Largo Resources Ltd. – Emerging High-grade, Low-cost Vanadium Producer
Overview
Largo Resources Ltd. (TSXV:LGO) is a Canadian based Strategic Mineral Company focused on developing its Vanadium and Tungsten projects in Brazil and Canada. Largo’s primary focus is to continue to advance its flagship Maracas Vanadium Project with the target to commence production in Q4 2013. The project, which is fully funded, permitted and in construction is poised to be the world’s premier producer of vanadium due to its high grade and low operating costs.
The Company’s Currais Novos Tungsten project in Brazil is in production with significant expansion potential. Largo’s other properties include the Campo Alegre de Lourdes iron ore and vanadium project in Brazil and the Northern Dancer Tungsten-Molybdenum Project-the largest undeveloped tungsten deposit in the world located in Canada’s Yukon Territory.
Investment Highlights
- Exposure to growing supply constrained commodities; specializing in vanadium and tungsten
- Maracas Vanadium Project: highest grade, highest quality, lowest cost project
- Funded, permitted and in construction with Glencore off-take partnership: 100% take-or-pay contract in place
- Commissioning targeted for Q4, 2013 with substantial cash flow generation in 2014
- Vanadium prices and demand are increases offer potential for substantial upside
- Management team with expertise in Vanadium and experienced mine-builders
- Strong independent board and supportive cornerstone investor-base
Key Projects
Maracas Vanadium-PGE Project – Bahia, Brazil
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Maracas Vanadium-PGE Project – Bahia,Brazil
The Maracas Vanadium Project is fully funded and currently under construction and it is on track to begin production in the fourth quarter of 2013. Substantial cash flow is expected beginning during the ramp-up period in 2014 which will fund further expansion of production capacity as well as the implementation of a ferro-vanadium plant. Largo has signed a 100 percent, Take or Pay off-take agreement with Glencore International for the first six years of production.
Cash flow represents average annual net after tax operating cash flow
Maracas Resources
In 2009 Largo delineated a Mineral Reserve estimate. The open pit deposit contains approximately 13.1 million tonnes grading at 1.34 per cent vanadium pentoxide, including 8.7 million tonnes grading at 1.94 per cent vanadium pentoxide, which is contained within a 23.2 million tonne Mineral Resource grading 1.27 vanadium pentoxide. This makes Largo’s Maracas project the highest grade vanadium project in the world by a significant margin.
In September 2012, Largo announced an increase to its mineral resource estimate. The additional inferred resources for the five satellite deposits were estimated to be 27.8 million tonnes grading 0.83% V2O5 containing 232,100 tonnes of V2O5 at a cut-off grade of 0.45% V2O5.
Maracas Process
The Maracas Project is being built according to proven and existing methods of vanadium extraction – there are no new technologies or processes being employed. As the Maracas Project is the highest grade and quality vanadium project in the world it will also become the lowest cost producer of the commodity. The high grade ore provides better initial recoveries, and requires less power and fewer inputs during processing. In addition, the Maracas deposit is bestowed with extraordinarily low levels of contaminants (like silica) so it requires less chemicals to remove them. Largo will also use a simple cost effective open-pit mining process to extract the ore.
Maracas Location and Regional Information
The Maracas Project is located in the municipality of Maracas in eastern Bahia State, Brazil. The property consists of 27,000 hectares with two exploration concessions approximately 813 kilometers northeast of the Brazilian capital Brasilia and 250 kilometers southwest of Salvador, the capital of Bahia State. Access to the property is through a secondary highway and gravel road located to the west of the town of Maracas. The Maracas project also has access to water, electricity and railroads within a reasonable distance.
The Maracas vanadium processing plant will generate 1,200 jobs in the municipality of Maracas while in construction plus an additional 400 jobs once in operation. The mine will be largest supplier of vanadium in South America.
Maracas Funding
The Maracas Vanadium Project is fully-funded: In 2011 Largo raised US$130 million in equity led by Banco Itau in Brazil and brought in its four key shareholders (Arias Resource Capital, Mackenzie Financial, Eton Park and Ashmore) and in 2012 it finalized a debt facility for US$166 million dollars with the Business Development Bank of Brazil. Largo’s Maracas Project is now the first Greenfield mining project to be entirely financed by Brazilian banks. The transaction has received international recognition in the project finance world and in 2013 was awarded Project Finance magazine’s Latin American Mining and Metals Deal of the Year Award for 2012.
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Construction, commission and ramp-up is projected for 2013, and full-scale production is projected for 2014.
Updated 3D Rendering of Maracas Vanadium Project
Northern Dancer Tungsten-Molybdenum Deposit –Yukon Territory, Canada
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The Northern Dancer Tungsten-Molybdenum Project is located in Canada’s Yukon Territory and hosts the world’s largest undeveloped tungsten-molybdenum resource. Largo commenced drilling in July 2011 following the successful 2008 drill program at Northern Dancer which found a NI 43-101 compliant resource estimate of 545,236,000 tonnes at a grade of 0.076 per cent WO3 and 0.024 per cent Mo.
In February 2011, results from the NI 43-101 compliant Preliminary Economic Assessment at Northern Dancer confirmed potential for the low cost production of tungsten and molybdenum from an open pit operation.
Based on a project life of 49 years and initial pre-production capital of US$ 645 million, the PEA estimated that Northern Dancer has an unleveraged IRR of 20.00% on a pre-tax basis.
Largo’s focus is presently on developing its flagship Maracas Project, but continues discussions with potential off-take partners and project partners to continue development at the project.
Currais Novos – Rio Grande de Norte, Brazil
The Currais Novos project is located 179 kilometers west-southwest of Natalin the State of Rio Grande do Norte, Northeastern Brazil. The project is in the municipality of Currais Novos, on the Campina Grande-Natal highway approximately 8 km south of the town of Currais Novos.
Construction commenced on the Currais Novos Tungsten project in 2011 and the company is currently ramping up the commercial production of low cost tungsten on site. Currais Novos produces tungsten concentrate through the reprocessing and recovery of tungsten and molybdenum from two tailings piles deposited during the processing of ore from the Barra Verde and Boca de Laje tungsten-molybdenum mines. The Currais Novos project involves reprocessing and recovering tungsten from two tailings deposited during ore processing, consisting primarily of reforming plant floors and existing rooms, erecting equipment bases, and constructing the power substation building. Positive test results indicate the potential to expand, and development is advancing rapidly in accordance with projected deadlines.
Largo Resources initially targeted 23,000 metric tonne units of tungsten trioxide concentrate for 2012, with the target increasing to 42,000 metric tonne units for subsequent years however a sever drought in the region has caused a sustained suspension of operations since late 2012. An off-take is currently in place for 100 percent of material with a major global tungsten end-user. Mineral resources of 3.46 million tonnes grading 0.12 per cent tungsten trioxide and 1.74 per cent flourine, containing 7.2 million pounds of tungsten trioxide are indicated, and inferred mineral resources were estimated to be 810,000 tonnes grading 0.093 per cent tungsten trioxide and 1.44 per cent flourine – containing 1.3 million pounds of tungsten trioxide. A preliminary exploration program is already underway at recently acquired properties in the immediate vicinity of project area, with a target to expand the resources base and extend the mine.
Campo Alegre de Lourdes Iron and Vanadium Deposit – Bahia, Brazil
The Campo Alegre de Lourdes property hosts a large potentially world class iron, titanium and vanadium deposits. The 9,275-hectare property is located 875 kilometres north-northeast of Brasilia, the capital of Brazil, and 650 kilometres northwest of Salvador, the capital of Bahia State.
These Fe-Ti-V deposits are hosted within the Campo Alegre de Lourdes mafic-ultramafic intrusion which consists of a sequence of pyroxenite, gabbro and gabbro-anorthosite intrusive rocks. The mineralization consists of wide zones of massive titaniferous magnetite and ilmenite mineralization with high iron (50%) and V2O5 (0.75%) grades. The deposits are open along strike and at depth. The mineralization has been traced for eleven kilometres along strike and two kilometres wide and are characterized by 11 deposits aligned roughly north-south as elongated hills.
Metallurgical testwork was carried out in 2011 with results suggesting a Titanium Dioxide deposit. Further metallurgical testing is underway to move forward with the project’s development. The company plans to develop an extensive exploration plan for the large deposit with the goal of targeting 1.5 billion tonnes.
Summary
Largo Resources Ltd. has a strategic portfolio of vanadium and tungsten projects in Brazil and Canada. The Canadian Company is nearing production at its flagship project, Maracas Vanadium Project, – the highest grade vanadium deposit in the world and soon to be lowest cost producer in the market.
The Maracas project is fully-funded entirely by Brazilian Banks and currently in construction with production scheduled for the fourth quarter of 2013. Following full-scale production targeted for 2014, substantial cash flow generation is expected which will fund further expansion. Set to be the largest supplier of ferro-vanadium in the Brazilian state of Bahia, the vanadium processing plant will generate 1,200 jobs while in construction plus an additional 400 jobs once in operation.
The Company’s Currais Novos Tungsten project in Brazil is in production with significant expansion potential. Largo’s other properties include the Campo Alegre de Lourdes iron ore and vanadium project in Brazil and the Northern Dancer Tungsten-Molybdenum Project—the largest undeveloped tungsten deposit in the world located in Canada’s Yukon Territory.
Management
Mark Brennan – President, CEO, and Director
Mr. Brennan is a founding member of Desert Sun Mining with over 20 years financing experience in North America & Europe. Founder and principal of Linear Capital, Brasoil Corporation, James Bay Resources, Morumbi Oil & Gas and former President, CEO and Chairman of Admiral Bay Resources.
Tim Mann, P.Eng. – Chief Operating Officer
Mr. Mann is a mining Engineer with extensive international operations and management experience in mine engineering, development and mine operations with SNC Lavalin, Placer Dome and Goldcorp.
Andy Campbell – Vice President Exploration
Mr. Campbell has over 30 years’ experience in mining and exploration, including LAC Minerals and Noranda.
Kurt Menchen – General Manager (Brazil)
Mr. Menchen was the former Jacobina Mine Manager, Brazil. Mining Engineer with over 30 years’ experience including Anglo Gold and Desert Sun Mining.
Les Ford - Technical Director of Brazilian Operations
Mr. Ford began his career with Highveld Steel and Vanadium Corp. (“Highveld”) where he was appointed Assistant Technical Manager at the Vantra Project in South Africa. During his tenure with Highveld, Mr. Ford developed an innovative change to the process chemistry used in the production of V2O5 which allowed for a major increase in production at a significant reduction in operating costs. Mr. Ford later went on to become Assistant General Manager of Highveld and a member of the Highveld Executive Committee.
Mr. Ford’s expertise has been consulted for several other major vanadium projects, including, the Rand Mines Vansa vanadium plant where Ford was appointed Managing Director and successfully redesigned and commissioned the plant, making Rand Mines Vansa one of the lowest cost producers of V2O5 in the world. Mr. Ford has also held senior positions with Xstata Alloys, Precious Metals Australia, and Windimurra where he has similarly been appointed to evaluate and reform production processes and to appraise potential ventures in the vanadium industry. This substantial experience marks Mr. Ford as one of the world’s foremost experts in vanadium.
Douglas Herbst - Maracas Project Manager
Mr. Herbst has extensive management experience in the design and construction of heavy and medium size industrial projects, ranging from oil and gas, steel mills, chemical and food plants as well as minerals refining and processing plants.
Donald Clark - Construction Advisor and Specialists
Mr. Clark formerly headed up Yamana’s construction management team in Brazil, is serving as Maracás’ Project Construction Advisor and Specialist. Mr. Clark has over 30 years of experience managing the design, construction and operations of major mineral processing plants in Brazil and abroad and will provide guidance with respect to the construction management process for Maracás.
John Laurie – Chief Financial Officer
Mr. Laurie has over 30 years of accounting and financial management experience.
