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Ferro-Alloy Resources Limited
Annual Report
for the year ended
31 December 2021
2
Contents
Company Information 3
Directors’ Report 4
Report on Operations 10
Environmental and Social Report 17
Responsibility Statement 22
Governance Statement 23
Independent Auditors’ Report 25
Consolidated Statement of Profit or Loss and Other 31
Comprehensive Income
Consolidated Statement of Financial Position 32
Consolidated Statement of Changes in Equity 33
Consolidated Statement of Cash Flows 34
Notes to the Consolidated Financial Statements 35-64
3
Company Information
Ferro-Alloy Resources Limited
Company Registration Number 63449
Registered Office Noble House
Les Baissieres
St Peter Port
Guernsey
GY1 2UE
Directors Sir Mick Davis (appointed on 7 June 2021)
Nicholas Bridgen
Andrey Kuznetsov
William Callewaert (appointed on 1 April 2022)
Christopher Thomas
Petrus Nienaber (appointed on 7 June 2021)
James Turian
Corporate Brokers Shore Capital and 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 St Brides Partners Limited
and Investor Relations Warnford Court
29 Throgmorton Street
London, EC2N 2AT
Ferro-Alloy Resources Limited
Directors’ Report
for the year ended 31 December 2021
4
Directors’ Report
The Directors present their annual report and the financial statements of the Group for the year ended
31 December 2021.
General
Ferro-Alloy Resources Limited (“the Company”) is registered in Guernsey as a Guernsey non‐
cellular limited company.
The Company’s principal place of business and registered office is Noble House, Les Baissieres, St
Peter Port, Guernsey.
The Company is subject to the City Code on Takeovers and Mergers. The existing ordinary shares
of the Company have been listed on the Standard segment of the main market of the London Stock
Exchange since 28 March 2019.
On 6 January 2020, its shares were listed on the Astana International Stock Exchange.
Principal Activity
The Company is the holding company of a group of wholly owned companies (together, the
“Group”) which carries on a mining and mineral processing business with operations located at the
Balasausqandiq vanadium/polymetallic mineral deposit in the Kyzylordinskaya Oblast in Southern
Kazakhstan.
Development plan
The main objective of the Group is to bring into production the Balasausqandiq mine and to build a
processing plant to treat one million tonnes of ore per year (Phase 1) and later increase to a total of
four million tonnes per year (Phase 2). A feasibility study was carried out under Kazakhstan standards
and is currently being upgraded and expanded to western bankable standards.
Phase 1 is expected to take two years to design and build, and Phase 2 will be started as soon as
commissioning of Phase 1 has been successfully concluded. Production is expected to be 5,600
tonnes per year of vanadium pentoxide from Phase 1 and a total of 22,400 tonnes per year after Phase
2. Further income is expected from co-product carbon and other by-products which are expected to
account for in excess of one third of revenue depending on realised prices.
Owing to the unique type of ore and the level of existing infrastructure at the mine site, the capital
and operating costs of this operation are expected to be a fraction of those of other vanadium projects
and producers. The net present value of Phases 1 and 2 combined is estimated to be around US$2
billion using a long-term assumption of US$7.5/lb for vanadium pentoxide.
As part of the bankable feasibility study into the Balasausqandiq project a pilot plant with a capacity
of 15,000 tonnes per year of ore was built and operated successfully. After completing the test
programme, the plant was converted to process bought-in concentrates which, being of higher grade
than mined ore, enabled it to produce at a commercial level. It is now being expanded, potentially
making a significant contribution to the capital costs of Phase 1 of the Balasausqandiq project whilst
being a separate operation. The existing operation and Phase 1 together are expected to provide
sufficient finance for Phase 2.
Ferro-Alloy Resources Limited
Directors’ Report
for the year ended 31 December 2021
5
Business Review
A review of the business during the year is included in the Report on Operations at page 10.
The Group’s business and operations and the results thereof are reflected in the attached financial
statements. In addition, refer to Note 25 of the financial statements for financial instrument risks.
Business Risks
A review of the key risks to the Company is set out in the Report on Operations at page 10 and the
notes to the financial statements at pages 39 to 68.
Financial Results
During the 12 months ended 31 December 2021, the Company reported a loss of US$ 2.8m (2020:
loss of US$ 3.9m).
No dividends have been declared in respect of the years ending 2021 or 2020.
Directors
The board is comprised of two executive directors and four non-executive directors. The biographical
details of those directors that served during the year are as follows:
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.
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 Nick is 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.
Ferro-Alloy Resources Limited
Directors’ Report
for the year ended 31 December 2021
6
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 TOO Firma Balausa 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.
Christopher Thomas, Non-executive Director (Chairman of the remuneration committee and
member of the audit committee)
Chris has nearly 35 years’ 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
Mr Peet Nienaber 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 Mr
Nienaber’s leadership. After retiring from the position in 2012, Xstrata Alloys subsequently went
on to be acquired by Glencore plc.
Mr Nienaber 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
Ferro-Alloy Resources Limited
Directors’ Report
for the year ended 31 December 2021
7
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.
Directors’ Remuneration
Salary/ fees
(US$’000)
Benefits
(US$’000)
Pension
(US$’000)
Total
(US$’000)
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
Sir Mick Davis
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
Nicholas Bridgen
240
240
nil
nil
nil
nil
nil
nil
240
240
Andrey Kuznetsov
195
160
nil
nil
nil
nil
nil
nil
195
160
Christopher Thomas
30
36
nil
nil
nil
nil
nil
nil
30
36
Petrus Nienaber
nil
10
nil
nil
nil
nil
nil
nil
nil
10
James Turian
30
36
nil
nil
nil
nil
nil
nil
30
36
Total
495
518
nil
nil
nil
nil
nil
nil
525
518
Principal shareholders
A list of shareholders who beneficially hold more than 5% of the Company’s shares at 31 December
2021 is as follows:
Name of shareholder
Number of Ordinary
Shares
Percentage of voting
rights
Andrey Kuznetsov
68,517,333
18.1%
Nicholas Bridgen
49,738,800
13.2%
Vision Blue Resources Limited (and related
co-investors)
47,087,747
12.5%
Vision Blue Resources Limited (“Vision Blue”) also hold convertible loan notes which are due to be
converted into an additional 8,779,073 shares when to do so will not trigger the requirement for the
issue of a new prospectus by the Company.
Interests of directors
The interests (all of which are beneficial) of the Directors in the Company’s issued share capital at
31 December 2021 and at 28 April 2022 are as follows:
Ferro-Alloy Resources Limited
Directors’ Report
for the year ended 31 December 2021
8
Name of director
Position
31 Dec 2021
Number of
Ordinary
Shares
31 Dec
2021 %
of Share
Capital
28 April 2022
Number of
Ordinary
Shares
28
April
2022 %
of
Share
Capital
Sir Mick Davis
Non-executive
Chairman
*nil
-
*nil
-
Nicholas Bridgen
Chief
executive
officer
49,738,800
13.2
49,738,800
13.2
Andrey Kuznetsov
Operations
director
68,517,333
18.1
68.517,333
18.1
Christopher Thomas
Non-executive
director
**5,758,512
1.52
**5,758,512
1.52
James Turian
Non-executive
director
444,712
0.12
444,712
0.12
* Sir Mick Davis is Chairman of Vision Blue Resources Limited and the beneficiary of a Trust that is a
shareholder in Vision Blue Resources Limited and, therefore, indirectly has an interest in that company’s
investment in Ferro-Alloy Resources Limited arising from the investment agreement noted in the paragraph
headed Going Concern below.
** including shares of Assiduous Group Limited which holds 5,203,800 Ordinary Shares (1.46%). Assiduous
Group Limited is an investment vehicle in which Christopher Thomas is the sole shareholder and director.
Website Publication
The Directors are responsible for ensuring that the annual report and the 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 Company signed an investment agreement with Vision Blue on 15 March 2021 as a result of
which Vision Blue and their co-investors have so far subscribed for shares and convertible loan notes
to the value of US$ 10.1m to fund the expansion of the existing operation and completion of the
feasibility study in the Balasausqandiq project, both of which are in process.
Vision Blue may, at their option, invest a further US$ 2.5m at the original deal price of 9 pence per
share at any time up to two months after the issue of the feasibility study for the development of
Phase 1 of the Balasausqandiq project, expected during the first half of 2023. Since the share price
Ferro-Alloy Resources Limited
Directors’ Report
for the year ended 31 December 2021
9
is currently significantly higher than this figure, the Directors are confident that these funds are likely
to be available.
The Group’s production has now reached a profitable level and although the amount of those profits
available to fund the 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.
Auditor
Crowe U.K. LLP was appointed as auditor to the Company during the year under review. 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.
Signed on behalf of the Board of Directors on
28 April 2022
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
10
Report on Operations
Introduction
The 2021 financial year was one of considerable development and investment as we continued our
strategy of expanding our existing operations while progressing the feasibility study into the
development of the transformative Balasausqandiq vanadium project.
In March 2021, the Company entered into an investment agreement under which Vision Blue and
their associates invested US$ 10.1m (part convertible loan and part equity) during the year to fund
the completion of the feasibility study into the Balasausqandiq project and the expansion of the
existing operations. Under the terms of the investment agreement, Vision Blue have an option to
invest a further US$ 2.5m at the investment agreement price of 9 pence per share after completion of
the Phase 1 feasibility study, plus a further US$ 10m at 25 pence per share and US $20m at 77 pence
per share to fund the construction of Phase 1 of the Balasausqandiq project.
Following the strategic investment from Vision Blue, the Company increased the scope of the
feasibility study beyond the previously planned Phase 1 to include Phase 2 as well as the assessment
of options to generate revenues from additional by-products. Drilling was initially focused on Ore
Body 1 (“OB1”) and is moving to Ore Bodies 2, 3 and 4 during the remainder of 2022. Metallurgical
test work to validate the process and confirm critical process parameters tested in the pilot plant such
as leach extraction, extraction kinetics, effect of recycle streams, solid/liquid separation
requirements, reagent consumptions and final vanadium pentoxide product quality is ongoing in the
SGS laboratory in Canada.
Production continued to increase in 2021 despite challenging global conditions during the first half
of the year. Production of ammonium metavanadate (“AMV”) grew by 9.4% year on year although
by the fourth quarter, after the worst effects of the Covid-19 pandemic and the world-wide transport
issues of the first half of the year had subsided, production was running at some 70% greater than
the average of 2020. In October 2021 the Company started production and commercial sales of a
new product – ferro-molybdenum. The sale of nickel concentrates continued as planned until the end
of the year but are now being stockpiled pending treatment in a planned nickel recovery process
which will yield much higher returns. After production of nickel starts later in 2022, the full range
of valuable materials will be recovered from the raw materials treated, leaving little or no residues
or tailings.
The investment programme for the existing operations included the connection to the high voltage
power line, construction of a new laboratory, a new warehouse, construction and commissioning of
a new pre-roaster oven and the creation of the new ferro-molybdenum department. A third roaster
oven was ordered and installed after the year end.
The prices of vanadium pentoxide, the Group’s principal product, rose over the year from US$
5.40/lb to US$ 8.75/lb and at 24 April 2022 is around US$ 12.00/lb. Molybdenum (in ferro-
molybdenum) has risen from around US$ 23/kg to around US$ 44/kg over the year and is now at
around US$ 46/kg. Nickel similarly rose over the year from US$ 17/kg to US$ 21/kg and is now at
US$ 34/kg.
Production
During the year, production of vanadium pentoxide amounted to 260 tonnes, 9.4% above 2020.
Growth occurred mainly in the last quarter, while the earlier quarters were affected by the continuing
Covid-19 situation and global logistics problems causing limitations on raw materials available for
production. The Company started converting the previous calcium molybdate product into the higher
priced ferro-molybdenum in October 2021, with production totalling 6 tonnes of contained
molybdenum in the fourth quarter.
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
11
Quarter (2021)
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)
Q1
57.4
+20%
13.7
Q2
30.8
-37%
2.1
Q3
70.2
-23%
13.5
Q4
101.2
+104%
9.4
2021 total
259.6
+9.4%
38.7
Production outlook
The Group’s operations are now operating smoothly and profitably but a number of additional
initiatives are underway to ensure that the existing operation reaches its full planned potential. The
Company’s production focus is not only on maximising the production of vanadium but also on
maximising the recovery of all the valuable components from each tonne of raw material treated, and
to process each product to the point where full international pricing can be obtained without
discounts. We aim to become the most competitive company in our field, to maximise profitability
from each tonne treated and thus reduce the sensitivity of the enterprise to the potential effects of
rising raw material prices. To this end, in 2022 we have, or plan to:
• Increase the production of vanadium by the installation of the third roasting oven which was
installed and commissioned at the end of March 2022.
• Set-up of the new ferro-molybdenum department with the focus on increasing production of
ferro-molybdenum, including some additional production from molybdenum contained in
water recovery ponds. This was completed in April 2022.
• Start production and sales of vanadium pentoxide to decrease the discount that is given by
selling AMV. This project was delayed in 2021 because the use of some of the equipment
was diverted to the production of ferro-molybdenum which was more profitable. The
replacement equipment for use in conversion of AMV to vanadium pentoxide is now being
constructed.
• Start processing of the nickel-rich tailings which were formerly sold but are now being
stockpiled ready for the start-up of a nickel recovery process during 2022. The Company has
developed a process superior to the previously planned electric arc furnace which will
produce a high-grade concentrate from which the Company plans to make ferro-nickel using
the alumothermic process. The equipment to be used is the same as existing equipment
already in operation. Its operation is well-known to the Company and it can be constructed
in Kazakhstan, enabling cancellation of the proposed electric arc furnace that was to have
been built in Russia.
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
12
Feasibility study
Following the investments by Vision Blue, the decision was made to expand the scope of the
feasibility study to include not only the first phase of development of Balasausqandiq, known as
Phase 1, but also to include Phase 2. Phase 1 envisages the treatment of 1 million tonnes of ore per
year to produce 5,600 tonnes of vanadium pentoxide, and Phase 2 envisages an expansion to 4 million
tonnes per year with production rising to 22,400 tonnes of vanadium pentoxide. Including the latter
involves the drilling of Ore-Bodies 2, 3 and 4 to prove sufficient reserves under the JORC system of
classification that the Company uses. Furthermore, the scope of the study has been expanded to
include an investigation of the suitability of the carbon-silica tailings for use as a filler in making
rubber – particularly tyres, and more recently, the decision has been taken to include the recovery of
rare earth elements in the study, with early indications that, if successful, they will add significantly
to the project’s value.
A concept study into the development of a ferro-silicon process plant will also be carried out. This is
a logical development of the vanadium operation which makes use of the carbon-silica tailings to
make ferro-silica, where the untreated tailings will replace all of the silica and around half of the
carbon requirements. The project appears to be extremely profitable as not only are the raw materials
available on site but it can also make use of power generated from gas at very low cost, potentially
making the Company one of the lowest cost producers in the world.
At Balasausqandiq, there are five currently known ore-bodies. The confirmatory infill drilling of
OB1, the reserves of which (based on the previous ore reserve estimate) are sufficient for Phase 1 of
the project, has been completed. The core samples are currently being assayed with the results
expected by around the end of May 2022. In April 2022, the Company started the core and reverse
circulation drilling of Ore Bodies 2, 3 and 4 to provide the reserves necessary to support the feasibility
study into Phase 2.
The Company has commissioned SRK Consulting (Kazakhstan) Limited (“SRK”) to produce the
overall feasibility study, with the metallurgy and process plant being covered by Tetra Tech Inc.
Based on the results of infill drilling of OB1, SRK’s recommended drilling programme is rather more
extensive than previously planned, with the original core-drilling increased from 6,000 meters to
10,000 meters. The rate of drilling by subcontractors to date has also been slower than planned,
resulting in a delay in the expected date of completion of Phase 1 of the study to around the middle
2023. The Company is currently taking steps to keep as close as possible to the original schedule
including the addition of a third core drill-rig and further rigs are under discussion.
The leaching process brings into solution not only the vanadium but also various other components
of the ore, including uranium, molybdenum, aluminium, potassium and rare earth elements.
Recovery from the leach solution is carried out by a three-stage sorption process in which uranium
and molybdenum are recovered in the first, vanadium in the second and rare earth elements can
possibly be recovered in the third. The aluminium and potassium can be precipitated from the
solutions as potassium alum. The recovery of these by-products will be confirmed within the
metallurgical test-programme which is ongoing.
Potentially the most valuable by-product is carbon, which makes up around 14% of the ore and is
contained in the tailings with the remaining material being mostly silica. The carbon is similar in
physical and chemical form to carbon black which is a high-value form of carbon, usually made by
the incomplete combustion of oil or gas. The Company has previously successfully tested two
potential uses for this product; the first as a filler for making rubber and the second for smelting to
make ferro-silicon. Two test-programmes are currently underway to further test each of these uses.
The Company has worked with a Kazakhstan university to test the processes for concentration of the
carbon in the tailings and the use of a 40% carbon concentrate to produce rubber which is now being
tested in the Belorussian Technological University to prove its physical and mechanical properties.
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
13
The use of similar carbon concentrates tested by the same laboratory in Kazakhstan has indicated
that there may be a very large, high-value, potential market for this material for making tyres.
Strengthened management team
The Group has taken a number of steps to ensure it has the appropriate management resources in
place to support its ongoing development through the expansion of existing operations, the delivery
of the extended feasibility study and the expected commencement of project construction in the
second half of 2023.
In April 2022, William Callewaert was appointed Chief Financial Officer to oversee the operation
and development of the Group’s finance function. 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 and KPMG in both
the UK and offshore. Most recently, William was a Business Advisory Director of the advisory
department at BDO Guernsey. As a result of this appointment, the Group’s financial and commercial
team are at full compliment.
To support the continued development of the project in Kazakhstan, a process has also been initiated
to recruit an experienced project director to oversee the final stages of the feasibility study, manage
the construction of the mine and plant and bring the project into production
Earnings and cash flow
The Group reported increased revenues of US$ 4.73m for the period compared to US$ 2.37m in
2020, reflecting a considerable increase in production and sales.
Revenue, and the corresponding trade receivable, are recognised at the time of transfer of control 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 port of destination. Therefore, revenues recognised
at the time of shipment are subject to adjustment to prices prevailing up to four months later.
Typically, the customer makes a provisional payment based on volumes, quantities and spot price at
the date of shipment and makes a final payment once the product has reached its final destination.
As a result, when prices are rising, the final receipt can exceed the initial revenue recorded and vice
versa. Where prices decrease significantly, this can result in the Company being in a net payable
position if a downward adjustment to the consideration exceeds the provisional payment received.
Amounts receivable from, or payable to, customers for sales which are still subject to final price
determination are initially recorded at the estimated fair value at the time of shipment, with changes
in fair value recorded as other revenue. Changes in this fair value during the year and, for those sales
where the final determination has not been made, fair values assessed on the basis of prices prevailing
at the year end, increased revenue by US$ 0.02m to US$ 4.73m (2020: increase by US$ 0.07m to
US$ 2.37m). In periods of rising prices this adjustment would be expected to be positive and when
falling, negative. In the long run such pluses and minuses can be expected to even out. The final price
determinations made after the end of 2021 in respect of sales made before the end of the year were
not significantly different from the fair value assessed at the end of the year.
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
14
US$’000
2021
2020
Revenue from shipments recorded at the price
at time of dispatch
4,709
2,300
Adjustments to revenue after final price
determination and fair value changes
22
73
Total Revenue
4,731
2,373
Cost of sales increased to US$ 4.9m from US$ 3.8m in 2021 primarily reflecting the increased
volumes and increases in the price of the vanadium concentrate purchased at the high prices
prevailing in 2020/21 and utilised in 2021. 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 prices prevailing at the time of purchase.
Administrative expenses of US$ 2.4m (2020: US$ 2.2m) principally comprised employee costs,
ongoing listing costs, audit and professional services and unrecoverable VAT. The costs directly
relating to the Company being listed on the London Stock Exchange amounted to US$ 0.119m (2020:
US$ 0.103m).
Net finance costs were US$ 0.117m (2020: US$ 0.133m) the majority of which relate to interest
payable on bonds issued by the Group.
The Group made a loss before tax of US$ 2.83m (2020: loss before tax of US$ 3.94m).
Net cash outflows from operating activities totalled US$ 4.98m (2020: US$ 1.33m) with the increase
principally reflecting an increase in the volume of raw materials held for processing to ensure
consistent production output. Changes in trade receivables increased to US$ 0.4m (2020: US$ 0.1m)
as a result of payment for goods being requested prior to shipping to customers. Changes in trade
payables decreased by US$ 0.85m (2020: increase US$ 0.5m) in addition to a change in inventory
which generated a cash outflow of US$ 1.2m (2020: US$ 1.0m outflow).
Net cash outflows from investing activities totalled US$ 2.5m (2020: US$ 1.1m) and included US$
2.2m (2020: US$ 0.73m) of capital expenditure associated with expanding the processing operation
and US$ 0.33m (2020: US$ 0.33m) of expenditure on the feasibility study for the exploration and
evaluation asset.
Net cash inflows from financing activities included subscriptions for shares amounting to US$ 5.9m
(2020: US$ 1.6m), the issue of bonds amounting to US$ 0.48m (2020: US$ 0.9m) and the issue of a
convertible loan note for US$ 4m (2020: US$ nil).
The Group held cash of US$ 2.81m at 31 December 2021 (2020: US$ 0.707m).
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 mine 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 company 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
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
15
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. This has been dealt with in
the section “Production” above.
Balance sheet review
Total non-current assets increased to US$ 7.25m from US$ 5.1m principally due to the continued
capitalisation of the feasibility study as Exploration and Evaluation Assets and the addition of new
production plant items at the mine site. The decrease in prepayments for equipment is largely related
to the new powerline being brought into a state of readiness.
Current assets increased from US$ 1.66m to US$ 5.7m, principally reflecting an increase in inventory
held by the Company for processing and an increase in cash from the finance raising activities
completed during the year, as noted above.
Corporate
During the year, the Company undertook a number of fund-raising activities in order to support its
ongoing and future operations.
The primary financing activity of 2021 was the conclusion of the strategic investment in the
Company by Vision Blue and others. Under the terms of the investment agreement, Vision Blue and
its co-investors invested, in aggregate, US$ 5.65m (net) by way of share subscriptions (47,087,747
Ordinary Shares issued at 9p per share) in addition to the provision of a convertible loan note of US$
4.1m (net). Vision Blue has the option to make further investments, under the terms of the Investment
Agreement, at varying share prices, as noted above.
In addition, the Company issued 242 bonds with a two-year maturity, at a domination of US$ 2,000
each, for total net proceeds of US$ 476,000.
Description of principal risks, uncertainties and how they are managed
(a) Current processing operations:
Current processing operations make up a small part of the Group’s expected future value but 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), availabilities of vanadium bearing concentrates and efficiency of recovery of products.
The Company is constantly reviewing the market opportunities for alternative supplies of vanadium
bearing concentrates and has sufficient long term contracts in place. The Company 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) Geopolitical situation:
While the invasion of Ukraine by Russia is not directly impacting the Company’s operations, the
Directors are closely monitoring situation. The main risk is to transport routes, many of which
involve transit through Russia. Whilst these are currently operating, sanctions have been made
against Russian and Belorussian vehicles transiting through Europe. There is a risk that further
sanctions might prevent transit through Russia into Latvia, to and from where some of the Company’s
imports and exports currently flow. The Company is investigating 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. Routes to China are working normally.
Ferro-Alloy Resources Limited
Report on Operations
for the year ended 31 December 2021
16
(c) Financing risk:
The Company is in a strong financing position. The existing operation is operating well and, subject
to the uncertainties over prices and costs, is forecast to make significant profits in 2022 and onwards.
In March of 2021 the Company signed an investment agreement with Vision Blue. Under the terms
of this agreement, investments totalling US$ 10.1m 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 has further options
to subscribe up to US$ 30m at higher prices to partially finance the construction of the
Balasausqandiq project. However, 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 Feasibility Study.
(d) Climate change risk:
See the separate environmental and social report on page 17.
(e) 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.
(f) Balasausqandiq project:
The Balasausqandiq project is a much larger contributor to the Group’s value than current operations
and is primarily dependent on long term vanadium prices.
The project is also dependent on raising finance to meet capital costs anticipated to amount to in
excess of US$100m for the first phase. Raising this money will be dependent on the successful
outcome of the western bankable feasibility study which is ongoing. The favourable financial and
other characteristics of the project determined by studies so far completed give the Directors
confidence that the outcome of the study will be successful. Initial discussions with the providers of
finance, including with the Development Bank of Kazakhstan for which our project has passed
through initial screening, have been encouraging.
Signed on behalf of the Board of Directors on
28 April 2022
Ferro-Alloy Resources Limited
Environmental and Social Report
for the year ended 31 December 2021
17
Environmental and Social Report
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
project in Kazakhstan. 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
Company’s workforce.
These objectives have guided the Company’s approach to the development of the Balasausqandiq
project in Kazakhstan, where we already produce vanadium and molybdenum and plan to produce
nickel from bought-in raw materials treated in our expanded pilot plant, and 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 Company produces will play an important role in the world’s
transition to clean energy and a more sustainable future.
The Company believes 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 feasibility
study underway on the development of Balasausqandiq is, therefore, considering the optimum
approach that can maximise resource utilisation by processing each element and by-product to the
point where it becomes a saleable product. The aim is to avoid any residual waste or discharge
from being generated by the Company’s operations.
Development of appropriate frameworks
As an exploration and development Company, 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 comply with all applicable laws and report accurately where
required, and implement appropriate governance standards.
As the Company 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, we have appointed SRK to undertake an analysis of our existing principles, controls,
procedures, and performance metrics by comparison to standards they believe are reasonably
applicable to the Company. It is anticipated that following the initial report, further guidance will
be sought to implement the recommendations. Their initial report is expected to be completed later
this year and the conclusions and recommendations will be incorporated into the Group’s operating
procedures and reporting processes as soon as practicable. The conclusions and recommendations
will be used, in particular, to guide our plans for the development of the project and will be
incorporated into the feasibility study that is currently being prepared.
The Company has also committed to comply with the Financial Reporting Council’s reporting
recommendations contained in their publication “Streamlined Energy and Carbon Reporting”,
although not currently required to do so.
Ferro-Alloy Resources Limited
Environmental and Social Report
for the year ended 31 December 2021
18
Extracting full value from our production
The Company 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 aim to produce
no residual waste or discharge from our existing or future operations.
The Company’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
metal’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 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 Company is also already producing and selling ferro-molybdenum which is used in steel alloys
to increase strength, hardness, electrical conductivity and resistance to corrosion and wear. During
2022 the Company is planning to start production of nickel which is also used in the allowing 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. In addition, the feasibility study is also assessing the options for
recovering molybdenum, uranium, potassium, aluminium and rare earth elements that are used in
the production of components for diverse high technology products including electric cars, wind
turbines, mobile phones, lasers and computers.
The remaining tailings from Balasausqandiq have a number of potential uses including the
manufacture of acid-proof cement. Small amounts of gypsum-rich waste are also produced, which
can be converted into ceramic tiles and blocks that can be used for the construction of Company
facilities and off-site.
Minimising impacts from production
We believe that the feasibility study for Balasausqandiq will confirm that the 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. At
Balasausqandiq, the ore is different, and the proposed process does not require pre-concentration or
roasting. Roasting alone accounts for over 40% of the energy used by one primary producer using
TVM ore. The reduced energy consumption confers associated benefits in terms of de-carbonisation
through lower 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
Ferro-Alloy Resources Limited
Environmental and Social Report
for the year ended 31 December 2021
19
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 Balasausqandiq for use as carbon black in the making rubber is also
much more energy efficient than competitive processes. Carbon black is usually made by the
incomplete combustion of oil or gas, 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 Company’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 Company currently employs an operating
and management team of 200 employees. As we grow and develop, the company 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
• 1% of annual profits on research and development
In addition, the Group has signed an agreement with 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 aims to also meet international standards. As part of this study, a mine closure plan has been
prepared and the Company is required to maintain a fund of 1% of annual mining costs to ensure that
funds are available. The Company will aim to back-fill the open pit with waste rock from mining and
contour surplus waste as mining progresses. A gap analysis is being prepared by consultants to ensure
that this study enables the Company to meet applicable and desirable western standards of
environmental impact and control.
Water
Water is almost fully recycled, and no discharges are made from the site. In 2021 water
consumption was 13,778 m
3
(2020: 14,817 m
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
Ferro-Alloy Resources Limited
Environmental and Social Report
for the year ended 31 December 2021
20
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 company already
recycles as much water as possible and plans to do the same at the Balasausqandiq project. The
Balasausqandiq project process has been designed to operate on a very low liquid: solid ratio, to
minimise water usage and associated reagent use.
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 (2020: nil).
Energy and emissions
The table below discloses the Group’s greenhouse gas emissions for the current year, disclosed by
energy use; that being either emissions resulting from activities for which the Company 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 Company for its own use (Scope 2 emissions).
All of the Company’s emissions have been generated outside of the United Kingdom and offshore
area, as defined by the The Companies (Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018 (“the SECR Regulations”).
Scope 1 (energy generated on site)
Process plant
KwH
CO
2
e
(tonnes)
Coal for heating/steam
1,547,166
12.9
Diesel for roasting
3,848,923
7.2
Diesel for other plant
17,948
0.03
Other
Coal for heating
1,139,166
9.3
Diesel (vehicles)
191,055
0.4
Benzine (vehicles)
416,138
0.7
Total scope 1
7,160,396
30.5
Scope 2 (purchased electricity)
Process plant
Whole plant
898,780
*-
Total scope 2
898,780
-
Total scope 1 and scope 2
8,059,176
**30.5
*this information is currently not available in Kazakhstan
** includes scope 1 only
Ferro-Alloy Resources Limited
Environmental and Social Report
for the year ended 31 December 2021
21
Energy Consumption
The Group has consumed 8,059,176 KwH of energy during the year.
All of the Groups’s energy consumption has taken place outside of 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 Company 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 Group 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.
Ferro-Alloy Resources Limited
Responsibility Statement
for the year ended 31 December 2021
22
Responsibility statement
Directors’ Responsibility Statement
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.
So far as each of the Directors are aware, there is no relevant audit information of which the Group’s
auditor is unaware; having taken all the steps the Directors ought to have taken to make themselves
aware of any relevant audit information and to establish that the Group’s auditor is aware of that
information.
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.
Ferro-Alloy Resources Limited
Governance Statement
for the year ended 31 December 2021
23
Governance statement
General
As a consequence of the Ordinary Shares 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 (the “Corporate Governance Code”), 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 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 of Directors of the Company 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
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 Chris Thomas
is a member. James 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 responsibility as chairman.
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. Chris Thomas is the chairman of the committee and James Turian is a
member.
During the year, the Company created an environmental, social and governance committee. The
members of that committee are Sir Mick Davis, Peet Nienaber and Nicholas Bridgen.
The Directors are of the opinion that due to the nature and size of the Company and its current Board
of Directors, the functions often carried out by a nomination committee can be more successfully
conducted by the full Board of Directors so no such committee has been created.
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.
Ferro-Alloy Resources Limited
Governance Statement
for the year ended 31 December 2021
24
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 the Company’s
information.
The Company aims to promote effective communication with shareholders and encourage effective
participation 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 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
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 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 executive directors who discuss necessary changes on almost a daily basis;
• The Company appointed a Group Finance Director in April 2022. There is a Kazakhstan
group finance manager, employed in a Group services company, to oversee and control the
quality of financial reporting of operating companies in Kazakhstan and perform group
accounting and financial roles and the Group’s main operating company has recently
appointed a new Financial Accountant with good international accounting experience who
is nearing completion of the international ACCA accounting qualification to supplement the
existing accounting staff;
• Significant contracts require approval by members of the Board; and
• All Group payments must be authorised by a director. Any Company payments above
US$10,000 must be authorised by two mandate signatories that must include a director.
Ferro-Alloy Resources Limited
Independent Auditor’s Report
for the year ended 31 December 2021
25
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FERRO-ALLOY
RESOURCES LIMITED
Opinion
We have audited the financial statements of Ferro-Alloy Resources Limited (the “Company”) and its
subsidiaries (the “Group”) for the year ended 31 December 2021 which comprise the Consolidated
statement of comprehensive income, Consolidated statement of changes in equity, Consolidated
statement of financial position, Consolidated cash flow statement and notes to the financial
statements, including a summary of 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 2021 and of the
Group’s profit for the year then ended;
• have been properly prepared in accordance with EU adopted International Financial Reporting
Standards (IFRS); and
• 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 public interest
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 Director's use of the going concern
basis of accounting in the preparation of the Group financial statements is appropriate. Our evaluation
of the Director’s assessment of the Group’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 viability statement
based on budgets and forecasts;
• Understanding what forecast expenditure is committed and what could be considered
discretionary;
• Considering the liquidity of existing assets on the statement of financial position;
• Considering the terms of the finance facilities and the amount available for drawdown; 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
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.
We identified two significant components, being the principal operating subsidiary Firma Balausa
LLC and the parent company Ferro-Alloy Resources Limited. Our group audit strategy focused on
these and both of the significant components were subject to a full scope audit. The audits of both of
Ferro-Alloy Resources Limited
Independent Auditor’s Report
for the year ended 31 December 2021
26
the significant components were principally performed in Kazakhstan by a local Crowe member firm
under the direction and supervision of the Group audit team. The Group consolidation was also
subject to a full scope audit and was performed by the Group audit team. The remaining components
of the Group were considered non-significant and these components were principally subject to
analytical review procedures by the Group audit team.
Our involvement with component auditors
For the work performed by component auditors, 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 Group financial statements as a whole. Our involvement with component
auditors included the following:
• Detailed Group reporting instructions were sent to the component auditor, which included
the significant areas to be covered by the audit (including areas that were considered to be
key audit matters as detailed above), the level of component materiality, and set out the
information required to be reported to the Group audit team.
• The Group audit team reviewed the component auditor’s work papers remotely and held
regular calls with the component audit teams during the audit.
• We held calls and meetings with members of Group and component management to discuss
accounting and audit matters arising.
Our application of 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 Group financial
statements as a whole to be $225,000, based on about 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. For the Group performance
materiality was set at $168,750.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for
related party transactions and Directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of $11,250. Errors
below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required
on qualitative grounds.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, 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) that we identified. These matters included
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.
We identified going concern as a key audit matter and have detailed our response in the conclusions
relating to going concern section above.
This is not a complete list of all risks identified by our audit.
Ferro-Alloy Resources Limited
Independent Auditor’s Report
for the year ended 31 December 2021
27
Key audit matter
How the scope of our audit responded to the key audit
matter
Assessment of impairment of
Property, Plant & Equipment
(PP&E) and Exploration &
Evaluation assets (E&E).
See notes 12 and 13.
The Group has a significant balance
of PP&E and E&E at 31 December
2021 and there is a risk that it could
be impaired.
At 31 December 2021, management
have undertaken an impairment test
on the processing operation assets
which form the Group’s PP&E.
This assessment required the Board
to form estimates in determining
inputs to forecast net present value
calculations underlying the
assessment of the fair value less cost
to sell (“FVLCS”), including
commodity prices; future
production; operating costs; capital
expenditure and discount rates.
Given the estimates and judgments
required this area was considered to
represent a significant audit risk and
key audit matter.
Our procedures included:
- Assessing the Group’s budgeting review and approval
procedures upon which the cash flow forecasts are based.
- Comparing the Group’s assumptions to externally
derived data in relation to key inputs such as forecast
commodity prices, market premium and discount rates.
To challenge the reasonableness of the assumptions we
also assessed the historical accuracy of the Group’s
forecasting.
- Performing scenario-specific sensitivity analysis
including changes to market price, production capacity
and discount rates to confirm that headroom remained
under reasonably possible sensitivities.
- Comparing the forecast capital expenditure to the
Competent Person’s report which included an estimate of
the capital cost for the expansion of the processing
operations and the Board approved capital budgets.
- Reviewing the Competent Person’s Report and market
analyst reports to compare the implied net present values
included in those reports against the carrying value of the
asset.
- Assessing whether the Group’s disclosures about the
sensitivity of the outcome of the impairment assessment
to changes in key assumptions reflected the risks inherent
in the valuation of goodwill
We found the resulting estimate of the recoverable amount
of goodwill and intangible assets to be acceptable.
Revenue recognition.
See notes 3 and 4
The Group generated revenues of
$4.79m as detailed in note 4 based
on the group’s revenue recognition
policy as detailed in notes 3(l) and
4.
In applying IFRS 15 “Revenue
from Customers” to the Group’s
contracts particularly
consideration was required
regarding:
• The identification of the
performance obligations within the
contracts and the point at which
We assessed the revenue recognition policy against the 5-step
model of IFRS 15 to assess the compliance of the accounting
policy.
We obtained and reviewed sales agreements for a sample of
customers to assess the appropriateness and application of the
revenue recognition policy. Specific consideration was given
to the identification of performance obligations and the time
or circumstances at which they are satisfied per the
agreements.
We evaluated the appropriateness of management’s
accounting treatment of the provisional pricing clauses for
open sales against the relevant accounting standards, which
gave rise to receivables and payables held at fair value. We
evaluated the valuation methodology used by management
using market data.
Ferro-Alloy Resources Limited
Independent Auditor’s Report
for the year ended 31 December 2021
28
performance obligations are
satisfied and revenue is recorded;
• The accounting for variable
consideration associated with
estimates of the quantity and
quality required for sales prior to
year end based on test data which
are subject to subsequent final
checks post year end; and
• The accounting treatment for
provisional pricing estimates that
apply under the contracts to
determine the fair value of contract
receivables and payables.
Given the above we considered this
area to represent a significant audit
risk and key audit matter.
We evaluated the accounting treatment of quality and quantity
estimates, comparing the estimates to actual outcomes post
year end.
We agreed a sample of revenue transactions in the year we
obtained supporting shipping, delivery and other relevant
sales documents. For a sample of sales around the year end
we reviewed third party shipping documents to check that
revenue was recorded in the correct period.
We reviewed disclosures and accounting policies for
compliance with IFRS 15.
We found the revenue has been appropriate recognised in line
with IFRS 15.
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.
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. 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. In connection with our audit of the financial statements, 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 audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Other Companies (Guernsey) Law, 2008 reporting
We have nothing to report 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 Company; or
• the financial statements are not in agreement with the accounting records; or
• we have failed to obtain all the information and explanations which, to the best of our
knowledge and belief, are necessary for the purposes of our audit.
Responsibilities of the Directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 22, 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.
Ferro-Alloy Resources Limited
Independent Auditor’s Report
for the year ended 31 December 2021
29
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.
Explanation as to what extend the audit was considered capable of detecting irregularities,
including fraud
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 however the primary responsibility for the
prevention and detection of fraud lies with management and those charged with governance of the
Company.
• 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 significant laws
and regulations of Kazakhstan to be those relating to the mining industry, elements of financial
reporting framework, tax legislation and environmental regulations;
• 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 of management and those charged with governance
concerning both whether they had any knowledge of actual or suspected fraud and their
assessment of the susceptibility of fraud. We considered the risk was greater in areas involve
significant management estimate or judgement. Based on this assessment we designed audit
procedures to focus on the key areas of estimate or judgement, this included specific testing of
journal transactions, both at the year end and throughout the year.
• Testing the appropriateness of journal entries made through the year by applying specific criteria
to detect possible irregularities and fraud;
• Performing a detailed review of the Group’s year-end adjusting entries and investigating any that
appear unusual as to nature or amount and agreeing to supporting documentation;
• For significant and unusual transactions, particularly those occurring at or near year-end,
obtaining evidence for the rationale of these transactions and the sources of financial resources
supporting the transactions;
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 organised 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
Independent Auditor’s Report
for the year ended 31 December 2021
30
Use of our report
This report is made solely to the Company's members, as a body, in accordance with 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
Senior Statutory Auditor
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
55 Ludgate Hill
London
EC4M 7JW, UK
28 April 2022
Ferro-Alloy Resources Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2021
31
Note
2021
$000
2020
$000
Revenue from customers (pricing at shipment)
4
4,709
2,300
Other revenue (adjustments to price after
delivery and fair value changes)
4
22
73
Total revenue
4
4,731
2,373
Cost of sales
5
(4,893)
(3,779)
Gross loss
(162)
(1,406)
Other income
6
28
8
Administrative expenses
7
(2,471)
(2,233)
Distribution expenses
(94)
(178)
Other expenses
8
(11)
-
Loss from operating activities
(2,710)
(3,809)
Net finance costs
10
(117)
(133)
Loss before income tax
(2,827)
(3,942)
Income tax
11
-
(2)
Loss for the period
(2,827)
(3,944)
Other comprehensive loss
Items that may be reclassified subsequently to
profit or loss
Exchange differences arising on translation of
foreign operations
(158)
(528)
Total comprehensive loss for the period
(2,985)
(4,472)
Loss per share (basic and diluted)
20
(0.008) (0.012)
These consolidated financial statements were approved by the Directors on 28 April 2022 and were
signed on its behalf by:
_____________________________
Nicholas Bridgen
Director
The notes on pages 35 to 64 form part of these consolidated financial statements.
Ferro-Alloy Resources Limited
Consolidated Statement of Financial Position
for the year ended 31 December 2021
32
Note
31 December 2021
$000
31 December 2020
$000
ASSETS
Non-current assets
Property, plant and equipment
12
4,863
2,800
Exploration and evaluation assets
13
1,434
813
Intangible assets
14
21
21
Prepayments
18
930
1,467
Total non-current assets
7,248
5,101
Current assets
Inventories
16
2,100
694
Trade and other receivables
17
116
205
Prepayments
18
670
52
Cash and cash equivalents
19
2,810
707
Total current assets
5,696
1,658
Total assets
12,944
6,759
EQUITY AND LIABILITIES
Equity
Share capital
20
41,252
35,606
Convertible loan notes
20
4,019
-
Additional paid-in capital
397
397
Foreign currency translation reserve
(3,621)
(3,462)
Accumulated losses
(31,387)
(28,561)
Total equity
10,660
3,980
Non-current liabilities
Loans and borrowings
21
901
412
Provisions
22
42
47
Total non-current liabilities
943
459
Current liabilities
Loans and borrowings
21
489
524
Trade and other payables
23
828
1,736
Interest payable
24
-
Payables at FVTPL
24
-
60
Total current liabilities
1,341
2,320
Total liabilities
2,284
2,779
Total equity and liabilities
12,944
6,759
Ferro-Alloy Resources Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2021
33
Share
capital
$000
Convertible
loan notes
$000
Additional paid
in capital
$000
Foreign currency
translation reserve
$000
Accumulated
losses
$000
Total
$000
Balance at 1 January 2020
33,965
-
397
(2,934)
(24,617)
6,811
Loss for the year
-
-
-
-
(3,944)
(3,944)
Other comprehensive expenses
Exchange differences arising on translation of foreign
operations
-
-
-
(528)
-
(528)
Total comprehensive loss for the year
-
-
-
(528)
(3,944)
(4,472)
Transactions with owners, recorded directly in equity
Shares issued, net of issue costs
1,641
-
-
-
-
1,641
Balance at 31 December 2020
35,606
-
397
(3,462)
(28,561)
3,980
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
-
-
-
(158)
-
(158)
Total comprehensive income (loss) for the year
-
-
-
(158)
(2,827)
(2,985)
Transactions with owners, recorded directly in equity
Shares issued, net of issue costs (Note 20)
5,646
-
-
-
-
5,646
Convertible loan notes
-
4,019
-
-
-
4,019
Balance at 31 December 2021
41,252
4,019
397
(3,620)
(31,388)
10,660
Ferro-Alloy Resources Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2021
34
2021
$000
2020
$000
Cash flows from operating activities
Loss for the year
Note
(2,827)
(3,944)
Adjustments for:
Depreciation and amortisation
5, 7
455
431
Write-off of property, plant and equipment
(84)
-
Write-off of VAT non-refundable
7
499
301
Write-off of prepayments
7
-
7
Write-off of receivables
7
-
15
Expenses on credit loss provision
7
-
15
Share payments and issuance of call option
20
-
75
Income tax
11
-
2
Net finance costs
10
117
133
Cash from operating activities before changes in working
capital
(1,840)
(2,965)
Change in inventories
(1,209)
1,044
Change in trade and other receivables
(397)
90
Change in prepayments
(628)
(25)
Change in trade and other payables
(846)
517
Change in payables at FVTPL
(59)
7
Net cash from operating activities
(4,979)
(1,332)
Cash flows from investing activities
Acquisition of property, plant and equipment
12
(2,211)
(733)
Acquisition of exploration and evaluation assets
13
(333)
(326)
Acquisition of intangible assets
14
(1)
(1)
Net cash used in investing activities
(2,545)
(1,060)
Cash flows from financing activities
Proceeds from issue of share capital
20
5,900
1,649
Transaction costs on share subscriptions
(254)
(82)
Proceeds from issuance of convertible loan notes
4,019
-
Proceeds from borrowings
21
476
924
Interest paid
21
(80)
(19)
Net cash from financing activities
10,061
2,472
Net increase in cash and cash equivalents
2,537
80
Cash and cash equivalents at the beginning of year
19
707
648
Effect of movements in exchange rates on cash and cash
equivalents
(434)
(21)
Cash and cash equivalents at the end of year
2,810
707
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
35
Note to the consolidated financial statements for the year ended 31 December 2021
1 Basis of preparation
The consolidated financial statements for the year ended 31 December 2021 comprise the Company
and the following subsidiaries:
Company
Location
Company’s share
in share capital
Primary activities
Energy Metals
Limited
UK
100%
Dormant
Vanadium Products
LLC
Kazakhstan
100%
Performs services for the Group
Firma Balausa LLC
Kazakhstan
100%
Production and sale of vanadium
and associated by-products
Balausa Processing
Company LLC
Kazakhstan
100%
Development of processing
facilities
(a) Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (“IFRS”).
(b) Basis of measurement
The consolidated financial statements are prepared on the historical cost basis except as otherwise
noted below.
(c) Functional and presentation currency
The national currency of Kazakhstan is the Kazakhstan tenge (“KZT) which is also the functional
currency of the Group’s operating subsidiaries. The functional currency of the Company is US$.
The presentation currency of the consolidated financial statements is US$.
(d) Going concern
The consolidated financial statements are prepared in accordance with IFRS on a going concern
basis.
The Directors have reviewed the Group’s cash flow forecasts for a period of at least 12 months from
the date of approval of the financial statements, together with sensitivities and mitigating actions. In
addition, the Directors have given specific consideration to the continued risks and uncertainties
associated with the geopolitical situation with respect to Russia and Ukraine.
The Company signed an investment agreement with Vision Blue on 15 March 2021 as a result of
which Vision Blue and their co-investors have so far subscribed for shares and convertible loan notes
to the value of US$ 10.1m to fund the expansion of the existing operation and completion of the
feasibility study in the Balasausqandiq project, both of which are in process.
Vision Blue may, at their option, invest a further US$ 2.5m at the original deal price of 9 pence per
share at any time up to two months after the issue of the feasibility study for the development of
Phase 1 of the Balasausqandiq project, expected during the first half of 2023. Since the share price
is currently significantly higher than this figure, the Directors are confident that these funds are likely
to be available.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
36
The Group’s production has now reached a profitable level and although the amount of those profits
available to fund the 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.
2 Use of estimates and judgements
Preparing the financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets and
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods
affected.
Carrying value of processing operations
The Directors have tested the processing operations’ property, plant and equipment for impairment
(Note 12) at 31 December 2021. In doing so, net present value cash flow forecasts were prepared to
approximate value in use which required key estimates including vanadium pentoxide, ferro-
molybdenum and ferro-nickel prices, production including the impact of corresponding ongoing
costs and an appropriate discount rate. Key estimates included:
• Production volumes of 66 tonnes per month of vanadium pentoxide (as AMV), 10 tonnes of
molybdenum (as ferro-molybdenum) and from September 2022, 17 tonnes of nickel (as
ferro-nickel).
• Average prices of vanadium pentoxide of US$12/lb, ferro-molybdenum of US$45.2/kg and
ferro-nickel of US$32.8/kg in 2022 and thereafter, reflecting management estimates having
consideration of market commentary less a discount, and used by the Company as a long-
term assumption for other planning purposes.
• Discount rate of 10% post tax in real terms.
Based on the key assumptions set out above, the recoverable amount of PP&E (US$ 89.2m) exceeds
its carrying amount (US$ 4.6m) by US$ 84.6m and therefore PP&E were not impaired.
Sensitivity analysis
Any impairment is dependent on judgement used in determining the most appropriate basis for the
assumptions and estimates made by management, particularly in relation to the key assumptions
described above. Sensitivity analysis to potential changes in key assumptions has, therefore, been
provided below.
The impact on the impairment calculation of applying different assumptions to product sales prices,
production volumes and post-tax discount rates, all other inputs remaining equal, would be as
follows:
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
37
Decrease in headroom
$’000
Impact if product sales prices decreased by 20%
(24,113)
Impact if production volumes decreased by 20%:
(24,111)
Impact if post-tax discount rate increased by 2
percentage points:
(10,071)
Fair value of trade receivables and payables classified at fair value through profit and loss (Note
24)
The consideration receivable in respect of certain sales for which performance obligations have been
satisfied at year end and for which the Group has received prepayment under the terms of the sale
agreements, remain subject to pricing adjustments with reference to market prices in the month of
arrival at the port of final destination for AMV and month of shipment from the port for calcium
molybdate. Under the Group’s accounting policies, the fair value of the consideration is determined
and the remaining receivable is adjusted to reflect fair value, or, if the final estimated consideration
is lower than the amounts received prior to the year end, a payable at FVTPL is recorded. In the
absence of forward market prices for the commodity, management estimated the forward price based
on: a) spot market prices for vanadium pentoxide and molybdic oxide at 31 December 2021 less
applicable deductions for AMV or calcium molybdate; b) foreign exchange rates; c) risk free rates
and d) carry costs when material.
As at 31 December 2021 the Group recognised a payable at FVTPL of US$ nil (2020: US$0.06m).
Inventories (Note 16)
The Group holds material inventories which are assessed for impairment at each reporting date. The
assessment of net realisable value requires consideration of future cost to process and sell and spot
market prices at year end less applicable discounts. The estimates are based on market data and
historical trends.
Exploration and evaluation assets (Note 13)
The Group holds material exploration and evaluation assets and judgement is applied in determining
whether impairment indicators exist under the Group’s accounting policy. In determining that no
impairment indicator exists management have considered the Competent Person’s Report on the
asset, the strategic plans for exploration and future development and the status of the Subsoil licence.
Judgement was required in determining that the application for deferral of obligations under the
licence (Note 26) will be granted and management anticipate such approvals being provided given
the impact of Covid-19, their understanding of the Kazakh market and plans for the asset.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
38
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements and have been applied consistently by Group entities, except for
the implementation of new standards and interpretations.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that
control ceases. The accounting policies of subsidiaries have been changed when necessary to align
them with the policies adopted by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the consolidated financial statements. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there is no
evidence of impairment.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group
entities at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated
to the functional currency at the exchange rate at that date.
Non-monetary items in a foreign currency that are measured based on historical cost are translated
using the exchange rate at the date of the transaction.
Foreign currency differences arising in translation are recognised in profit or loss.
(ii) Presentation currency
The assets and liabilities of foreign operations are translated to US$ at the exchange rates at the
reporting date. The income and expenses of foreign operations are translated to US$ at the average
exchange rate for the period, which approximates the exchange rates at the dates of the transactions.
Where specific material transactions occur, such as impairments or reversals of impairments, the
daily exchange rate is applied when the impact is material.
Foreign currency differences are recognised in other comprehensive income and are presented within
the foreign currency translation reserve in equity.
Foreign currency differences arising on intercompany loans, where the loans are not planned to be
repaid within the foreseeable future and form part of a net investment, are recorded within other
comprehensive income and are presented within the foreign currency translation reserve in equity.
(c) Financial instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of
financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
39
Financial assets are classified as either financial assets at amortised cost, at fair value through other
comprehensive income (“FVTOCI”) or at fair value through profit or loss (“FVTPL”) depending
upon the business model for managing the financial assets and the nature of the contractual cash flow
characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial assets, other than those at
FVTPL, at the end of each reporting period. The Group applies a simplified approach to measure the
credit loss allowance for trade receivables using the lifetime expected credit loss provision. The
lifetime expected credit loss is evaluated for each trade receivable taking into account payment
history, payments made subsequent to year end and prior to reporting, past default experience and
the impact of any other relevant and current observable data. The Group applies a general approach
on all other receivables classified as financial assets. The general approach recognises lifetime
expected credit losses when there has been a significant increase in credit risk since initial
recognition.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership
of the asset to another party. The Group derecognises financial liabilities when the Group’s
obligations are discharged, cancelled or have expired.
Customer contracts
Under its customer sale arrangements, the Group receives a provisional payment upon satisfaction
of its performance obligations based on the spot price at that date, which occurs prior to the final
price determination, with the Group then subsequently receiving or paying the difference between
the final price and quantity and the provisional payment. As a result of the pricing structure, the
instrument is classified at FVTPL and measured at fair value with changes in fair value recorded as
other revenue.
Other receivables
Other receivables are accounted for at amortised cost. Other receivables do not carry any interest and
are stated at their nominal value as reduced by appropriate expected credit loss allowances for
estimated recoverable amounts as the interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be material.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances in banks, call deposits and highly liquid
investments with maturities of three months or less from the acquisition date that are subject to
insignificant risk of changes in their fair value and petty cash.
Financial liabilities
The Group has the following non-derivative financial liabilities: borrowings and trade and other
payables. Such financial liabilities are recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition these financial liabilities are measured at
amortised cost using the effective interest method.
Long-term borrowings
After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost
using the effective interest rate method. Gains and losses are recognised in profit or loss. Amortised
cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the effective interest rate. The effective interest rate amortisation is
included as finance costs in the statement of profit or loss.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
40
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
impairment losses. Land is measured at cost.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, any other costs directly attributable
to bringing the asset to a working condition for their intended use, the costs of dismantling and
removing the items and restoring the site on which they are located.
When parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items (major components) of property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing
the proceeds from disposal with the carrying amount of property, plant and equipment, and is
recognised net within other income/other expenses in profit or loss.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will
flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised
in profit or loss as incurred.
(iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of
individual assets are assessed and if a component has a useful life that is different from the remainder
of that asset, that component is depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment, since this most closely reflects the expected
pattern of consumption of the future economic benefits embodied in the asset. Leased assets are
depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that
the Group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and prior periods are as follows:
• Buildings 10-50 years;
• Plant and equipment 4-20 years;
• Vehicles 4-7 years;
• Computers 3-6 years;
• Other 3-10 years.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and
adjusted prospectively if appropriate.
Assets under construction are not depreciated and begin being depreciated once they are ready and
available for use in the manner intended by management.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
41
(e) Exploration and evaluation assets
Exploration and evaluation expenditure for each area of interest once the legal right to explore has
been acquired, other than that acquired through a purchase transaction, is carried forward as an asset
provided that one of the following conditions is met.
• Such costs are expected to be recouped through successful exploration and development of the
area of interest or, alternatively, by its sale;
• Exploration and evaluation activities in the area of interest have not yet reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable
reserves, and active and significant operations in relation to the area are continuing.
Exploration and evaluation costs are capitalised as incurred. Exploration and evaluation assets are
classified as tangible or intangible based on their nature. Exploration expenditure which fails to meet
at least one of the conditions outlined above is written off. Administrative and general expenses
relating to exploration and evaluation activities are expensed as incurred.
The exploration and evaluation assets shall no longer be classified as such when the technical
feasibility and commercial viability of extracting a mineral resource are demonstrable. This includes
consideration of a variety of factors such as whether the requisite permits have been awarded,
whether funding required for development is sufficiently certain of being secured, whether an
appropriate mining method and mine development plan is established and the results of exploration
data including internal and external assessments.
Exploration and evaluation assets will be reclassified either as tangible or intangible development
assets and amortised on a unit-of-production method based on proved reserves.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest
that the carrying amount of exploration and evaluation assets may exceed their recoverable amount,
which is the case when: the period of exploration license has expired and it is not expected to be
renewed; substantial expenditure on further exploration is not planned; exploration has not led to the
discovery of commercially viable reserves; or indications exist that exploration and evaluation assets
will not be recovered in full from successful development or by sale.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
(f) Intangible assets
(i) Intangible assets with finite useful lives
Intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost
less accumulated amortisation and accumulated impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as incurred.
(iii) Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its
residual value.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
intangible assets from the date that they are available for use since this most closely reflects the
expected pattern of consumption of future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
• Patents 10-20 years;
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
42
• Mineral rights 20 years.
Amortisation methods, useful lives and residual values are reviewed at each financial year end and
adjusted if appropriate.
(g) Leased assets
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments: fixed payments (including
in-substance fixed payments), less any lease incentives receivable and variable payments based on
index or rate amounts expected to be payable by the Group under residual value guarantees, payments
of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease
payments to be made under reasonably certain extension options are also included in the
measurement of the liability. The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case for leases in the Group,
the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have
to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and conditions.
(h) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based
on first-in first-out method, and includes expenditure incurred in acquiring the inventories,
production or conversion costs and other costs incurred in bringing them to their existing location
and condition. In the case of manufactured inventories and work in progress, cost includes an
appropriate share of production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses.
(i) Impairment
(i) Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax
assets are reviewed at each reporting date to determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss
is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its
estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs to sell (otherwise referred to as fair value less cost to develop in the industry). Fair value less
costs to sell is determined by discounting the post-tax cash flows expected to be generated by the
cash-generating unit, net of associated selling costs, and takes into account assumptions market
participants would use in estimating fair value. In assessing the value in use, the estimated future
cash flows are adjusted for the risks specific to the asset/cash-generating unit and are discounted to
their present value that reflects the current market indicators. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset or CGU.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together
into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs.
The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a
corporate asset may be impaired, then the recoverable amount is determined for the cash generating
unit to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit
exceeds its recoverable amount. Impairment losses are recognised in profit or loss.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
43
Impairment losses recognised in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(j) Employee benefits
(i) Defined contribution plans
The Group does not incur any expenses in relation to the provision of pensions or other post-
employment benefits to its employees. In accordance with Kazakhstan State pension social insurance
regulations, the Group withholds pension contributions from Kazakhstan based employee salaries
and transfers them into State operated pension funds. Once the contributions have been paid, the
Group has no further pension obligations. Upon retirement of employees, all pension payments are
administered by the pension funds directly.
(ii) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided. A liability is recognised for the amount expected to be paid under
short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the obligation
can be estimated reliably.
(iii) Share-based payments
The grant-date fair value of equity-settled share-based payment arrangements granted to employees
is generally recognised as an expense, with a corresponding increase in equity, over the vesting
period of the awards. The amount recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market performance conditions are expected to be met,
such that the amount ultimately recognised is based on the number of awards that meet the related
service and non-market performance conditions at the vesting date. For share-based payment awards
with non-vesting conditions, the grant-date fair value of the share-based payment is measured to
reflect such conditions and there is no true-up for differences between expected and actual outcomes.
(k) Provisions
Recognition and measurement
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
Site restoration
In accordance with the Group’s environmental policy and applicable legal requirements, a provision
for site restoration is recognised when the land is disturbed as a result of pit development and plant
decommissioning with a corresponding increase in exploration and evaluation costs or property, plant
and equipment. Subsequent changes in the provision due to estimates are recorded as a change in the
relevant asset. The provision is discounted at a risk-free rate with the costs incorporating risks
relevant to the site restoration and an unwinding charge is recognised within finance cost for the
unwinding of the discount.
(l) Revenue
(i) Goods sold
Revenue from customers comprises the sale of vanadium and molybdenum products with other
revenues from gravel and waste rock etc. being non-significant. Revenue from vanadium products is
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
44
recognised at a point in time when the customer has a legally binding obligation to settle under the
terms of the contract when the performance obligations have been satisfied, which is once control of
the goods has transferred to the buyer at a designated delivery point at which point possession, title
and risk transfers.
The Group commonly receives a provisional payment at the date control passes with reference to
spot prices at that date. The final consideration is subject to quantity / quality adjustments and final
pricing based on market prices determined after the product reaches its port of destination. The
quantity / quality adjustments represent a form of variable consideration and revenue is constrained
to record amounts for which it is highly probable no reversal will be required. However, given the
short period to delivery post year end the final quantity / quality adjustments are known and revenue
for the period is adjusted to reflect the final quantity / quality occurring subsequent to year end if
material.
Changes in final consideration due to market prices is not determined to qualify as variable
consideration within the scope of the IFRS 15 “Revenue from Customers”. Changes in fair value as
a result of market prices are recorded within revenue as other revenue.
(m) Finance costs
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions for
historical costs and site restoration and foreign currency losses. Borrowing costs that are not directly
attributable to the acquisition, construction or production of a qualifying asset are recognised in profit
or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis as either finance income or finance cost
depending on whether foreign currency movements result in a net gain or loss, this includes exchange
gains and losses that arise on trade and other receivables and trade and other payables in foreign
currency.
(o) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised
in profit or loss except to the extent that they relate to items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years. Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition
of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be
applied to the temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
assets and liabilities, and they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which
they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
(p) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic
EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding during the period, adjusted for own
shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
45
shareholders and the weighted average number of ordinary shares outstanding, adjusted for own
shares held, for the effects of all dilutive potential ordinary shares.
(q) New and amended standards adopted
No new standards and interpretations issued by the IASB have had a significant impact on the
consolidated financial statements.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
46
4 Revenue
Vanadium and molybdenum products
Under certain sales contracts the single performance obligation is the delivery of AMV or calcium
molybdate to the designated delivery point at which point possession, title and risk on the product
transfers to the buyer. The buyer makes an initial provisional payment based on volumes and
quantities assessed by the Company and market spot prices of vanadium pentoxide for AMV and
molybdic oxide for calcium molybdate at the date of shipment. The final payment is received once
the product has reached its final destination with adjustments for quality / quantity and pricing. The
final pricing is based on the historical average market prices during a quotation period based on the
date the product reaches the port of destination for AMV and the month of shipment from the port
for calcium molybdate and an adjusting payment or receipt will be made to the revenue initially
received. Where the final payment for a shipment made prior to the end of an accounting period has
not been determined before the end of that period, the revenue is recognised based on the spot price
that prevails at the end of the accounting period.
Other revenue related to the change in the fair value of amounts receivable and payable under the
sales contracts between the date of initial recognition and the period end resulting from market prices
are recorded as other revenue. Refer to Note 17 and 24 for details of trade receivables and payables
at FVTPL recorded in 2021 and 2020.
5 Cost of sales
2021
$000
2020
$000
Sales of vanadium products
4,078
2,197
Sales of calcium molybdate
392
68
Sales of ferro-molybdenum
161
-
Sales of gravel and waste rock
61
8
Service revenue
17
27
Total revenue from customers under IFRS 15
4,709
2,300
Other revenue - change in fair value of customer contracts
22
73
Total revenue
4,731
2,373
2021
$000
2020
$000
Materials
3,709
2,523
Wages, salaries and related taxes
656
435
Depreciation
425
405
Electricity
99
145
Professional services
-
117
Transportation cost
-
97
Taxes other than income
-
31
Other
4
26
4,893
3,779
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
47
6 Other income
7 Administrative expenses
2021
$000
2020
$000
Wages, salaries and related taxes
1,035
909
Professional services
305
312
Write-off of non-refundable VAT
499
301
Expenses on credit loss provision
-
15
Taxes other than income tax
17
114
Listing and reorganisation expenses
119
103
Audit
151
152
Materials
75
57
Rent
37
55
Depreciation and amortisation
30
26
Insurance
22
21
Bank fees
20
16
Travel expenses
18
19
Write-off of bad debts
-
15
Security
14
14
Research
11
14
Communication and information services
7
9
Write-off of prepayments
-
7
Other
111
74
2,471
2,233
8 Other expenses
2021
$000
2020
$000
Other (Sales of equipment)
28
8
28
8
2021
$000
2020
$000
Other
11
-
11
-
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
48
9 Personnel costs
2021
$000
2020
$000
Wages, salaries and related taxes
1,711
1,286
1,711
1,286
During 2021 personnel costs of US$ 630,000 (2020: US$ 351,000) have been charged to cost of
sales, US$ 1,035,000 (2020: US$ 909,000) to administrative expenses and US$ 46,000 (2020: US$
26,000) were charged to cost of inventories which were not yet sold as at the year end.
10 Finance costs
11 Income tax
The Group’s applicable tax rates in 2021 are an income tax rate of 20% for Kazakhstan registered
subsidiaries (2020: 20%) and 0% (2020: 0%) for Guernsey and BVI registered companies. The
Kazakh tax rate has been applied below as this is most reflective of the Group’s trading operations
and tax profile.
During the years ended 31 December 2021 and 2020 the Group incurred tax losses and, therefore,
did not recognise any current income tax expense.
Unrecognised deferred tax assets are described in Note 15.
Reconciliation of effective tax rate:
2021
2020
$000
%
$000
%
Loss before tax (Group)
(2,827)
100
(3,942)
100
Income tax at the applicable tax rate
(565)
20
(788)
20
Effect of unrecognised deferred tax assets /
(utilisation of previously unrecognised
losses)
581
(13)
502
(13)
Net non-deductible expenses/non-taxable
income or loss
(16)
(7)
284
(7)
-
-
(2)
-
2021
$000
2020
$000
Net foreign exchange costs
35
98
Unwinding of discount on site restoration provision
-
4
Interest expense on financial liabilities (bonds)
82
31
Net finance costs
117
133
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
49
12 Property, plant and equipment
Land and
buildings
$000
Plant and
equipment
$000
Vehicles
$000
Computers
$000
Other
$000
Construction in
progress
$000
Total
$000
Cost
Balance at 1 January 2020
1,687
2,014
587
39
104
1,445
5,876
Additions
-
28
10
1
5
255
299
Foreign currency translation difference
(158)
(189)
(56)
(4)
(10)
(140)
(557)
Balance at 31 December 2020
1,529
1,853
541
36
99
1,560
5,618
Balance at 1 January 2021
1,529
1,853
541
36
99
1,560
5,618
Additions
8
154
14
4
14
2,523
2,717
Transfers
569
740
7
-
-
(1,316)
-
Disposals
-
(51)
(39)
-
(8)
(80)
(178)
Foreign currency translation difference
(46)
(57)
(14)
(1)
(3)
(55)
(176)
Balance at 31 December 2021
2,060
2,639
509
39
102
2,632
7,981
Depreciation
Balance at 1 January 2020
639
1,645
330
17
39
-
2,670
Depreciation for the period
51
294
42
7
12
-
406
Foreign currency translation difference
(61)
(160)
(32)
(2)
(3)
-
(258)
Balance at 31 December 2020
629
1,779
340
22
48
-
2,818
Balance at 1 January 2021
629
1,779
340
22
48
-
2,818
Depreciation for the period
76
343
35
7
11
-
472
Disposals
-
(45)
(39)
-
(10)
-
(94)
Foreign currency translation difference
(17)
(49)
(9)
(1)
(2)
-
(78)
Balance at 31 December 2021
688
2,028
327
28
47
-
3,118
Carrying amounts
At 1 January 2020
1,048
369
257
22
65
1,445
3,206
At 31 December 2020
900
74
201
14
51
1,560
2,800
At 31 December 2021
1,372
611
182
11
55
2,632
4,863
During 2021 a depreciation expense of US$ 424,000 (2020: US$ 380,000) has been charged to cost of sales, excluding cost of finished goods that were not sold at year
end, US$ 30,000 (2020: US$ 25,000) to administrative expenses, and US$ 1,000 has been charged to cost of finished goods that were not sold at the year end (2020: US$
1,000). Construction in progress relates to upgrades to the processing plant associated with the expansion of the facility.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
50
13 Exploration and evaluation assets
The Group’s exploration and evaluation assets relate to the Balasausqandiq deposit. During the year
ended 31 December 2021 the Group capitalised the cost (US$ 333,000) of the services of Coffey
Geotechnics Ltd with respect to the production of the feasibility study as exploration and evaluation
assets (in 2020: US$ 770,000). As at 31 December 2021 the carrying value of exploration and
evaluation assets was US$ 1,434,000 (2020: US$ 813,000).
2021
$000
2020
$000
Balance at 1 January
813
59
Additions (feasibility study)
626
770
Change in estimate (asset restoration obligation)
(14)
(14)
Foreign currency translation difference
9
(2)
Balance at 31 December
1,434
813
14 Intangible assets
Mineral
rights
$000
Patents
$000
Computer
software
$000
Total
$000
Cost
Balance at 1 January 2020
100
34
3
137
Additions
-
1
-
1
Foreign currency translation difference
(9)
(3)
-
(12)
Balance at 31 December 2020
91
32
3
126
Balance at 1 January 2021
91
32
3
126
Additions
-
1
-
1
Foreign currency translation difference
(3)
-
-
(3)
Balance at 31 December 2021
88
33
3
124
Amortisation
Balance at 1 January 2020
100
10
3
113
Amortisation for the year
-
1
-
1
Foreign currency translation difference
(9)
-
-
(9)
Balance at 31 December 2020
91
11
3
105
Balance at 1 January 2021
91
11
3
105
Amortisation for the year
-
1
-
1
Foreign currency translation difference
(3)
-
-
(3)
Balance at 31 December 2021
88
12
3
103
Carrying amounts
At 1 January 2020
-
24
-
24
At 31 December 2020
-
21
-
21
At 31 December 2021
-
21
-
21
During 2021 and 2020 amortisation of intangible assets was charged to administrative expenses.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
51
15 Deferred tax assets and liabilities
Unrecognised deferred tax assets
2021
$000
2020
$000
Temporary deductible differences
119
320
Tax losses carried forward
11,590
10,511
Unrecognised tax deferred tax assets
(11,709)
(10,831)
-
-
Deferred tax assets have not been recognised in respect of these items given the taxable loss in the
year and because the Kazakhstan processing operations benefit from a tax incentive agreement which
reduces the tax payable to nil and it is, therefore, uncertain that future taxable profit will be available
against which the Group can utilise the benefits therefrom. The tax incentive agreement is effective
for ten years starting from 2018.
The increase in carried forward tax losses comprises the tax loss for the period and the effect of
resubmissions of previous tax filings which contributed to an increase in tax losses.
Temporary deductible differences mostly relate to property, plant and equipment. Unutilised tax
losses expire after 10 years from the year of origination.
Expiry dates of unrecognised deferred tax assets in respect of tax losses carried forward at 31
December 2021 are presented below:
Expiry year
$000
2022
322
2023
1,020
2024
521
2025
251
2026
881
2027
528
2028
566
2029
2,362
2030
3,721
2031
1,675
11,847
Unrecognised deferred tax assets above are calculated based on the Kazakh tax rate of 20%.
16 Inventories
2021
$000
2020
$000
Raw materials and consumables
1,805
434
Finished goods
287
75
Work in progress
7
185
Goods in transit
1
-
2,100
694
During 2021 inventories expensed to profit and loss amounted to US$ 3,709,000 (2020: US$
2,580,000).
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
52
17 Trade and other receivables
Current
2021
2020
$000
$000
Trade receivables from third parties
62
18
Due from employees
22
10
VAT receivable
58
205
Other receivables
9
8
151
241
Expected credit loss provision for receivables
(35)
(36)
116
205
The expected credit loss provision for receivables relates to credit impaired receivables which are in default
and the Group considers the probability of collection to be remote given the age of the receivable and default
status.
18 Prepayments
2021
$000
2020
$000
Non-current
Prepayments for equipment
930
1,467
930
1,467
Current
Prepayments for goods and services
670
52
670
52
The prepayments for equipment is related mainly to the high voltage powerline connection. For more details
see the earlier report on production.
19 Cash and cash equivalents
2021
$000
2020
$000
Cash at current bank accounts
2,795
688
Cash at bank deposits
14
14
Petty cash
1
5
Cash and cash equivalents
2,810
707
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
53
20 Equity
(a) Share capital
Number of shares unless otherwise stated Ordinary shares
31 December 2021
31 December 2020
Par value
-
-
Outstanding at beginning of year
330,589,052
312,978,848
Shares issued
47,087,747
17,610,204
Outstanding at end of year
377,676,799
330,589,052
Ordinary shares
All shares rank equally. The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the Company.
On 6 January 2020 the Company’s shares were admitted to listing on the Astana International Stock
Exchange.
From 23 January 2020 the Company’s shares were delisted from the Kazakh Stock Exchange.
During 2021 the Company issued 47,087,747 ordinary shares of no par value by way of a direct
subscription into the Company for cash at price 9 pence per share, raising a total of £4,200,000.
Convertible loan notes
Convertible loan notes are considered as equity as the conditions that are set out in the Convertible
Loan Note agreement provide for conversion into equity in all circumstances except in certain
conditions that the Directors do not consider probable. In particular, the conditions required to be
fulfilled before conversion takes place include an obligation on the Company to receive certain
consents from the regulatory authorities which have already been received, and avoidance of the
possibility of triggering a requirement for the issue of a prospectus which will automatically be
achieved upon the effluxion of time provided no further shares are issued.
Reserves
Share capital: Value of shares issued less costs of issuance.
Convertible loan notes: Further investment rights at issue price.
Additional paid in capital: Amounts due to shareholders which were waived.
Foreign currency translation reserve: Foreign currency differences on retranslation of results from
functional to presentational currency and foreign exchange movements on intercompany balances
considered to represent net investments which are considered as permanent equity.
Accumulated losses: Cumulative net losses.
(b) Dividends
No dividends were declared for the year ended 31 December 2021 (2020: US$ nil).
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
54
(c) Loss per share (basic and diluted)
The calculation of the basic and diluted loss per share has been based on the loss attributable to
ordinary shareholders and weighted-average number of ordinary shares outstanding. There are no
convertible bonds and convertible preferred stock, so basic and diluted losses are equal.
(i) Loss attributable to ordinary shareholders (basic and diluted)
2021
$000
2020
$000
Loss for the year, attributable to owners of the Company
(2,827)
(3,944)
Loss attributable to ordinary shareholders
(2,827)
(3,944)
(ii) Weighted-average number of ordinary shares (basic and diluted)
Shares
2021
2020
Issued ordinary shares at 1 January (after subdivision)
330,589,052
312,978,848
Effect of shares issued (weighted)
4,531,663
6,812,878
Weighted-average number of ordinary shares at
31 December
335,120,715
319,791,726
Loss per share of common stock attributable to the
Company (basic and diluted)
(0.008)
(0.012)
21 Loans and borrowings
In 2021 the Company issued unsecured corporate bonds with effective interest rates of 7.0%.
Investors have subscribed for a total of 242 of the Company’s bonds with a nominal value of US$
2,000 each but are issued at a premium to achieve the effective interest rates agreed. The bonds are
unsecured, have a three-year term and bear the coupon rate of 5.8%, paid twice-yearly. The bonds
have been listed on AIX with identifier FAR.0323 and ISIN number KZX000000336. The investors
in certain bonds have the right to receive early repayment after a minimum period of 12 months.
2021
$000
2020
$000
Non-current liabilities
Bonds payable
901
412
901
412
Current liabilities
Bonds payable (early repayment rights)
465
512
Interest payable
24
12
489
524
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
55
Terms and conditions of outstanding bonds in 2021 were as follows:
USD
Currency
Effective
interest
rate
Nominal
amount
Actual
amount
Coupon
rate
Coupon
paid
Interest
Bonds payable
USD
7.5%
506
503
5.8%
38
31
Bonds payable
USD
7.0%
886
876
5.8%
41
50
Bonds payable
USD
5.8%
20
21
5.8%
1
1
1,412
1,400
80
82
During 2021 the Group sold bonds to subscribers and received cash from subscribers in the total
amount of US$ 476,000 (2020: US$ 924,000).
Details of tranches of the bonds
Tranche date
Bond
denomina
tion
Actual
price per
bond
Number of
bonds
Nominal
amount
Actual
amount
Earliest
repayment
date
Maturity
date
08.02.2021
2000
1999
58
116,000
115,940
17.03.2023
17.03.2023
17.03.2021
2000
1956
52
104,000
101,708
17.03.2023
17.03.2023
17.03.2021
2000
1956
30
60,000
58,678
17.03.2023
17.03.2023
17.03.2021
2000
1956
102
204,000
199,504
17.03.2023
17.03.2023
Total
484,000
475,830
Non-cash transactions from financing activities are shown in the reconciliation of liabilities from
financing transactions.
Loans and borrowings
2021
$000
2020
$000
At 1 January
936
-
Cash flows:
-Interest paid
(80)
(19)
-Proceeds from loans and borrowings
476
924
Total
1,332
905
Non-cash flows
- Interest accruing in period
95
33
- Bond discount/premium
-
(2)
At 31 December
1,427
936
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
56
22 Provisions
2021
$000
2020
$000
Balance at 1 January
47
64
Unwinding of discount
-
4
Change in estimate
(4)
(14)
Foreign currency translation difference
(1)
(7)
Balance at 31 December
42
47
Non-current
42
47
42
47
Site restoration
A provision was recognised in respect of the Group’s obligation to rectify environmental issues in
the Balasausqandiq mine, Kyzylorda region.
In accordance with Kazakhstan environmental legislation, any land contaminated by the Group in
the Kyzylorda region must be restored before the end of 2043. The provision was estimated by
considering the risks related to the amount and timing of restoration costs based on the known level
of damage. Because of the long-term nature of the liability, the main uncertainty in estimating the
provision is the costs that will be incurred. In particular, the Group has assumed that the site will be
restored using technology and materials that are available currently. A fund to cover this liability will
be collected via annual statutory contributions to the special liquidation fund at the rate of 1% of
mining expenses as stipulated in the Subsoil contract. Based on the working program which forms
the part of the Subsoil contract the total amount is expected to reach KZT 675m or US$ 1,838,000.
The present value of restoration costs was determined by discounting the estimated restoration cost
using a Kazakh risk-free rate for the respective period, and inflation of 7.5% (2020: 7.5%). The
estimated period for discounting was 22 years (2020: 23 years). Environmental legislation in
Kazakhstan continues to evolve and it is difficult to determine the exact standards required by the
current legislation in restoring sites such as this. Generally, the standard of restoration is determined
based on discussions with the Government officials at the time that restoration commences.
23 Trade and other payables
2021
$000
2020
$000
Trade payables
625
1,035
Debt to directors/key management (Note 29)
7
522
Debt to employees
68
57
Other taxes
117
122
Advances received
11
-
828
1,736
24 Payables at FVTPL
2021
$000
2020
$000
Payables at FVTPL
-
60
-
60
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
57
25 Financial instruments and risk management
(a) Overview
The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk;
• market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management of
capital. Further quantitative disclosures are included throughout these consolidated financial
statements.
Risk management framework
The Chief Executive has overall responsibility for the establishment and oversight of the Group’s
risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed to reflect changes in market conditions and the
Group’s activities. The Group aims to develop a disciplined and constructive control environment in
which all employees understand their roles and obligations.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Group’s
receivables from customers.
(i) Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
The maximum exposure to credit risk for trade and other receivables at the reporting date by
geographic region was:
Carrying amount
2021
$000
2020
$000
Kazakhstan
71
-
71
-
Carrying amount
2021
$000
2020
$000
Trade and other receivables, excluding amounts due from
employees and VAT receivable
71
-
Cash and cash equivalents
2,809
702
2,880
702
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
58
The maximum exposure to credit risk for trade and other receivables at the reporting date by type of
customer was:
Carrying amount
2021
$000
2020
$000
Trade receivables:
Wholesale customers
62
-
Other receivables
Other
9
-
1
71
-
The ageing of trade and other receivables at the reporting date was:
Gross
Impairment
Net
Gross
Impairment
Net
2021
$000
2021
$000
2021
$000
2020
$000
2020
$000
2020
$000
Not past due
71
-
71
-
-
-
Past due
more than
180 days
35
(35)
-
36
(36)
-
106
(35)
71
36
(36)
-
The movement in the allowance for expected credit losses in respect of other receivables during the
year was as follows:
2021
$000
2020
$000
Balance at beginning of the year
36
21
Expected credit (loss) / gain change
(1)
15
Balance at end of the year
35
36
Amounts due from customers at year end have been subsequently collected in 2021, except for
credit impaired amounts. No additional expected credit loss provision has been applied.
(ii) Cash and cash equivalents
As at 31 December 2021 the Group held cash of US$ 2,810,000 (2020: US$ 707,000), of which bank
balances of US$ 2,809,000 (2020: US$ 702,000) represent its maximum credit exposure on these
assets, which excludes petty cash. 99% (2020: 64%) is held in banks with credit ratings of A+ and
1% in banks with credit ratings of B to BBB- (2020: 36%). Credit ratings are provided by the rating
agency FitchRatings.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
59
The following are the contractual maturities of financial liabilities. It is not expected that the cash
flows included in the maturity analysis could occur significantly earlier, or at significantly different
amounts.
2021
Carrying
amount
$000
Contractual
cash flows
$000
On demand
$000
0-6 mths
$000
6 months - 1
year
$000
1-3 years
$000
Financial liabilities
Trade and other payables and
payables at FVTPL
601
601
9
592
-
-
Loans and borrowings
1,390
1,477
-
-
957
520
1,991
2,078
9
592
957
520
2020
Carrying
amount
$000
Contractual
cash flows
$000
On demand
$000
0-6 mths
$000
6 months - 1
year
$000
1-3 years
$000
Financial liabilities
Trade and other payables and
payables at FVTPL
1,674
1,674
9
1,665
-
-
Loans and borrowings
936
1,015
-
23
540
452
2,610
2,689
9
1,688
540
452
(d) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
and equity prices will affect the Group’s income or the value of its holdings of financial instruments.
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
In order to ascertain market risk the Group has analysed the impact of different levels of vanadium
pentoxide prices on profitability as well as closely monitoring the market conditions for other leading
international organisations operating in the vanadium industry. The sensitivity analysis shows that a
price of $4/lb for vanadium pentoxide is the minimum price that must be achieved by the Group in
order to maintain operations.
The current level of vanadium pentoxide prices is sufficient to keep the Group at a stable future
profitable level.
(i) Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a
currency other than the respective functional currency of Group entities.
In respect of monetary assets and liabilities denominated in foreign currencies, the Group ensures
that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates
when necessary to address short term imbalances.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
60
Exposure to currency risk
The Group’s exposure to foreign currency risk was as follows based on notional amounts:
2021
US$-
denominated
GBP-
denominated
EUR-
denominated
RUB-
denominated
KZT-
denominated
2021
$000
2021
$000
2021
$000
2021
$000
2021
$000
Cash and cash equivalents
2,725
42
-
-
42
Trade and other payables
(206)
(24)
(31)
(33)
(534)
Loans and borrowings
(1,390)
-
-
-
-
Net exposure
1,129
18
(31)
(33)
(492)
2020
US$-
denominated
GBP-
denominated
EUR-
denominated
RUB-
denominated
KZT-
denominated
2020
$000
2020
$000
2020
$000
2020
$000
2020
$000
Cash and cash equivalents
248
198
-
-
260
Trade and other payables
(700)
(497)
(31)
(34)
(412)
Loans and borrowings
(936)
-
-
-
-
Net exposure
(1,388)
(299)
(31)
(34)
(152)
The following significant exchange rates applied during the year:
in US$
Average rate
Reporting date spot rate
2021
2020
2021
2020
KZT 1
0.0023
0.0024
0.0023
0.0024
GBP 1
1.3756
1.2827
1.3855
1.3576
RUB 1
0.0136
0.0139
0.0138
0.0134
EUR 1
1.1831
1.1414
1.1907
1.2268
(ii) Interest rate risk
Changes in interest rates do not significantly impact the Group’s position as at 31 December 2021.
Management does not have a formal policy of determining how much of the Group’s exposure should
be to fixed or variable rates. However, at the time of raising new loans or borrowings management
uses its judgment to decide whether it believes that a fixed or variable rate would be more favourable
to the Group over the expected period until maturity.
The bonds interest rates are fixed by agreement.
Changes in interest rates at the reporting date would not significantly affect profit or loss.
(iii) Other risks
IAS 1 requires the disclosure of the risks and measures to meet the risks related to external capital
requirements.
The Group manages its capital to ensure that entities in the Group will be able to continue as going
concerns while maximising returns to shareholders through the optimisation of the debt and equity
balance. The Group’s overall strategy remains unchanged from 2020.
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
61
The capital structure of the Group consists of net debt (see Note 21) and the equity of the Group (see
note 20).
The Group is not subject to any externally imposed capital requirements.
The Group reviews the capital structure on a regular basis giving consideration to the cost of capital
and the risks associated with each class of capital.
Debt is defined as long- and short-term borrowings as detailed in Note 21.
Equity includes all capital and reserves of the Group that are managed as capital.
(e) Fair values versus carrying amounts
Management believes that the fair value of the Group’s financial assets and liabilities approximates
their carrying amounts.
Categories of financial instruments
2021
$000
2020
$000
Financial assets (includes cash)
Trade and other receivables at FVTPL
71
-
Cash at amortised cost
2,809
702
2,880
702
Financial liabilities – measured at amortised cost
Trade and other payables at amortised cost
601
1,614
Trade payables at fair value through profit and loss
-
60
Loans and borrowings at amortised cost
1,390
936
1,991
2,610
The basis for determining fair values is disclosed below.
Trade payables and receivables at FVTPL are recorded at fair value through profit and loss as they
fail the criteria for amortised cost owing to the variability as a result of final pricing adjustments.
Financial instruments measured at fair value are presented by level within which the fair value
measurement is categorised. The levels of fair value measurement are determined as following:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The Group’s contract receivables and liabilities at the year end are recorded at fair value through
profit and loss and fair valued based on the estimated forward prices that will apply under the terms
of the sales contracts upon the product reaching the port of destination. Any trade receivable fair
value reflects amounts receivable from the customer adjusted for forward prices expected to be
realised.
In the absence of observable forward prices the forward price is estimated using a valuation
methodology which is based on vanadium spot prices at the year end adjusted for the discount for
AMV / calcium molybdate versus vanadium pentoxide / molybdic oxide, time value of money and
carry costs. Given the short period to final pricing the time value of money and carry costs are not
significant and the forward price materially approximates the spot price at year end with the
adjustment to reflect the difference between vanadium pentoxide / molybdic oxide prices and AMV
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
62
/ calcium molybdate. Any fair value of trade receivables and payables at FVTPL are categorised at
Level 3. During the year there were no transfers between levels of fair value hierarchy.
26 Commitments
Under the conditions of the subsoil use contract under which the Group has the right to develop and
exploit the Balasausqandiq deposit, the Group is obliged to undertake a minimum level of mining
and to make certain levels of expenditure on the training of Kazakh employees, research and
development and the development of the Shieli region. There is also an obligation set aside funds to
provide for the eventual costs of mine closure and or site reclamation.
• Minimum quantity of ore to be mined:
Year
Tonnes
2018
15,000
2019
15,000
2020
15,000
2021
15,000
2022
15,000
2023
545,000
2024
763,000
2025 onwards
Increase to 1,000,000 per
year starting from 2025
• Training costs should be equal to 1% of the Group’s capital expenditures on subsoil
activities. Costs in 2021: US$ 4,000 (2020: US$ 2,000)
• Research and development should be equal to 1% of the Group’s income from subsoil
activities. Costs in 2021: US$ 11,100 (2020: US$ 13,700)
• The addition to the liquidation fund should be equal to 1% of the Group’s costs of mining
ore. Costs in 2021: US$ 12,000 (2020: US$ 12,000)
• Expenditure on social development of the Shieli region should be equal to 1.5% of the
Group’s costs of mining ore. Costs in 2021: US$ 750 (2020: US$ 400).
All obligations of the Subsoil Use Contract have been complied with except for certain exploration
work programme requirements, specifically the volume of ore to be mined. As a result, the Group
has applied for amendments to the Subsoil Use Contract given the unique situation created by the
Covid-19 pandemic during 2020 and 2021. The amendments that the Group have requested relate to
the transfer of 30,000 tons of ore to be mined between 2020 and 2021 to 2022 and 2023. As a result,
and if the amendments are granted, the obligation for mining in 2020 and 2021 will be equal to zero
tons, 2022 to 2024 will be equal to 590,000 tons and starting from 2025 1,000,000 tons of ore, per
year. The request is in the process of review with the relevant authorities of the Kazakh government.
27 Contingencies
(a) Insurance
The insurance industry in the Kazakhstan is in a developing state and many forms of insurance
protection common in other parts of the world are not yet generally or economically available. The
Group does not have full coverage for its plant facilities, business interruption or third party liability
in respect of property or environmental damage arising from accidents on Group property or relating
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
63
to Group operations. There is a risk that the loss or destruction of certain assets could have a material
adverse effect on the Group’s operations and financial position.
(b) Taxation
The taxation system in Kazakhstan is relatively new and is characterised by frequent changes in
legislation, official pronouncements and court decisions which are often unclear, contradictory and
subject to varying interpretations by different tax authorities. Taxes are subject to review and
investigation by various levels of authorities which have the authority to impose severe fines,
penalties and interest charges. A tax year generally remains open for review by the tax authorities
for five subsequent calendar years but under certain circumstances a tax year may remain open
longer.
These circumstances may create tax risks in Kazakhstan that are more significant than in other
countries. Management believes that it has provided adequately for tax liabilities based on its
interpretations of applicable tax legislation, official pronouncements and court decisions. However,
the interpretations of the relevant authorities could differ and the effect on these consolidated
financial statements, if the authorities were successful in enforcing their interpretations, could be
significant.
There are no tax claims or disputes at present.
28 Segment reporting
The Group’s operations are split into three segments based on the nature of operations: processing,
subsoil operations (being operations related to exploration and mining) and corporate segment for
the purposes of IFRS 8 Operating Segments. The Group’s assets are primarily concentrated in the
Republic of Kazakhstan and the Group’s revenues are derived from operations in, and connected
with, the Republic of Kazakhstan.
2021
Processing
$000
Subsoil
$000
Corporate
$000
Total
$000
Revenue
4,731
-
-
4,731
Cost of sales
(4,893)
-
-
(4,893)
Other income
28
-
-
28
Administrative expenses
(1,131)
(31)
(1,309)
(2,471)
Other expenses
-
-
(11)
(11)
Distribution & other expenses
(94)
-
-
(94)
Finance costs
97
-
(214)
(117)
Loss before tax
(1,262)
(31)
(1,534)
(2,827)
2020
Processing
$000
Subsoil
$000
Corporate
$000
Total
$000
Revenue
2,373
-
-
2,373
Cost of sales
(3,779)
-
-
(3,779)
Other income
8
-
-
8
Administrative expenses
(990)
(25)
(1,218)
(2,233)
Distribution & other expenses
(178)
-
-
(178)
Finance costs
(68)
-
(65)
(133)
Loss before tax
(2,634)
(25)
(1,283)
(3,942)
Ferro-Alloy Resources Limited
Notes to the Consolidated Financial Statements for the year ended 31 December 2021
64
Included in revenue arising from processing are revenues of US$ 4,600,000 (2020: US$ 2,300,000)
which arose from sales to three of the Group’s largest customers. No other single customer
contributes 10 per cent or more to the Group’s revenue.
All of the Group’s assets are attributable to the Group’s processing operations.
Sales to the Group’s largest customers in 2021 were as follows:
London Chemicals (UK) US$ 2,300,000 (47%) (2020: US$ 2,000,000 (87%))
Sideralloys SA (Switzerland) US$ 1,000,000 (25%) (2020: US$ 300,000 (12%))
MITAX Ltd (UK) US$ 1,300,000 (27%) (2020: US$ nil (0%))
29 Related party transactions
Transactions with management and close family members
Management remuneration
Key management personnel received the following remuneration during the year, which is included
in personnel costs (see Note 9):
2021
$000
2020
$000
Wages, salaries and related taxes
400
527
Refer to Note 23 for details of payables to key management and the Directors’ Report for shares
issued to key management. The amount of wages and salaries outstanding at 31 December 2021 is
equal to US$ 70,000 (2020: US$ 500,000).
30 Subsequent events
There are no subsequent events to report following the year end.