Enhanced Access to Vanadium and Profitability Indicated by Pre-Feasibility Study Strengthens Foundation for Strategic Commitment to Energy Storage Business
Enhanced Access to Vanadium and Profitability Indicated by Pre-Feasibility
Study Strengthens Foundation for Strategic Commitment to Energy Storage
Business
All amounts expressed are in U.S. dollars, denominated by “$”.
Technical Report Outlines a Significant Expansion of V2O5 Production and Reserves
Supported by New Cash Flow Generation from TiO2 Pigment Co-Product Sales and a
20 Year Mine Life for the Maracás Menchen Mine
$2.0 Billion After-Tax NPV7% for Largo’s Vanadium-Titanium Operations (including
an increase of 12 years in mine life over the Company’s 2017 filed technical report)
Value Generated By the Maracás Menchen Mine is Expected to Be Additive to the
Potential Value Generated by the Company’s Energy Storage Business Initiatives in
the Long Term
TORONTO--(BUSINESS WIRE)--November 3, 2021--Largo Resources Ltd. ("Largo" or the
"Company") (TSX: LGO) (NASDAQ: LGO) is very pleased to announce positive results of an
updated mining plan to provide enhanced access to the vanadium needed for the Company to
continue to execute on its energy storage transition strategy. An independent technical report (the
"Technical Report") is being prepared in respect of the Company’s Maracás Menchen Mine in
accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI
43-101"). See Appendix A for additional details on the Technical Report.
Largo’s Board of Directors has approved the vertical integration of the Company’s foundational
mining business with its recently announced energy storage operations, with a view of becoming
a global leader in the redox flow battery sector. In executing on this shareholder value creation
strategy, the Company has undertaken a comprehensive optimization study for the Maracás
Menchen Mine, with the objectives of improving forecast vanadium production efficacy and
extending mine life. Drilling and engineering work performed on the Campbell Pit, and NAN
and GAN deposits, in addition to the inclusion of titanium dioxide (“TiO2”) has resulted in a
significant increase in reserves and resources. In comparison to the Company’s restated 2020
Annual Information Form, the Technical Report details a 305% tonnage increase in Proven and
Probable reserves and a 128% tonnage increase in Measured and Indicated resources for the
Maracás Menchen Mine supported by a robust economic assessment, which indicates a material
increase in the profitability and net present value of the Company’s mining operations.
The materially enhanced Company profitability forecast by the Technical Report is driven by
expanded V2O5 production and incremental cash flows generated by the production and sale of
TiO2 pigment as a co-product. The Company believes the enhanced profitability of the mining
operations contemplated by the Technical Report will unlock the flexibility to allocate operating
costs between V2O5 and TiO2 in a manner that will drive increased market competitiveness and
create additional shareholder value.
Ian Robertson, Co-Chair of Largo, stated: “The increase in V2O5 production, extension of
planned mine life and opportunity to deliver significant enhanced cash flow support our
ambition of becoming an industry leader in the long duration energy storage sector with our
vanadium redox flow battery solution. Following Board approval of our strategic transition to
become an energy storage leader and approval of Phase 1 of our operational scenario contained
in the Technical Report, I look forward to working collaboratively with Paulo Misk to pursue our
clear and profitable path forward for Largo, one that we believe will create significant value for
our shareholders.”
Paulo Misk, President and CEO of Largo, stated: “Our updated mine plan contemplates a
phased expansion approach to include the production of TiO2 pigment. When combined with the
results from our existing vanadium production, significant free cash flow of more than $4.0
billion dollars over the life of mine is forecast. Part of the TiO2 feedstock will be sourced from
non-magnetic concentrate and from the TiO2 content in the vanadium ore created from our
ongoing operations making our TiO2 production more profitable compared to a business
engaged in the full scope of TiO2 mining activities.”
Implications of the Technical Report:
Enhanced Profitability and Market Competitiveness: In addition to the significant
shareholder value created through the enhanced profitability delivered from the sale of
TiO2 pigment, expanded V2O5 production is expected to drive increased competitiveness
of the Company’s products in the energy storage market
V2O5 production expansion: Current nameplate production capacity of 13,200 tonnes
per annum expected to increase to an approximate average of 15,900 tonnes per annum in
2032
Updated Mine Life of 20 Years: Total operating mine life for the Maracás Menchen
Mine of 20 years, representing an increase of 12 years in mine life compared to the
parameters set forth in the Company’s 2017 technical report
Technical Report Indicates $2.8 billion Pre-Tax NPV7% / $2.0 billion After-Tax
NPV7% for Largo’s Mining Operations: Using weighted average price of $8.80/lb
vanadium pentoxide (“V2O5”)(inclusive of high purity V2O5 premium), $3,685.0/tonne
TiO2 pigment and $210.0/tonne ilmenite. Anticipated cash flow generated from the
Company’s TiO2 pigment product sales are expected to self-fund additional processing
plant expansions of the Company’s TiO2 pigment chemical processing plant; in due
course, the Company’s energy storage business may add significant additional value in
conjunction with the Maracás Menchen Mine operations
Technical Report and Qualified Persons
A Technical Report prepared in accordance with NI 43-101 for the Maracás Menchen Mine will
be filed on SEDAR (www.sedar.com) on or before December 20, 2021. The Technical Report
will be focused on the development of V2O5 and TiO2 production and mine life. The Technical
Report does not specifically address the Company’s energy storage business. All comments
related to the energy storage business are the opinion of the Company. Readers are encouraged to
read the Technical Report in its entirety, including all qualifications, assumptions and exclusions
that relate to the Mineral Reserve and Mineral Resource declaration. The Technical Report is
intended to be read as a whole, and sections should not be read or relied upon out of context. The
Mineral Reserve and Mineral Resource statement for the Maracás Menchen Mine included in
this press release (including Appendix A) were prepared under the supervision of by Porfírio
Cabaleiro Rodriguez, Mining Engineer, BSc (Mine Eng), FAIG, GE21 director. Mr. Rodriguez is
a “qualified persons” as defined in National Instrument 43-101 and have reviewed and approved
disclosure of the scientific and technical information and data in this press release that relate to
the mineral operations which will be the subject of the Technical Report but has not reviewed
disclosure relating to the Company’s energy storage business.
About Largo
Largo is a Canadian-based company that has historically been solely committed to the
production and supply of high-quality vanadium products. The Company believes that the
development and sale of vanadium-based utility scale electrical energy storage systems to
support the planet's on-going transition to renewable energy presents both an attractive economic
opportunity for the use of the Company's vanadium products and an opportunity to enhance the
Company's sustainability. The Company is confident that using its VPURETM and VPURE+TM
products, which are sourced from one of the world's highest-grade vanadium deposits at the
Company's Maracás Menchen Mine in Brazil, in its VCHARGE± vanadium redox flow battery
technology results in a competitive and practical long duration energy storage product.
Consequently, the Company is undergoing a strategic transformation through the creation of
energy storage business operations to be vertically integrated with its highly efficient vanadium
production mining operations, to create a unique competitive advantage in the rapidly growing
long duration energy storage market.
Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange
under the symbol "LGO". For more information on the Company, please visit
www.largoresources.com.
Appendix A
Technical Report Overview
The Technical Report results outline a robust economic assessment of the Maracás Menchen
Mine based on an increase in Reserve and Resources following significant drilling work arising
partly with the new inclusion of titanium dioxide (“TiO2”) production sourced from existing
V2O5 deposits, the construction and subsequent phased expansions of an ilmenite concentrate
plant and TiO2 pigment processing plant and an expansion of the Company’s vanadium
operations in Brazil. Largo retained GE21 Consultoria Mineral Ltda. ("GE21") to prepare the
Technical Report which contains an updated Life of Mine Plan (“LOMP”) for its Campbell Pit,
new LOMP’s for the Novo Amparo Norte (“NAN”) and Gulçari A Norte (“GAN”) deposits and
a Pre-Feasibility Study for the Maracás Menchen Mine.
The key assumptions underlying the Technical Report are based on the exclusive sale of the
mining operations’ vanadium products, in the open market at spot price, including premiums, for
use in the steel additive, chemical and aerospace sectors and do not consider any potential value
from sales to the Company’s energy storage operations. Should the Company’s business evolve
such that it is believed that the integrated use of the Company’s vanadium products with the
energy storage operations generates a higher economic benefit, the Company may prioritize sales
of its vanadium products to the energy storage market, including its own energy storage business.
Any significant changes to the overall economics that result from such change would have to be
contained in a new NI 43-101 technical report.
Since 2018, the Company has worked diligently on creating a new operational vision for the
Maracás Menchen Mine with the objective of creating a mine plan and strategy that optimizes
substantial return on investment, while achieving profitability through the inclusion of ilmenite
and TiO2 and expansion of the Company’s vanadium operations. Consistent with that objective,
the Company has evaluated and is expected to implement phased operational scenarios that will
generate positive margins and drive meaningful cash flow over the balance of the mine life.
Resource and Reserve Updates
(see Reserve and Resource tables below for details)
Campbell Pit:
As defined in the Company’s restated Annual Information Form, the Campbell Pit 2020-
year end reserves, adjusted for mining depletion, totaled 14.90 million tonnes of Proven
and Probable Reserves with a total Measured and Indicated Resources of 15.71 million
tonnes and Inferred Resources of 1.61 million tonnes.
The updated Campbell Pit Proven and Probable Reserves has increased 20% to 17.85
million tonnes.
The updated Campbell Pit Measured and Indicated Resources has increased 24% to 19.43
million tonnes, with an increase of 217% in Inferred Resources to 5.10 million tonnes
following the inclusion of TiO2.
NAN and GAN Deposits
In addition, the new mine plan will include Mineral Reserve contributions from the NAN
and GAN deposits based on recent drilling work and the inclusion of TiO2. The maiden
NAN Proven and Probable Reserves total 22.35 million tonnes.
As previously announced (see press release dated June 11, 2019) the Measured and
Indicated resources at NAN totaled 12.23 tonnes with an Inferred Resource of 11.33
million tonnes. The maiden NAN Measured and Indicated resources now total 22.89
million tonnes, representing an 87% increase. The updated NAN Inferred Resource
decreased 48% to 5.90 million tonnes due to upgrading of previous Inferred
mineralization to a higher confidence of mineral categories.
As stated in the Company’s restated Annual Information Form, GAN had an Inferred
Resource of 9.73 million tonnes.
The maiden GAN Proven and Probable Reserves total 20.16 million tonnes. The
upgraded GAN Measured and Indicated resources total 21.37 million tonnes.
The updated GAN Inferred Resource decreased 53% to 4.52 million tonnes due to
upgrading previous Inferred mineralization to a higher confidence of mineral categories.
Proven and Probable Reserves for the Maracás Menchen Mine now total 60.36 million tonnes,
representing a 305% increase over the 14.90 million tonnes previously reported in Company’s
restated 2020 Annual Information Form.
Measured and Indicated resources at the Maracás Menchen Mine, including all deposits, has
expanded from 27.94 million tonnes to 63.69 million tonnes, representing a 128% increase.
Inferred Resource at the Maracás Menchen Mine has decreased 31% from 22.67 million tonnes
to 15.52 million tonnes as a consequence of converting substantial material to a higher
confidence of mineral categories at NAN and GAN.
Phase 1: Ilmenite Concentration Plant + TiO2 Pigment Processing Plant Construction
(2022-2023)
Phase 1 considers an ilmenite concentration plant with a capacity to produce 150,000
tonnes of ilmenite concentrate per year from the Campbell Pit non-magnetic concentrate
as previously approved by the Company’s Board of Directors (the “Board”) (see press
release dated March 18, 2021). Concurrent with this approval, the Company will invest
$25.2 million in 2022 to construct the ilmenite concentration plant with production
expected to commence in 2023. The majority of the ilmenite concentrate will be fed
through the Company’s new TiO2 pigment chemical processing plant which is to be
constructed in Camaçari, Brazil in 2022 and 2023. The TiO2 pigment chemical
processing plant is expected to produce 30,000 tonnes of TiO2 pigment per year
beginning in 2024 with a total investment of $96.4 million ($50.7 million in 2022 and
$45.7 million in 2023). The Company anticipates that the Total investment for Phase 1
will be $121.6 million and will generate an average production of 140,000 tonnes of
ilmenite concentrate (from 2023 to 2025) and 30,000 tonnes of TiO2 pigment per year
(from 2024 to 2025). The ilmenite concentrate production is expected to supply all
necessary feedstock for the TiO2 pigment chemical processing plant with any surplus
being sold in the open market . The Company’s annual V2O5 equivalent production
capacity of 13,200 tonnes will remain unchanged during this period.
The Company’s Board has also approved the additional TiO2 pigment plant expenditures
for Phase 1.
Estimated Unit Cash Costs1: $2.31/lb V2O5 (Campbell Pit)
Phase 2: TiO2 Pigment Processing Plant + Vanadium Trioxide Plant Expansions (2024-
2025)
Phase 2 will consider the expansion of the Company’s TiO2 pigment chemical processing
plant located in Camaçari, Brazil to a nameplate capacity of 60,000 tonnes of TiO2
pigment per year. The Company estimates a total investment of $59.8 million with $29.9
million to be incurred in 2024 and $29.9 million in 2025. The ilmenite concentrate
feedstock that will support the Company’s TiO2 pigment production in 2026 and 2027
will be sourced from the current Campbell Pit non-magnetic concentrate (86%) and from
the non-magnetic stock contained within ponds (14%) from past operations. The
Company does not estimate any surplus of Ilmenite concentrate production during this
period. In 2024, the Company will consider an expansion of the vanadium trioxide
(“V2O3”) plant in Maracás with a total investment of $4.7 million. This expansion is
expected to double current capacity of 14 tonnes per day to 28 tonnes and will support the
Company’s VRFB deployment plans. The Company’s annual V2O5 equivalent production
capacity of 13,200 tonnes will remain unchanged during this period.
Estimated Unit Cash Costs1: $2.31/lb V2O5 (Campbell Pit), $1,765.81/tonne TiO2
Pigment
Phase 3: TiO2 Pigment Processing + Ilmenite Concentration Plant Expansions (2026-2028)
Phase 3 will consider a further expansion of the Company’s TiO2 pigment chemical
processing plant to a capacity of 120,000 tonnes of pigment production per year with an
expected cost of $132.0 million to be incurred in 2026 and 2027. The Company expects
to reach a production rate of 120,000 tonnes of TiO2 pigment from 2028 to 2040.
Concurrent with the TiO2 pigment chemical processing plant expansion, the Company
will also perform an expansion of its ilmenite concentration plant in Maracás to support
its TiO2 pigment chemical plant expansion a new average production rate of
approximately 425,000 tonnes of ilmenite concentrate per year. The Company plans to
invest $36.5 million to support this expansion and will source the ilmenite concentrate
feedstock from its stocks of non-magnetic material located in its tailings ponds from past
operations. The stocked material in the Company’s tailings ponds will be depleted in
2032, at which point the Company plans to source feedstock for its ilmenite concentrate
processing plant from the non-magnetic concentrate generated from the GAN and NAN
operations. From 2033 to 2040, there will be an average ilmenite concentrate surplus of
144,000 tonnes, which the Company expects to sell in the open market. The Company’s
annual V2O5 equivalent production capacity of 13,200 tonnes will remain unchanged
during this period and for the years 2029 and 2030.
Estimated Unit Cash Costs1: $2.31/lb V2O5, $1418.43/tonne TiO2 Pigment
Phase 4: V2O5 Expansion (2029-2032)
The Company’s Campbell Pit will be depleted in 2032 at which point the Company
expects to begin mining and processing of its NAN and GAN deposits. The Company
plans to invest in duplicate crushing, milling, kiln and leaching circuits, with a total
investment of $230.6 million ($23.1 million in 2029, $69.2 million 2030, $92.3 million in
2031 and $46.1 million in 2032). This expansion is expected to result in an approximate
average of 15,900 tonnes from 2033 to 2041. The duplicate crushing circuit will be
located near the NAN orebody, which is roughly 6.5 km from the Campbell Pit. The pre-
concentrate will be transported by truck and milling circuit, second kiln and leaching
circuit will be located near the Company’s current operations.
Phase 2, 3 and 4 are each subject to the Board’s approval.
Estimated Unit Cash Costs1: $2.31/lb V2O5 (Campbell Pit), $3.65/lb V2O5 (NAN and
GAN), $1,552.89/tonne TiO2 Pigment (2033-2041)
Additional supporting parameters of the Technical Report economics are presented in the
following table:
Key Assumptions Life of Mine
Exchange Rate (R$/US$) 5.1
Commodity Prices
Weighted average price of $8.80/lb V2O5 (inclusive of high
purity V2O5 premium), $3,685.0/tonne TiO2 pigment and
$210.0/tonne ilmenite
Vanadium Premium (% of sales) 25
Tonnes / lb 2204.62
Production Profile Life of Mine
Mine Life (Years) 20
Mining Rates (million, tonnes / year) 8.3 (Campbell Pit: 2022-2032), 42.0 (NAN/GAN: 2032-
2041),
Strip Ratio (Waste : Ore) 3.94 : 1 (Campbell Pit), 7.76 : 1 (NAN), 6.92 : 1 (GAN)
Project Economics
NPV7% (Pre-tax, After-Tax) $2.8 billion, $2.0 billion
Discounted Life of Mine Cash Flow (Pre-Tax, After-
Tax) $5.8 billion, $4.2 billion
CAPEX $590.0 million
Sustaining CAPEX $234.0 million
Maracás Menchen Mine Mineral Reserves Estimates (as at October 10, 2021)
Category Tonnage
(Mt) %Magnetics
Head Magnetic Concentrate Metal Contained
%V2O5 %TiO2 Mag
(Mt) %V2O5 %TiO2
V2O5 in
Magnetic
Concentrate
(t)
TiO2 Non-
Magnetic
Concentrate
(t)
Campbell Piti
Proven 15.64 31.91 1.22 8.02 4.99 3.14 5.04 156,686 1,002,650
Probable 2.21 29.77 1.02 8.22 0.66 2.69 4.54 17,677 151,610
Total
Campbell Pit
Reserve 17.85 31.65 1.20 8.04 5.65 3.09 4.98 174,363 1,154,260
GANii
Proven 12.10 17.75 0.49 7.57 2.15 1.88 1.94 40,375 874,242
Probable 8.06 21.15 0.57 8.33 1.71 2.04 2.29 34,790 632,616
Total GAN
Reserve 20.16 19.11 0.52 7.87 3.85 1.95 2.08 75,165 1,506,858
NANiii
Proven 17.43 23.22 0.7 8.71 4.05 2.36 2.95 95,538 1,399,099
Probable 4.92 23.38 0.72 8.76 1.15 2.44 2.78 28,059 398,901
Total NAN
Reserve 22.35 23.26 0.70 8.72 5.20 2.38 2.91 123,598 1,798,000
Total Maracás Menchen Mine Proven and Probable Reserves
Proven 45.17 24.76 0.82 8.17 11.19 2.62 3.40 292,599 3,275,992
Probable 15.19 23.12 0.68 8.45 3.51 2.29 2.78 80,526 1,183,126
Total 60.36 24.35 0.79 8.24 14.70 2.54 3.25 373,125 4,459,118
Notes:
1. Mineral Reserves estimates were prepared in accordance with the CIM Standards.
2. Mineral Reserves are the economic portion of the Measured and Indicated Mineral Resources.
3. Mineral Reserves were estimated by Guilherme Gomides Ferreira, BSc. (MEng), MAIG, a GE21
associate, who meets the requirements of a “Qualified Person” as established by the Canadian
Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and
Mineral Reserves (May 2014) (“the CIM Standards”).
4. Mineral Reserves is reported effective date October 10th, 2021.
5. The reference point at which the Mineral Reserves are defined is the point where the ore is delivered
from the open pit to the crushing plant.
6. Vanadium product comes from magnetic concentrate, while TiO2 product from non-magnetic portion.
7. Exchange rate $1.00 = R$5.10.
8. Mineral Reserves were estimated using the Geovia Whittle 4.3 software and following the economic
parameters:
i. Recovery 100% and dilution 3%. Pit slope angles ranging from 37.5° to 64°. V2O5 long term
price of $7.80/lb, with an additional premium of $2.50/lb for high purity product. TiO2 pigment
selling price of $3,691/tonne. Mining costs of $1.60/tonne for mineralization and waste.
Vanadium processing costs of $37.80/tonne ore feed. V2O5 concentrate recovery of 80.5%.
Ilmenite concentrate costs of $55.00/tonne processed. TiO2 pigment costs of $1.374/tonne of
Ilmenite concentrate. TiO2 overall recovery of 37.9%. General and Administrative (G&A) costs
of $0.16/lb V2O5.
ii. Recovery 95% and dilution 5%. Pit slope angles ranging from 40° to 64°. V2O5 long term price
of $7.80/lb, with an additional premium of $2.50/lb for high purity product. TiO2 pigment selling
price of $3,691/tonne. Mining costs of $1.60/tonne for mineralization and waste. Vanadium