Ferro-Alloy Resources – Smithers Marketing Study Opens Up Massive Potential For This £25m Company, With Its Shares Exploding 130% - More To Come?

One of the best, if not the best, performer in the market yesterday was a tiny loss-making company – Ferro-Alloy Resources (LON:FAR).

Its shares reacted to some very positive corporate news, rising throughout the day to close up over 120% higher at 5.16p, valuing the company at £24.9m.

The company, which is a vanadium producer and developer of the large Balasausqandiq vanadium deposit in Southern Kazakhstan, announced an update on its carbon black substitute product following the completion of a new marketing study.

The ore-resource at the Balasausqandiq deposit contains over 8% carbon in a form similar to carbon black.

Carbon black is a high value form of carbon predominantly used as a reinforcing filler in the making of rubber, particularly for the manufacture of vehicle tyres.

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

Marketing Study

Smithers, the consultancy group that offers insight and information in packaging, paper and print, and the rubber, plastics, pigments and biomaterials industries, concluded a new marketing study on CBS.

They estimate that the price of the group’s CBS product at $500 per tonne in the tyre market and between $550 - $600 per tonne in the non-tyre market.

The Smithers materials science and engineering division which, by substituting standard carbon black with the company's CBS product in a typical rubber formulation for passenger vehicle tyre side walls, demonstrated that the company's CBS product can be used in the manufacture of vehicle tyre sidewalls and other rubber uses.

CEO Nick Bridgen stated that:

"This marketing study confirms the enormous value of the Company's CBS revenue stream that is now expected to be comparable in size with the Company's main vanadium product.

With relatively small production costs, it adds hugely to the anticipated project NPV.

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

Ferro-Alloy's Balasausqandiq deposit is already expected to be the world's lowest-cost primary producer of vanadium, and this co-product, recovered from the tailings from the vanadium operation, will enhance that competitive position even further."

Analyst Views

At Shore Capital Markets, their analyst Edward Maravanyika considers the update positively as it highlights the company’s CBS product’s commercial potential, especially as it looks to strongly position it within the global carbon black market, which is estimated at $20bn pa.

In Shore’s view, the company’s CBS product’s much lower emissions would extend further its potential price and competitiveness advantage in the market.

For the year to the end of next month, the analyst estimates FAR revenues of $6.1m ($5.7m), with adjusted pre-tax losses of $5.5m ($5.3m).

However, the broker reckons that FAR could see a significant financial uplift potentially.

Over at Panmure Liberum, the trio of analysts Yuen Low, Duncan Hay and Tom Price, have a strong Buy rating on the group’s shares – looking for 35p a share in due course.

They estimate sales this year of $5.0m, with an $8.4m loss.

For 2025, they see $20.0m of sales, with a $2.1m loss.

The 2026 year is when the group could well shift into gear, with Panmure estimating $24.0m of sales and a substantial $47.9m loss.

This research team reckon that CBS could account for 40% or more of future group revenues, while noting that tyre manufacture accounts for some 70% of the $20bn a year global carbon black market.

In My View

Still very early days, but it does look as though FAR is on to a real winner with its Balausa Project.

Its

shares, at 5.41p, could turn out to be a cracking gambling counter as punters view the massive profits to be generated.