Symbol: LGO (TSX.V)
- After tax IRR of 22.4% and NPV of $274 million
- Revised mine-plan to produce vanadium pentoxide for first 5 years
TORONTO, Sept. 13, 2012 /CNW/ - Largo Resources Ltd. ("Largo" or the "Company") is pleased to announce the results from a National Instrument 43-101 compliant technical report (the "Report") which outlines certain revisions to the previously determined mine-plan as well as providing a revised cash-flow model for its Maracás Vanadium Project in Bahia, Brazil (the "Maracas Project").
The Report is being prepared by Runge-Pincock, Allen & Holt ("Runge") and will be filed on SEDAR in due course.
Results from the Report demonstrate the encouraging economic viability of certain revisions to the previously disclosed mine plan which will result in Largo producing vanadium pentoxide for the first five years of production with a shift to production of ferro-vanadium in subsequent years. Theinitial mine plan (originally detailed in the September 2008 Definitive Feasibility Study ("DFS") as amended in May 2009) had contemplated the production of ferrovanadium at the outset. Highlights of the findings included in the Report are presented below.
Highlights:
Average Annual
Production (years
1-5) |
9,200 tonnes of vanadium pentoxide (V2O5) |
Average Annual
Production (years
6-15) |
6,136 tonnes of ferrovanadium (FeV) |
Vanadium
Pentoxide Price: |
$6.46 per lb, or $14.24 per Kg (3 year average) |
Ferrovanadium
Price |
$27.74 per Kg (3 year average) |
Average
Vanadium Pentoxide
Operating Costs |
$3.12 per lb |
Average
Ferrovanadium
Operating Costs |
$14.74 per kg |
| IRR and NPV |
IRR of 22.4% and NPV of US$274 million (8% discount rate) |
| Initial Capital Costs: |
$230,347 ($USD millions) |
USD/BR$ Exchange
Rate: |
2.00 |
Off-take
Agreement: |
Agreement with Glencore International remains in place for 100% of
vanadium products for first 6 years |
Sensitivity Analysis:
| Item |
IRR (%) |
NPV (USD Million) |
| Base Case |
22.4% |
273.7 |
| Capex +15% |
21.1% |
258.5 |
| Capex -15% |
23.9% |
289.0 |
| Sale Price (V205) +15% |
23.7% |
294.6 |
| Sale Price (V205) -15% |
21.1% |
252.8 |
| Sale Price (FeV) +15% |
23.1% |
298.2 |
| Sale Price (FeV) -15% |
21.7% |
249.2 |
| Sale Price (Fe) +15% |
22.8% |
281.6 |
| Sale Price (Fe) -15% |
22.1% |
265.8 |
| Production Cost +15% |
21.4% |
250.4 |
| Production Cost -15% |
23.4% |
297.1 |
| Exchange Rate 2.2 |
24.4% |
300.1 |
| Exchange Rate 1.6 |
20.4% |
244.0 |
Mark Brennan, President and Chief Executive officer to Largo, stated: "It is important to note the above sensitivity to both CAPEX reduction and to the exchange rate - as we announced previously we have already placed orders for 50% of the total CAPEX and remain under budget. The Brazilian Reais has also weakened significantly during the past several months which continues to benefit Largo as we move forward with the construction and procurement process."
He continued: "Although the Maracas Project is very profitable at the current vanadium pricing level, which has been severely impacted by the general slowdown in the global economy, recent announcements from China that formalize plans to move forward with large infrastructure projects, as well as growth in the aerospace sector, suggest to us that the Maracas project could be well timed to take advantage of a potential recovery in vanadium pricing overtime."
The Report is being produced as a supplement to the Company's May 2009 amended DFS on the Maracas Project which was completed in a very different economic climate and based on a less optimal mine plan. The proposed revised mine plan, has been the subject of pilot-plant test work carried out under the supervision of Les Ford, Technical Director of Operations to Largo, in October of 2010. Results drawn from this test-work were used to define the processing parameters for the Report.
Revised Mine Plan:
Les Ford, Technical Director of Operations for the Company, stated: "The decision to produce vanadium pentoxide ("V2O5") rather than ferrovanadium ("FeV") for the first 5 years was based upon several factors which, not only allow us to improve the economics of the project, but also to ramp up production more efficiently. By producing only V2O5 we will be better able to ramp up the plant to full production and budgeted yields at an early stage."
He continued, "The FeV route is far more complex and we project it could take up to 3 years to optimise the FeV route fully. No vanadium plant has ever been successfully commissioned on a FeV only route in the past and as such Largo has determined to avoid this route in order to mitigate the potential downside risk. As V2O5 is the main ingredient in the FeV production process, enhancing and adjusting the pentoxide process is crucial to the successful production of FeV."
He continued, "It is also important to note that cash flow in the first 3 years of production is better with V2O5 than FeV, and in the present market there is little if any financial premium for FeV. We do assume in this model that FeV will be produced in year 5, at which point we could decide to produce both products (FeV and V2O5) or, just FeV which will give us versatility and enable the Company to benefit from prevailing market conditions through the ability to choose one or the other or both products. This adaptability will be very advantageous in the future as demand for vanadium products is projected to rise."
After completing a Preliminary Economic Assessment in 2007, a Definitive Feasibility Study (DFS) was initiated later that year and amended in (2009). The DFS production scenario comprised production over 23 years with approximately 4,500 tpa of FeV being produced during the 1st 8 years of production. The results of the DFS were very robust and Largo started the process of securing funds to implement the Project. This activity was interrupted by the economic events of the 4th quarter of 2008 when implementation activity ceased.
Given these circumstances, Largo elected to commence a process of optimization of the Project using in-house staff located in Brazil supported by external consultants. This process continued through 2009 and into 2010. In addition, in mid-2010, a further program of metallurgical test work involving piloting was undertaken to more accurately define some of the operating parameters for the plant. To assist in this endeavour and to provide guidance with the optimization process, Largo hired Mr. Les Ford, a recognized vanadium specialist to facilitate this process. This work complemented the program of test work carried out during the preparation of the DFS and provided additional data to better define the optimal operating parameters of the plant. The results of this 2010 test work have been incorporated into Runge's analysis of the Maracas Project in the Report.
Both Largo's and Runge's investigations have demonstrated that a 15-Year V2O5/FeV production case provides better economic returns in the present market than the DFS Case from the current Maracás mineral reserve of 13.08 million tonnes. As Largo expects that additional resources will be delineated in the areas identified by the recent drill program (see Largo press release dated March 29,2012), it determined that it would be advantageous to utilize an operating plan that could process the grades of ore that are known to exist or are likely to be discovered in the future that require no special future accommodation or expansion of the crushing, beneficiation, calcining and hydrometallurgical circuits of the plant or that entails preference being given to high-grade ore to maintain profitability. This approach provides the existing plant design a great deal of flexibility. Largo's investigations indicate that this can be achieved by processing a blended ore or an ore that represents the average grade of the deposit.
Long-Term Metal Pricing:
Runge has used the three year average pricing from Metal Bulletin (www.MetalBulletin.com) as their base case scenario for metal pricing for both V2O5 and FeV. Metal Bulletin is a widely accepted reference source for non-LME listed minor metal pricing and industry information.
As metal pricing for both V2O5 and FeV were subject to extreme fluctuations during the 2008 period, it was determined to use the three year average to exclude this period.
Product:
|
3 Year Average*
|
Today's Pricing*
|
V2O5
|
$6.46 per lb, or $14.24 per Kg
|
$5.50 per lb, or $12.38 per Kg
|
FeV
|
$27.74 per Kg
|
$24.75 per Kg |
* Vanadium pricing determined based pricing as reported on Metal Bulletin
Quality Assurance Quality Control:
The scientific and technical information in this press release has been reviewed and approved by Tim Mann, P.Eng., Chief Operating Officer of Largo, and also by Don Arsenault, P. Eng., MBA, Vice President of Mining - Canada for Runge, both of whom are Qualified Persons as defined by National Instrument 43-10.
About Largo
Largo is a Canadian-based mineral resource exploration and development company focused on creating a world leading strategic metals company. Largo currently holds a 90% interest in the Maracás Vanadium Project, a 100% interest in the Currais Novos Tungsten Tailing Project, a 100% interest in the Campo Alegre de Lourdes Iron-Vanadium Project, all in Brazil, and a 100% interest in the Northern Dancer Tungsten-Molybdenum property located in the Yukon Territory, Canada. The immediate goal of the Company is to develop the Maracás Vanadium Project by Q4 2013 and continue to produce WO3 concentrate from the reprocessing of tungsten tailings from Currais Novos. Largo's skilled management team both in Canada and Brazil, are confident in their ability to advance these projects.
Largo is listed on the TSX Venture Exchange under the symbol "LGO".
For more information please refer to Largo's website: www.largoresources.com
Disclaimer
This press release contains forward-looking information under Canadian securities legislation. forward-looking information includes, but is not limited to, statements with respect to completion of the private placement, Largo's development potential and timetable of the Maracas and Northern Dancer projects; Largo's ability to raise additional funds necessary; the future price of tungsten and molybdenum; the estimation of mineral reserves and mineral resources; conclusions of economic evaluation; the realization of mineral reserve estimates; the timing and amount of estimated future production, development and exploration; costs of future activities; capital and operating expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Largo to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on SEDAR from time to time. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.
NEITHER THE TSX VENTURE EXCHANGE (NOR ITS REGULATORY SERVICE PROVIDER) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE
SOURCE: Largo Resources Ltd.