Largo Resources Ltd. (TSX-V:LGO) is a mid-tier mining development company primarily focused on ramping-up production of vanadium at its Maracás Menchen Mine in Brazil.
Largo has accomplished a unique feat in the mining industry, by successfully financing, building and (in the near term) bringing a project to production in a trying market environment and in a unique commodity.
Largo’s Maracás Menchen Mine boasts the highest grade vanadium deposit yet discovered and is expected to be a low cost producer. With an off-take in place with commodities giant Glencore, Largo is well positioned to become the leading producer of vanadium globally and expects to generate substantial cash-flows.
Largo Resources rallies on expanded production scenario economics at Maracas project
Largo Resources (CVE:LGO) shares jumped as much as 15% Monday after reporting results from its preliminary economic assessment (PEA) for an expanded production scenario at its Maracas vanadium project in Brazil just before the weekend.
Shares of the company were lately higher by almost 5% at 21.5 cents, but earlier hit as high as 23.5 cents.
The report, prepared by RungePincockMinarco, was commissioned to re-scope the project by incorporating a new production stream of both vanadium pentoxide and ferrovanadium, as opposed to just a ferrovanadium scenario.
The new production scenario sees production increased by around 46% following year two, the company said, and sees a dual revenue stream of both products following year three. The mine life is also increased to 29 years from the 15 years previously set out in the feasibility study from 2008.
The changes resulted in an increase in the net present value at an 8% discount rate to $554 million versus the prior $274 million and a rise in the internal rate of return to 26.3% from 22.4% previously.
The expanded production was a result of the company using all the mineral resources at the project as in a report released last December.
The additional capex to expand the operation of roughly $US 50 million was minimized, Largo said, by the fact that the capacity of "significant components of the original plant design" were purposefully designed to be larger than required with a view to a future possible expansion.
This additional $US 50 million would be over and above the already funded US$230.347 million currently being utilized at the project, which is now under construction. Largo has already ordered equipment with additional capacity in anticipation of increasing production.
It aims to produce both products by 2017, with the goal of completing the expansion of the vanadium pentoxide plant by the third quarter of 2015 and produce at an expanded rate within a year, while designing th ferrovanadium plant during this period. The company still has an offtake agreement with Glencore International, for 100 per cent of vanadium products for the first six years.
Average vanadium pentoxide operating costs were pegged at $3.18 per pound, while average ferrovanadium operating costs were estimated at $15.62 per kilogram.
The Canadian mineral resource exploration and development company currently holds a 100 per cent interest in the Maracás project, the Currais Novos tungsten tailings project, and the Campo Alegre de Lourdes iron-vanadium project, all in Brazil.
It also holds the Northern Dancer tungsten-molybdenum property in the Yukon, Canada.