Share Value Share market price does not equal share value.
Based on Maracus alone the NPV is 3.74 times greater then the market capitalization as of today.
NPV is $554 million vs a market cap of only $148 million as of today.
Put another way market capitalization is only 26.7% of NPV.
How good/solid is that $554 million NPV:
1) It was determined recently, 18 January 2013. It is is backed by current and reliable data in a 43-101 compliant Preliminary Economic Assessment (PEA) that increased the NPV 102% from $274 million to $554 million.
2) It is based on a 29 year mine life that was increased from 15 years with a doubling of resources reported just last December.
3) It is virtually assured to be realized with Maracus on budget and schedule as reported in today's MD&A. The reliability of this assurance is that it is coming at an advanced stage of the Maracus project:
- procurement is 95% complete
- 25 kilometer water line is installed and operational.
- 88 kilometer 138 kvolt line on target for August completion. Electrical substation is up with 50% of the electrical panels assembled and 60% of the cables laid to the main transformers. Electrical terminal yard is installed. Electrical cables underground and on pipe racks are being installed and on schedule.
- Primary crusher is installed. Secondary and tertiary crusher platforms are completed. Half of crusher conveyors are installed and remainder being assembled.
- Primary and regrind mill foundations completed and primary mill plates are being installed. Mill motors, baseplates, anchors and linings are delivered. The regrind mill shell is on-site and the ball mill is in transit. Mill installation is scheduled for early May.
- Majority of kiln components are ready for shipment.
- Sodium sulphate recovery plant, flash dryer, deammoniator reactor, and fusion furnace for production of V2O5 flake from South Africa is done and at sea or ready to be shipped.
- various tanks for water, reagents, slurries are complete.
- fabrication of 3 thickners are progressing.
- Administration building and medical centre have been completed. Cafeteria and kitchen are 90% complete,
- the sewage treatment plant and water treatment plant construction is in progress.
- pictures posted on the Maracus gallery confirm progress.
- engineering, procurement, and construction (EPC) contractor, Promon, has a track record of completing large projects on time and on budget.
5) It has robust economic backing. Maracus is the highest such grade deposit in the world, triple the grade of any other primary vanadium producer. It allows for a small plant to have the same per unit production. It will be the lowest cost producer. Even with depressed prices Largo will be the last man standing and will take market share. However, vanadium prices are rising and forecast to continue to rise.
6) It has production assurance with known and proven production processes. The production stream was recently changed to produce V2O5 in the initial years with a FeV stream added later. Production of V2O5 ensures a smooth ramp up to full production.
7) It has stock market support.
While some large investor has been selling off a large volume of shares through Macquaire recently it is more telling to look to the large investor who is buying through Canaccord.
While the Macquaire seller may have many reasons to sell it is not because of any fundemental reasons related to the Maracus project. In fact it is quite the opposite. When Largo released its updated PEA on Maracus last January we saw the share price rise and maintain that until depressed with unrelated high frequency trading smack down triggered two weekends ago with a coordinated shorting of gold by the bullion banks. The Macquaire seller may be facing unrelated financial difficulties forcing them to sell.
On the other hand the Canaccord buyer has only one reason to buy. The buyer has done due deligence on Largo, looked at its NPV and is taking up millions of shares.