Thursday, 13 June 2013

Largo Resources moves higher as Maracas project still on plan for Q4 commissioning

Shares of Largo Resources (CVE:LGO) were on the rise Thursday after the company said that construction was still progressing on plan at its Maracás vanadium project in Brazil, with the property on schedule and within budget to start commissioning at the end of the fourth quarter. 
This is quite a feat in an environment when many Canadian juniors are struggling to survive. 
According to a statment detailing an update of operations at the project in Bahia, Brazil, mechanical erection of the electrical switchyard and main substation is now complete, with pre-commissioning also concluded. Final commissioning of these areas will start once the 86 km power line is completed, which is 50 per cent of the way there, the company said.
It also said pre-commissioning of the crushing circuit will begin soon. 
Meanwhile, in terms of ongoing development, the foundation for the ball mill has been completed, with the bearings currently being installed. In addition, six of the 10 rollers for the kiln and cooler have now been fabricated and are scheduled for shipping by the end of the month. 
Equipment has also been imported from South Africa, and has arrived in Brazil, with Largo awaiting clearance from local authorities. 
Construction of the water treatment plant, the company said, is expected to be ready for commissioning by early August. 
"Our team has done an exceptional job of monitoring our minute-to-minute progress and responding to and managing potential issues in order to keep us in line with our year-end target," said COO Tim Mann in the release Thursday. 
"I believe this is largely due to the fact that we have an extremely experienced team of engineers on the ground who have built and operated many projects over the years, who have analyzed potential unforeseen events and who have built contingencies into the construction timeframes." 
The project, which is scheduled to eventually produce two vanadium products and an iron ore by-product, is projected to generate significant cash flow at current vanadium pentoxide (V2O5) prices - which are expected to increase over the intermediate term due to growing demand and unstable supply. 
Largo’s economic report for Maracás, from March of this year, was based on a 1.4 million tonne per year processing plant capacity, yielding an estimated after-tax net asset value of US$554 million at an 8 per cent discount rate, and an after-tax IRR of 26.3 per cent. 
All-in operating costs are expected at US$2.10 per pound of vanadium pentoxide equivalent, which includes a credit for the iron ore by-product, a natural effluent of the process, in addition to the two vanadium products of V2O5 and FeV. Capex is seen costing roughly $236 million, with about $200 million spent thus far. 
Largo has already inked a six-year off-take agreement with international commodities trader Glencore International for 100 per cent of the project's output of the important steel alloy. 
"I congratulate our team for overcoming the inevitable and unpredictable hurdles associated with these types of projects that we have encountered to date and for working aggressively to sustain the rapid pace of forward development which presently keeps us on track to commission in the fourth quarter of this year," said Mann. 
Production from the mine is expected to work out to around 7 per cent of world output of 75,000 tonnes a year, said Largo's chief, Mark Brennan, who doesn't expect to raise any equity capital, with a total cash position of some $40 million.
Separately, the company also announced the appointment of Andrew Hancharyk to the position of chief legal officer. According to the statement, Hancharyk has more than 18 years of experience in business law across various industries, and has been an executive with, or counsel to, several large public and private companies, including First Quantum and Sherritt International
Shares of Largo Resources rallied more than 13 per cent on Thursday morning, to 20.5 cents, stretching year-to-date gains to almost 8 per cent. 

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