“This, combined with the earlier small fundraising is significant for FAR due to the current capital constrained position of the company, not aided by the recent COVID-19 related disruption,” said the broker.
“However, our analysis indicates that modest levels of capital investment can achieve significant results in terms of improving the earnings outlook given the stage of development of the secondary processing expansion.”
The company has one of the most promising-looking vanadium projects anywhere in the world, and is already benefitting from limited and small scale production.
“Whilst we anticipate that further capital is required to realise the company’s full near term objectives, we estimate around US$4.5mln, it is not the case that the company cannot make significant steps forward until it is raised and the bond issue is a positive step forward which avoids further dilution. The impact of the interest is minimal against our current earnings which anticipate revenue of US$5mln for 2020 and net income of US$1.5mln.”
Following the partial commissioning of new equipment which was installed earlier this year production following the restart has been notably higher with the daily output rate up 69% against the average for the first quarter of 2020. This will enable the company to work towards our target of 410 tonnes of V2O5 for 2020, which VSA called “encouraging.”
It reiterated its buy rating.