RE: RE: RE: RE: Largo it is Hi and HNY to all!!!
Apologies for my lengthy absence, still long and strong LGO into 2012. Glafan et al., thanks for all your efforts and wellwishing - I shall have to disagree on one point though - I hope (and expect) to see more of the scummy spammers on this board soon, as this is a sure mark of company success/equity performance.
Global economic outlook and Chinese demand going into 2012 - relatively uncertain. FerroVanadium price currently stands at $23.65/kg - I have never seen such an oversold chart - RSI <1 - in my opinion this is overdue a significant upside correction. On the upside, even at these abysmal FeV price levels, LGO still has a healthy margin of $10/kg on its Maracas production due H1 2013. At the $10 margin level, I still see a conservative de-risked Maracas project NPV of $350m+, ignoring the enhancements to project economics we all expect to see from the 2011 drill program (due Q1 2012).
Tungsten prices have remained relatively firm at the $435/MTU level, which bodes well for 2012 cashflows fom our fully-operational Currais Novos tailings processing project.
Campo Alegre (prospecitive 1.5bn tonnes Iron Ore 50% + TiO2 20%), and Northern Dancer (largest undeveloped Tungsten Molybdenum resource in the world) - LGO's blue sky projects (with combined NPVs in excess of $3bn), should both show significant progress in 2012.
As far as share count is concerned - I am very comfortable with LGO's 450m shs outstanding (~825m shs fully diluted), and here's why: LGO is only awaiting the final rubber-stamp on its $150m debt facility from the Banco Itau consortium and BNDES. Having completed a dilutive equity issue for $115m in Q1 2011, this will be all that the company needs to bring the Maracas project into production, with a fair amount left over for exploration and development of the other projects. By 2013, I expect LGO to be able to finance a significant portion of the capex bills for both CA & ND from Maracas & CN operating cashflows. Throw a JV partner into the mix, and I estimate a maximum float of around 1.1bn shares in issue for this company by 2014, which would equate to a share price of around
.90 based on a projected mkt cap of $1bn - applying a 5X multiple to 2013 earnings (Maracas $50m + CN $10m), and a 20% (and increasing) weight to CA & ND NPVs. Yes, share counts are important, but only when they are growing or shrinking (or projected to do so). When a company's sole ability to finance itself lies in the issuance of new stock, it has BIG problems. LGO has all it needs going forward, and enough left over to fill the treasury with a cashpile the size of its current mkt cap by 2014/15.
Seasonally speaking, we may be entering a good Q (Q1) for FeV demand, and I expect Q on Q growth throughout 2012 after a particularly weak 2011. Chinese inventories are not high, and a restocking will take place at some stage...the only question is - when.
Wishing you all an extremely profitable 2012,
E17