- Record production of 2,595 tonnes of V2O5 in Q4 2018, a 2% increase over Q4 2017
- Record FY 2018 production of 9,830 tonnes of V2O5, exceeding midpoint guidance of 9,650 tonnes by
2% and a 6% increase over FY 2017
- 2019 Guidance: Annual V2O5 production of 10,000-11,000 tonnes; Average annual cash operating costs
excluding royalties1 of US$3.45-3.65/lb V2O5;
Sustaining capital expenditures of US$10-14 million; Expansion capital expenditures of
US$10-14 million
TORONTO, Jan. 9, 2019 /CNW/ - Largo Resources Ltd. ("Largo" or
the "Company") (TSX: LGO) (OTCQX: LGORF) is very pleased to report fourth quarter and full year 2018 production results from its
Maracás Menchen Mine highlighted by a new quarterly production record of 2,595 tonnes of vanadium pentoxide
("V2O5") and record full year production of 9,830 tonnes of V2O5. Largo
delivered strong operational performance in 2018 exceeding the Company's midpoint guidance of 9,650 tonnes of
V2O5 at record production rates. Management is confident in its ability to deliver continued
operational success through its production and cost guidance for 2019.
Total production from the Maracás Menchen Mine in 2018 was 9,830 tonnes of V2O5, exceeding the Company's
midpoint of guidance by 2%. This represents an increase of 6% over FY 2017 and is the strongest full year of production from the
mine since operations commenced in 2014. The Company also achieved a new quarterly production record in Q4 2018 with 2,595 tonnes
of V2O5 produced, up 2% from the previous quarter and representing the fourth consecutive quarter of
production growth during 2018.
Global V2O5 recovery rates averaged 77.0% in 2018 representing an increase of 2% over the year prior.
Recoveries of 75.3% in Q4 2018 averaged somewhat lower when compared to 77.1% in Q3 2018 due to issues with kiln stability.
Following the kiln refractory replacement in Q1 2019, the Company expects recoveries to stabilize throughout the year as it
continues its focus on established maintenance programs and best production practices at the mine.
A summary of Q4 and FY 2018 production results from the Maracás Menchen Mine is presented below:
Maracás Menchen Mine Production
|
Q4 2018
|
Q3 2018
|
Q2 2018
|
Q1 2018
|
FY 2018
|
|
|
|
|
|
|
Global recovery2 (%)
|
75.3%
|
77.1%
|
79.2%
|
75.9%
|
77.0%
|
Concentrate produced (tonnes)
|
92,190
|
88,075
|
85,639
|
77,222
|
343,126
|
Grade of concentrate (% V2O5)
|
3.27%
|
3.48%
|
3.37%
|
3.56%
|
3.41%
|
Contained V2O5 (tonnes)
|
3,016
|
3,065
|
2,889
|
2,747
|
11,717
|
V2O5 flake produced (flake + powder)
(tonnes)
|
2,595
|
2,563
|
2,458
|
2,214
|
9,830
|
V2O5 produced (equivalent
pounds)3
|
5,721,000
|
5,650,000
|
5,419,000
|
4,881,000
|
21,671,000
|
Mark Smith, Chief Executive Officer of Largo, stated: "Largo's ability to consecutively
increase its production at the mine is a testament to the very skilled operations team at Maracás and has enabled the Company to
exceed its midpoint guidance of 9,650 tonnes of V2O5 for the year. We are also very
proud to report yet another quarterly production record from the Maracás Menchen Mine in addition to a new record of full year
production for 2018."
He continued: "During the year ahead, Largo will continue its focus on profitability and looks forward to reaping the
benefits of the increased production rate as a result of the Company's ongoing expansion project. The expansion project to
increase nameplate production capacity to approximately 1,000 tonnes of V2O5 per month is progressing on
time and the Company expects to reach the new nameplate capacity rate in Q3 2019."
2019 Production and Cost Guidance – Continued Profitability Underscored by Low-Cost Production
Largo Resources experienced a solid year of production growth at the Maracás Menchen Mine setting multiple production records
during the year. Building on the operational successes throughout 2018, management expects to continue this momentum in 2019 as
it increases its nameplate production rate by way of its expansion plan. The Company anticipates the expansion ramp up to be
completed in Q3 2019 and expects to reach the increased nameplate production rate of 1,000 tonnes of V2O5
per month in the same quarter.
Additionally, the Company plans to replace the kiln refractory in Q1 2019 which will result in approximately 17 days of down
time affecting production rates and cash operating costs4 for the quarter. As a result of the kiln refractory
maintenance, the Company now anticipates lower production during the month of March and higher cash operating costs5
in Q1 2019. The Company's V2O5 total production for 2019 will range between 10,000 and 11,000 tonnes which
is inclusive of high-purity vanadium flake and high-purity vanadium powder production.
The Company has also provided an annual average cash operating cost6 guidance for the year excluding royalties as
it believes this guidance more fully represents the total costs associated with producing vanadium. Current cash operating costs
include royalties which vary based on the price of V2O5 and in Largo's view does not completely reflect the
operational performance undertaken at the mine. In 2019, the Company expects an annual average cash operating cost excluding
royalties of US$3.45 – 3.65/lb V2O5.
A summary of 2019 production, cost and capital expenditure guidance are included in the table below:
2019 Production and Cost Guidance
|
|
|
Annual V2O5Production
Guidance
|
10,000 – 11,000 tonnes
|
Average Annual Cash Operating Cost7 Guidance Per
Pound Excluding Royalties
|
US$3.45 – 3.65
|
Sustaining Capital Expenditure8
|
US$10 – 14 million
|
Expansion Capital Expenditure9
|
US$10 – 14 million
|
Vanadium Outlook Update
On the back of the Company's solid production growth in 2018, vanadium prices soared approximately 156% but have recently
receded to the range of US15.50-16.00/lb10. This reported price range for vanadium is presently up 38% when compared
to the same period last year and Largo continues to believe as a result of the structural supply deficit, an elevated pricing
environment should remain for the metal in the short-term.
About Largo Resources
Largo is a Toronto-based strategic mineral company focused on the production of vanadium flake, high purity vanadium
flake and high purity vanadium powder at the Maracás Menchen Mine located in Bahia State, Brazil. The
Company's common shares are principally listed on the Toronto Stock Exchange under the symbol "LGO". For more
information on Largo, please visit our website at www.largoresources.com.
Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility for the adequacy or
accuracy of this press release.
Cautionary Note:
Readers are cautioned that Metal Bulletin pricing should be considered only as indicative pricing for the global vanadium
market, Metal Bulletin pricing does not directly reflect the price realized by the Company for a corresponding period.
Forward-looking Information:
This press release contains forward-looking information under Canadian securities legislation, some of which may be
considered "financial outlook" for the purposes of application Canadian securities legislation ("forward-looking statements").
Forward?looking information in this press release includes, but is not limited to, statements with respect to
timing for and completion of the Maracás Menchen Mine expansion project and the costs associated therewith; the duration of the
planned kiln shutdown; the timing and amount of estimated future production; costs of future activities and operations; and the
extent of capital and operating. 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". All information contained in this news
release, other than statements of current and historical fact, is forward looking information. 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. Forward-looking statements are based on the opinions and estimates of management as
of the date such statements are made. 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. Readers should also review the risks and uncertainties sections
of Largo's annual and interim MD&As which also apply.
Future Oriented Financial Information:
Any financial outlook or future oriented financial information contained in this press release, as such term is defined by
applicable securities laws, has been approved by management of Largo as of the date hereof and is provided for the purpose of
providing information about management's current expectations and plans relating to the Company's 2019 production guidance.
Readers are cautioned that any such future oriented financial information contained herein should not be used for purposes other
than those for which it is disclosed herein. The Company and its management believe that the prospective financial information as
to the Company's anticipated 2019 production guidance has been prepared on a reasonable basis, reflecting management's best
estimates and judgments. However, because this information is highly subjective, it should not be relied on as necessarily
indicative of future results.
Non-GAAP Measures
The Company uses certain non-GAAP financial performance measures in this press release, which are described in the
following section.
Cash Operating Costs
The Company's press release refers to cash operating costs per pound produced, a non-GAAP performance measure, in order to
provide investors with information about a key measure used by management to monitor performance. This information is used to
assess how well the Maracás Menchen Mine is performing compared to plan and prior periods, and also to assess its overall
effectiveness and efficiency.
Cash operating costs includes mine site operating costs such as mining costs, plant and maintenance costs, sustainability
costs, mine and plant administration costs, royalties and sales, general and administrative costs, but excludes depreciation and
amortization, share-based payments, foreign exchange gains or losses, commissions, reclamation, capital expenditures and
exploration and evaluation costs. These costs are then divided by the pounds of production from the Maracás Menchen Mine to
arrive at the cash operating costs per pound produced.
The measure, along with revenues, is considered to be one of the key indicators of the Company's ability to generate
operating earnings and cash flow from its Maracás Menchen Mine. These cash operating costs do not have any standardized meaning
prescribed by IFRS and differ from measures determined in accordance with IFRS. They are intended to provide additional
information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with
IFRS. These measures are not necessarily indicative of net earnings or cash flow from operating activities as determined under
IFRS.
____________________________________________
1 Largo reports non-GAAP measures such as "Cash Operating Costs". Please see information on this
non-GAAP measure in the "Non-GAAP Measures" section of this new release.
|
2 Global recovery is the product of crushing recovery,
milling recovery, kiln recovery, leaching recovery and chemical plant recovery.
|
3 Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or
lbs.
|
4 Refer to footnote 1.
|
5 Refer to footnote 1.
|
6 Refer to footnote 1.
|
7 Refer to footnote 1.
|
8 Excludes capitalized waste stripping costs.
|
9 Excludes capitalized waste stripping costs.
|
10 European Metal Bulletin vanadium price range as reported
during the week of January 4, 2019.
|
SOURCE Largo Resources Ltd.
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