when to do so will
not trigger the requirement for the issue of a new prospectus by the Company.
Directors’ Report continued
Ferro-Alloy Resources Limited Annual Report 2022 25
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Directors’ Indemnity Insurance
During the year, Director’s and Officer’s liability insurance
was maintained for the Directors and other officers of the
Group.
Political Donations
The Group did not make any political donations during the
year.
Electronic Communications
The Directors are responsible for ensuring that the
Company’s annual report and financial statements are made
available on a website. Financial statements are published on
the Company’s website (www.ferro-alloy.com) in accordance
with applicable legislation in Guernsey governing the
preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial
statements contained therein.
Going Concern
The Directors have reviewed the Group’s cash flow forecasts
for a period of at least 12 months from the date of approval
of the financial statements, together with sensitivities
and mitigating actions. In addition, the Directors have
given specific consideration to the continued risks and
uncertainties associated with the geopolitical situation with
respect to Russia and Ukraine.
The Group now has the facilities and capacity in place to
operate profitably and although the amount of those profits
available to fund the Stage 1 feasibility study and investment
programme may vary with metal prices and other factors,
the Directors are confident that the Company has sufficient
resources to continue as a going concern for at least the
next 12 months.
Post Balance Sheet Events
Please refer to Note 29 of the consolidated financial
statements at page 65 for relevant events that occurred after
the year end.
Auditor
Crowe U.K. LLP has expressed its willingness to continue in
office as auditor and a resolution to re-appoint Crowe U.K.
LLP will be proposed at the Company’s forthcoming annual
general meeting.
Statement as to Disclosure of
Information to Auditor
The Directors who were in office at the date of the approval
of the consolidated financial statements have confirmed
that, as far as they are aware, there is no relevant audit
information of which the Company’s auditor is unaware and
that each director has taken all the steps he ought to have
taken as a director to make himself aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.
Approved by the Board of Directors and signed on its behalf
William Callewaert
Director
27 April 2023
Ferro-Alloy Resources Limited Annual Report 202226
The Companies (Guernsey) Law, 2008 requires the Directors
to prepare financial statements for each financial period
which give a true and fair view of the state of affairs of the
Group for that period and of the profit or loss of the Group
for that period. Under that law they have elected to prepare
the financial statements in accordance with International
Financial Reporting Standards as adopted by the European
Union and applicable law.
In preparing those financial statements the Directors are
required to:
• Select suitable accounting policies and then apply them
consistently;
• Make judgements and estimates that are reasonable and
prudent;
• State whether applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements; and
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time
the financial position of the Group and to enable them to
ensure that the financial statements have been properly
prepared in accordance with the Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets
of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with the
above requirements in preparing the financial statements.
To the best of the Directors’ knowledge:
a) the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted
by the European Union and applicable law, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of Ferro-Alloy Resources Limited and the
undertakings included in the consolidation as a whole;
and
b) the management report includes a fair review of the
development and performance of the business and
the position of Ferro-Alloy Resources Limited and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks
and uncertainties that they face.
On behalf of the Board of Directors
William Callewaert
Director
27 April 2023
Directors’ Responsibility Statement
Ferro-Alloy Resources Limited Annual Report 2022 27
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Opinion
We have audited the consolidated financial statements
of Ferro-Alloy Resources Limited (the “Company”) and its
subsidiaries (“the Group”) for the year ended 31 December
2022 which comprise the consolidated statement of profit
or loss and other comprehensive income, the consolidated
statement of financial position, consolidated statement of
changes in equity, consolidated statement of cash flows and
notes to the consolidated financial statements, including
significant accounting policies. The financial reporting
framework that has been applied in their preparation is
applicable law and EU-adopted International Financial
Reporting Standards (“IFRS”)
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s affairs
as at 31 December 2022 and of its loss for the year then
ended;
• have been properly prepared in accordance with EU-
adopted International Financial Reporting Standards;
• have been prepared in accordance with the requirements
of the Companies (Guernsey) Law 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are
independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going
concern
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the entity’s
ability to continue to adopt the going concern basis of
accounting included
• Assessing the cash flow requirements of the Group
over the duration of the going concern period based on
budgets and forecasts;
• Understanding the forecast expenditure that is
committed, and that which could be considered
discretionary;
• Considering the liquidity of existing assets in the
statement of financial position; and
• Considering potential downside scenarios and the
resultant impact on available funds.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s ability to continue as a going
concern for a period of at least twelve months from when
the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept
of materiality. An item is considered material if it could
reasonably be expected to change the economic decisions
of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the
impact of misstatements identified.
Based on our professional judgement, we determined overall
materiality for the financial statements as a whole to be
$280,000 (2021: $200,000), based on approximately 1.5% of
total assets.
We use a different level of materiality (‘performance
materiality’) to determine the extent of our testing for the
audit of the financial statements. Performance materiality
is set based on the audit materiality as adjusted for the
judgements made as to the entity risk and our evaluation
of the specific risk of each audit area having regard to the
internal control environment. Performance materiality was
set at 70% of materiality for the financial statements as a
whole, which equates to $195,000 (2021: $140,000).
Where considered appropriate performance materiality
may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
Independent Auditor’s Report
to the members of Ferro-Alloy Resources Limited
Ferro-Alloy Resources Limited Annual Report 202228
We agreed with the Audit Committee to report to it all
identified errors in excess of $10,000 (2021: $10,000). Errors
below that threshold would also be reported to it if, in our
opinion as auditor, disclosure was required on qualitative
grounds.
Overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding
of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed
the risk of management override of internal controls,
including assessing whether there was evidence of bias by
the Directors that may have represented a risk of material
misstatement.
The Group operates through the Parent Company based
in Guernsey whose main function is the incurring of
administrative costs and providing funding to the operating
entities in Kazakhstan. In addition to the Parent Company,
the subsidiary Firma Balausa LLC was considered to be a
significant component.
In establishing our overall approach to the group audit, we
determined the type of work that needed to be performed
in respect of each component. A full scope audit of both
the Parent Company and Firma Balausa LLC subsidiary
was carried out principally in Kazakhstan by a local Crowe
network member firm, at the direction of instructions
provided by the Group auditor. The consolidation was
audited by the Group auditor. The remaining components
of the group were considered non-significant and these
components were subject to analytical procedures
performed by the Group auditor.
A member of the Group audit team visited the operating
location to meet with local management and substantiate
information and explanations provided during the audit
work.
Our involvement with component auditors
For the work performed by the component auditor, we
determined the level of involvement needed in order to
be able to conclude whether sufficient appropriate audit
evidence has been obtained as a basis for our opinion
on the consolidated financial statements as a whole. Our
involvement with the component auditor included the
following:
• Detailed group instructions were sent to the component
auditor, which included the significant areas to be covered
by the audit (including areas that were deemed to be key
audit matters as detailed below), the level of component
materiality, and set out the information required to be
reported on to the Group auditor;
• The Group auditor reviewed the component auditor’s
working papers at their offices in Kazakhstan and held
regular calls with the component auditor throughout the
engagement;
• We held calls and meetings with Group and component
management to discuss accounting and audit matters
arising.
Independent Auditor’s Report continued
Ferro-Alloy Resources Limited Annual Report 2022 29
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter How our scope addressed the key audit matter
1. Carrying value of intangible assets (note
13)
The Group carries intangible assets totalling
$4.2m (2021: $1.4m) in relation to the
Balasausqandiq deposit in Kazakhstan. These
costs are capitalized in accordance with the
requirements of IFRS 6.
At each reporting date, the directors are
required to assess whether there are any
indicators of impairment, that would require an
impairment assessment to be carried out. The
directors concluded there were no indicators of
impairment.
The directors’ consideration of the impairment
indicators requires them to make certain
judgements, and may include certain estimates.
These matters, together with the materiality of
the exploration and evaluation assets make this
a key audit matter.
We obtained and reviewed the directors’ assessment of the indicators
of impairment, as set out in IFRS 6 “Exploration for and evaluation
of mineral resources”. The following work was undertaken to
corroborate the director’s assessment that there were no indications
of impairment:
• We obtained a copy of the Group’s subsoil use agreement, and
confirmed that it remains valid.
• We made specific enquiries of the directors and key staff involved
in the exploration work, and reviewed budgets and forecasts to
support the Group continuing with further exploration work in the
area covered by the subsoil use agreement.
• We reviewed the most recent Competent Person’s report on the
exploration asset for any indications that the capitalised costs may
be impaired.
• We reviewed the adequacy of disclosures in the financial
statements in r elation to the impairment consideration.
Based on our work performed, we consider the directors’ assessment,
and the financial statements disclosures to be appropriate.
2. Carrying value of property, plant and
equipment (note 12)
The Group holds property plant and equipment,
totalling $5.4m (2021: $4.9m) principally relating
to the processing plant.
At each reporting date, the directors are
required to assess whether there are any
indicators of impairment, that would require
an impairment assessment to be carried out.
The directors concluded there were indicators
of impairment and so an assessment was
performed.
This assessment required the directors to make
estimates in relation to a net present value
model for the plant to determine its value in use
over its expected lifetime, based on operations
using bought-in concentrate.
Given the estimates and judgements required,
this area was considered to represent a
significant audit risk and a key audit matter.
We obtained and reviewed the directors’ impairment consideration,
including the following:
• We assessed the Group’s budgeting review and approval
procedures on which the cash flow forecasts are based.
• We compared the Group’s assumptions to external data for key
inputs such as commodity prices, consideration of the discount
rate, and comparison of production expectations to currently
achieved volumes.
• We reviewed of the scenario-based sensitivity calculations prepared
by management to assess whether these were reasonably likely
outcomes, and their impact on the cash flow forecasts.
• We assessed whether appropriate disclosure has been made in the
financial statements in relation to the impairment consideration
performed.
Based on our work performed, we consider the directors’ assessment
of impairment to tangible assets, and the financial statements
disclosures to be appropriate.
Ferro-Alloy Resources Limited Annual Report 202230
Independent Auditor’s Report continued
Key audit matter How our scope addressed the key audit matter
2. Revenue recognition (note 4)
The Group generated revenues of $6.27m
(2021: $4.73m) for the year.
In considering application of IFRS 15 “Revenue
from Contracts with Customers”, particular
attention was required to:
– The identification of performance obligations
in the contract, and the point at which
performance obligations are satisfied and
when revenue is recorded, which can be
specific to each contract.
– The accounting for variable consideration
associated with estimates of quality and
quantity for sales during the year, which are
subject to final checks post year end; and
– The accounting treatment for provisional
pricing estimates that apply under the
contracts to consider the fair value of
contract assets and liabilities.
Given the estimates and judgements required,
this area was considered to represent a
significant audit risk and a key audit matter.
We performed the following procedures:
• We assessed the Group’s contracts and revenue recognition
policy against the 5-step model of IFRS 15 to consider the
appropriateness of the accounting policy.
• We obtained and reviewed sales agreements for a sample of
customers to assess the appropriateness and application of
the accounting policy. Specific consideration was given to the
identification of performance obligations and the timing and
circumstances at which these are satisfied.
• We evaluated the appropriateness of management’s accounting
treatment for the provisional pricing clauses for open sales, and for
the estimation of quality and quantity amounts, comparing these to
actual outcomes post year end.
• We obtained sales confirmation letters from the Group’s key
customers, covering more than 99% of revenue.
• We agreed a sample of revenue transactions to documentation
supporting shipping and delivery of goods, ensuring that revenue
had been recognised at the appropriate point. For a sample of sales
around the year end, we vouched to documentation supporting
their inclusion in the correct accounting period.
• We reviewed financial statements disclosures to ensure these were
compliant with IFRS 15.
Based on our work performed, we consider that revenue has been
appropriately recognised in line with IFRS 15.
Our audit procedures in relation to these matters were
designed in the context of our audit opinion as a whole. They
were not designed to enable us to express an opinion on
these matters individually and we express no such opinion.
Other information
The other information comprises the information included
in the annual report other than the financial statements and
our auditor’s report thereon. The directors are responsible
for the other information contained within the annual report.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read
the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of
the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine
whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Ferro-Alloy Resources Limited Annual Report 2022 31
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Matters on which we are required to
report by exception
We have nothing to report to you in respect of the following
matters where the Companies (Guernsey) Law 2008 requires
us to report to you if, in our opinion:
• proper accounting records have not been kept by the
Group, or proper returns adequate for our audit have not
been received from branches not visited by us; or
• the consolidated financial statements are not in
agreement with the accounting records and returns; or
• we have not received all the information and explanations
we require for our audit.
Responsibilities of the directors for
the financial statements
As explained more fully in the directors’ responsibilities
statement set out on page 26, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and the
procedures in place for ensuring compliance. These
included the Companies (Guernsey) Law 2008, and the
significant laws and regulations in Kazakhstan including
the terms of the subsoil use agreement, tax legislation
and environmental legislation.
• As part of our audit planning process, we assessed the
different areas of the financial statements, including
disclosures, for the risk of material misstatement. This
included considering the risk of fraud where direct
enquiries were made with management and those
charged with governance concerning both whether they
had any knowledge of any actual or suspected fraud
and their assessment of the susceptibility to fraud.
We considered the risk to be greater in areas involving
significant management estimation or judgement. Based
on this assessment we designed audit procedures to
focus on these specific areas.
• We tested the appropriateness of journal entries
throughout the year by vouching a risk-based sample of
journals to supporting documentation and explanations.
• A detailed review of the Group’s year end adjusting
entries was performed. Any items that appeared unusual
in nature or amount were vouched to supporting
documentation.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that some material misstatements of the
financial statements may not be detected, even though the
audit is properly planned and performed in accordance with
the ISAs (UK). The potential effects of inherent limitations are
particularly significant in the case of misstatement resulting
from fraud because fraud may involve sophisticated and
carefully organized schemes designed to conceal it, including
deliberate failure to record transactions, collusion or
intentional misrepresentations being made to us.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Ferro-Alloy Resources Limited Annual Report 202232
Use of our report
This report is made solely to the company’s members, as
a body, in accordance with Section 262 of the Companies
(Guernsey) Law 2008. Our audit work has been undertaken
so that we might state to the company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Stephen Bullock
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
Date: 27 April 2023
Independent Auditor’s Report continued
Ferro-Alloy Resources Limited Annual Report 2022 33
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Note
2022
$000
2021
$000
Revenue from customers (pricing at shipment) 4 6,773 4,709
Otherrevenue(adjustmentstopriceafterdeliveryandfairvalue
changes)
4 (502 ) 22
Total revenue 4 6,271 4,731
Cost of sales 5 (7,516 ) (4,893 )
Gross loss (1,245 ) (162 )
Other income 6 77 28
Administrative expenses 7 (2,545 ) (2,471 )
Distribution expenses (265 ) (94 )
Other expenses 8 (426 ) (11 )
Loss from operating activities (4,404 ) (2,710 )
Net finance income / (costs) 10 118 (117 )
Loss before income tax (4,286 ) (2,827 )
Income tax 11 - -
Loss for the period (4,286 ) (2,827 )
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations (541 ) (158 )
Total comprehensive loss for the period (4,827 ) (2,985 )
Loss per share (basic and diluted) (US$) 20 (0.011 0.008
Consolidated Statement
of Profit or Loss and Other
Comprehensive Income
for the year ended 31 December 2022
Ferro-Alloy Resources Limited Annual Report 202234
Note
31 December 2022
$000
31 December 2021
$000
ASSETS
Non-current assets
Property, plant and equipment 12 5,434 4,863
Exploration and evaluation assets 13 4,208 1,434
Intangible assets 14 19 21
Prepayments 18 1,273 930
Total non-current assets 10,934 7,248
Current assets
Inventories 16 1,628 2,100
Trade and other receivables 17 1,151 116
Prepayments 18 911 670
Cash and cash equivalents 19 4,331 2,810
Total current assets 8,021 5,696
Total assets 18,955 12,944
EQUITY AND LIABILITIES
Equity
Share capital 20 50,827 41,252
Convertible loan notes 20 4,019 4,019
Additional paid-in capital 397 397
Share-based payment reserve 20 5 -
Foreign currency translation reserve (4,161 ) (3,620 )
Accumulated losses (35,674 ) (31,388 )
Total equity 15,413 10,660
Non-current liabilities
Loans and borrowings 21 - 901
Provisions 22 33 42
Total non-current liabilities 33 943
Current liabilities
Loans and borrowings 21 1,108 489
Trade and other payables 23 2,383 828
Interest payable 18 24
Total current liabilities 3,509 1,341
Total liabilities 3,542 2,284
Total equity and liabilities 18,955 12,944
These consolidated financial statements were approved by the Directors on 27 April 2023 and were signed on its behalf by:
William Callewaert
Director
The notes on pages 37 to 65 form part of these consolidated financial statements.
Consolidated Statement of
Financial Position
as at 31 December 2022
Ferro-Alloy Resources Limited Annual Report 2022 35
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Consolidated Statement of
Changes in Equity
for the year ended 31 December 2022
Share
capital
$000
Convertible
loan notes
$000
Additional
paid in
capital
$000
Share-
based
payment
reserve
$000
Foreign
currency
translation
reserve
$000
Accumulated
losses
$000
Total
$000
Balance at 1 January 2021 35,606 - 397 - (3,462 ) (28,561 ) 3,980
Loss for the year - - - - - (2,827 ) (2,827 )
Other comprehensive
expenses
Exchange differences
arising on translation of
foreign operations
Total comprehensive loss
for the year
Transactions with
owners, recorded directly
in equity
Shares issued, net of issue
costs
Convertible loan notes - 4,019 - - - - 4,019
Balance at 31 December
2021
Balance at 1 January 2022 41,252 4,019 397 - (3,620 ) (31,388 ) 10,660
Loss for the year - - - - - (4,286 ) (4,286 )
Other comprehensive
expenses
Exchange differences
arising on translation of
foreign operations
Total comprehensive loss
for the year
Transactions with
owners, recorded directly
in equity
Shares issued, net of issue
costs (Note 20)
Other transactions
recognised directly in
equity
Balance at 31 December
2022
Ferro-Alloy Resources Limited Annual Report 202236
Note
2022
$000
2021
$000
Cash flows from operating activities
Loss for the year (4,286 ) (2,827 )
Adjustmentsfor:
Depreciation and amortisation 5, 7 505 455
Write-off of property, plant and equipment 54 (84 )
Write-down of inventory to net realisable value 8 160 -
Write-off of VAT non-refundable 7 - 499
Share-based payment expense 20 5 -
Net finance (gain) / loss 10 (118 ) 117
Cash used in operating activities before changes in working
capital
(3,680 ) (1,840 )
Change in inventories 312 (1,209 )
Change in trade and other receivables (1,035 ) (397 )
Change in prepayments (584 ) (628 )
Change in trade and other payables 1,555 (846 )
Change in receivables / payables at FVTPL - (59 )
Net cash used in operating activities (3,432 ) (4,979 )
Cash flows from investing activities
Acquisition of property, plant and equipment 12 (1,466 ) (2,211 )
Acquisition of exploration and evaluation assets 13 (2,871 ) (333 )
Acquisition of intangible assets 14 (1 ) (1 )
Proceeds on fixed asset disposal 6 36 (1 )
Net cash used in investing activities (4,302 ) (2,545 )
Cash flows from financing activities
Proceeds from issue of share capital 20 10,000 5,900
Transaction costs on share subscriptions (425 ) (254 )
Proceeds from issuance of convertible loan notes - 4,019
Repayment / proceeds from borrowings 21 (300 ) 476
Interest paid 21 (82 ) (80 )
Net cash from financing activities 9,193 10,061
Net increase in cash and cash equivalents 1,459 2,537
Cash and cash equivalents at the beginning of year 19 2,810 707
Effect of movements in exchange rates on cash and cash
equivalents 62 (434 )
Cash and cash equivalents at the end of the year 4,331 2,810
Consolidated Statement of
CashFlows
for the year ended 31 December 2022
Ferro-Alloy Resources Limited Annual Report 2022 37
STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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STRATEGY CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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Ferro-Alloy Resources Limited
Company Registration Number 63449
Registered Office Noble House
Les Baissieres
St Peter Port
Guernsey
GY1 2UE
Directors Sir Mick Davis
Nicholas Bridgen
Andrey Kuznetsov
William Callewaert (appointed on 1 April 2022)
Christopher Thomas
Petrus Nienaber
James Turian
Corporate Brokers
Shore Capital Stockbrokers Limited
57 St James’s Street, Cassini House
London, SW1A 1LD
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London, EC2Y 9LY
Tengri Partners Investment Banking (Kazakhstan) JSC
17 Al-Farabi Avenue
Almaty, 050059
Kazakhstan
Auditors Crowe U.K. LLP
55 Ludgate Hill
London, EC4M 7JW
Registrar Computershare Investor Services (Guernsey) Limited
1
st
Floor, Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 1DB
Financial Press Relations and Investor
Relations
St Brides Partners Limited
Warnford Court
29 Throgmorton Street
London, EC2N 2AT
Company Information
Ferro-Alloy Resources Limited Annual Report 2022
Ferro-Alloy Resources Limited
Noble House
Les Baissieres
St. Peter Port
Guernsey
GY1 2UE
www.ferro-alloy.com