Largo Resources in Brief
Largo Resources: LGO.V
After a few months of lagging behind, it looks like the precious and base metals bull market is getting back in to full swing. With some metals hitting record high prices with record low storage, most plays seem to have swung to the upside significantly as of late. Many resources companies have seen a large up-swing in interest since the beginning of October, while a few seem to have been overlooked. Largo Resources is one of them.
With management holding large ties to the old Desert Sun Mining company which some of you remember was sold to Yamana Gold earlier this year, Mark Brennan and Stan Bharti are looking to repeat their performance this time in the Tungsten, Molybdenum and Platinum Group Metals (PGM) fields.
Largo primarily wanted to focus on its Macuchi gold/copper play in Ecuador, but recently announced that they would option it out to Aur Resources. Conditions of the deal were for a total of $1.025 million in cash payments to Largo and $3.5 million in work to the property over the next 5 years. Management shows a clear shift in strategy by focusing on advanced stage deposits.
In April of this year, Largo entered into an option to acquire the Northern Dancer Tungsten/Molybdenum deposit just slightly north of the BC/Yukon border. Former work by its previous owners Amax Minerals Exploration provided a NON 43-101 published resource of 162,000,000 tonnes grading .13% W03 and .052% MoS2. This resource estimate would imply that Northern Dance is the worlds largest undeveloped tungsten deposit in the world. Currently a 4800 metre / 20 hole drill program is being conducted to expand these resources and to bring it into NI 43-101 status. Drill results are pending for the last 9 holes and due within the next few weeks now. Efforts are to have an NI 43-101 report done by the end of the year and possible production of this deposit by 2010.
Some rough numbers of non 43-101 inferred resources are:
Tungsten - 162,000,000 x .13% = 210,600 tons
210,600 x 2000 lbs/ton = 421,200,000 lbs tungsten
Moly - 162,000,000 x .052% = 84240 tons
84240 x 2000 lbs/ton = 168,480,000 lbs moly
Late this month Largo announced its acquisition of the Maracas Vanadium/PGM deposit in the Bahia state of Brazil. Given Brazil's political stability this is a very attractive investment as this area holds some of the best grades of Vanadium in the world. Non NI 43-101 estimates are 10.4million tonnes of 1.37% Vanadium Pentoxide V2O5. Just today, Largo released significant platinum and palladium findings from initial core re-samplings. According to the recent conference call, plans are for the Maracas project to become NI 43-101 compliant by mid to late November.
With a current share price of $.25 and a market cap of $13 million, this company is undervalued. Largo's closest competitor is Tiberon Minerals Ltd with a share price of $2.68 and a market cap of $201 million. Given that Tiberon's tungsten resource is 1/3 the size of Largo's and current drilling may expand this resource, the value is sorely unrecognized. Management has been buying significantly on the open market since summer.
Disclosure: I have a position in Largo Resources Ltd, and all opinions expressed are my own.