Largo Reports Highlights of Its Fiscal 2016 Financial and Operating Results
PRESS RELEASE March 30, 2017
LARGO REPORTS HIGHLIGHTS OF ITS FISCAL 2016 FINANCIAL AND OPERATING RESULTS
TORONTO, March 30, 2017 - Largo Resource s Ltd. ("Largo" or the "Company") t oday released highlights of its financial
results for the year ended December 31, 2016, as filed in full on SEDAR at http://www.sedar.com and on the Company’s
website at http://www.largoresources.com. The reader is cautioned that the bel ow excerpt should be read in conjunction
with the Company’s annual consolidated financial statements for the years ended December 31, 2016 and 2015 as well as
the management’s discussion and analysis for the year ended December 31, 2016 (“MD&A”). Note references in this press
release refer to the notes contained in Largo’s annual consolidated financial statements for the years ended December 31,
2016 and 2015.
Q4 2016 highlights1
Q4 2016 Q4 2015
$ $
Revenues 31,482 7,600
Direct mine and mill costs 21,701 19,268
Cash provided by / (used in) operating activities 4,519 (2,761)
Summary of the Company’s 2016 financial results2
Dec. 31, 2016 Dec. 31, 2015
$ $
Cash 758 2,869
Total Current Assets 32,211 19,718
Mine properties, plant and equipment 321,084 296,041
Total Assets 353,295 315,759
Total Current Liabilities 94,082 100,313
Total Liabilities 326,469 282,817
2016 2015
$ $
Revenues 81,233 7,600
Operating costs (113,173) (29,377)
Direct mine and mill costs 3 (77,226) (19,268)
Net loss (55,630) (129,960)
Basic loss per share (0.14) (0.78)
Net cash provided by (used in):
Operating activities (15,942) (8,421)
Financing activities 29,193 39,997
Investing activities (15,565) (39,818)
1. Financial numbers are reported in thousands of Canadian dollars, except for per share amounts.
2. References to “2016” and “2015” refer to the twelve-month periods ended December 31, 2016 and December 31, 2015, respectively, and as reported
in the Company’s annual consolidated financial statements for the years ended December 31, 2016 and 2015.
3. Refer to note 21.
Cash operating costs since the commencement of commercial production on October 1, 2015 4
Production
Tonnes
Production
Pounds
Equivalent
CDN$ Cost
per pound
US$ Cost per
pound
Q4 2015 1,654 3,646,441 $5.97 $4.47
Q1 2016 1,169 2,577,201 $6.52 $4.75
Q2 2016 2,311 5,094,877 $4.19 $3.25
Q3 2016 2,182 4,810,481 $4.67 $3.59
Q4 2016 2,304 5,079,444 $4.82 $3.60
4. Refer to the “Non-GAAP Measures” section of the Company’s MD&A for a discussion regarding the calculation of these Non-GAAP Measures and
additional discussion of cash operating costs elsewhere in the Company’s MD&A.
Mark Smith, President and Chief Executive Officer for Lar go, stated: "We delivered subst antial financial improvements
during Q4 2016, as evidenced by our quarterly results. Re venues for Q4 2016 exceeded direct mine and mill costs by
$9,781, which demonstrates our robust financ ial performance. Similarly, cash generated from operating activities for Q4
2016 was $4,519. These achievements are the direct resu lt of our strong operational improvements and effective
management oversight at the Maracás Menchen Mine.”
He continued: "We are delighted with the Company's rece nt results and believe that our strong production record,
stabilization of cash operating costs and positive outlook for vanadium prices will underpin Largo’s financial performance
during fiscal 2017.”
Maracás Menchen Mine operating results
The Maracás Menchen Mine operation produced its first vanadium pentoxide flake on August 2, 2014. On October 1, 2015,
the Company declared commercial production at the Maracás Menchen Mine. Since this date, attributable borrowing costs
and depreciation are no longer capitalized and are recognized in the consolidated statement of loss and comprehensive
loss, together with revenues and operating costs.
Expenditures of $12,971 were capitalized to mine properties, plant and equipment during the year ended December 31,
2016 (year ended December 31, 2015 – $45,944).
During Q4 2016, production output was 5.6% higher than in Q3 2016, with new monthly and daily production records of 828
tonnes and 39 tonnes of V2O5, respectively, achieved in December. Recoveries have continued to improve over the course
of 2016, with the fusion recovery rate averaging 85% (2015 – 72%). For Q4 2016, the fusion recovery rate of 90% is a
significant improvement from the 78% achi eved in the same prior year period. T he overall recovery rate averaged 62.6%
for Q4 2016, an increase of 6.3% from the 58.9% achieved in Q3 2016, primarily due to improvements in milling control and
leaching performance. The lowest monthly production in Q4 2016 was in October with an output of 715 tonnes of V 2O5,
which was lower than expected due to a longer than anticipated scheduled shut-down of the kiln and cooler for refractory
repair and availability of the flash dryer. Total production for 2016 was 7,966 tonnes of V2O5, with production levels varying
by less than 6% per quarter from Q2 2016 onwards. Nam eplate annual production capacity for the Maracás Menchen
Mine is 9,634 tonnes of V2O5, or approximately 26.4 tonnes per day.
The cost per pound for Q4 2016 in Canadian dollars ($) (refer to page 5 of the MD&A) was higher than both Q3 2016 and
Q2 2016, partially due to a strengthening of the Brazilian real (R$) against the $, with the average rate moving from 0.3675
(R$/$) in Q2 2016 to 0.4052 in Q4 2016. In addition, the Q4 2016 cost per pound is impacted by the recognition of a provision
for litigation claims (refer to note 10(a)) in other general and administrative expenses.
During Q1 2017 the Company was focused on stable production and the implementation of improvement projects to support
higher recoveries and lower consumption of consumables in the chemical plant. During March 2017 embarked on a planned
shutdown of 20 days to replace the kiln refractory. In 2017, the Company plans to implement projects in the leaching and
kiln sections of the chemical plant to further increase these recovery levels. In addition, the Company aims to improve the
level of consumption of sodium carbonate and ammonium sulphate, two of the Company’s key consumables, by improving
control of the dosage system. Further, the Co mpany anticipates that its efforts in im proving overall recovery levels will
enable it to achieve monthly production of 840 tonnes of V2O5 in Q2 2017. The Company will also commence sales of high-
purity V2O5 flakes to its offtake partner, as well as making the necessary additions to the plant to enable the handling and
packing of V2O5 powder.
The cost per pound for 2016 (see “Non-GAAP Measures” section of the MD&A) was $4.85 (US$3.62), which is lower than
the 2016 guidance of $5.07 (US$3.87) as published in the Q3 2016 MD&A. This achievement demonstrates the greater
consistency in operations and producti on achieved at the Maracás Menchen Mi ne since Q1 2016. Consequently, the
Company expects to build on this in 2017. Production guidance for 2017 is as follows:
Annual
Production
High-End
Annual
Production
Low-End
Average
Annual
Production
Estimated Annual
Average
US$/CDN$ Cash
Operating
Costs Per Tonne 1,2,3
Estimated Annual
Average
US$/CDN$ Cash
Operating
Costs Per Pound 1,2,3
2017 2 9,777 tonnes 4,5
~ 21.6 mil. lbs
8,777 tonnes 4,5
~ 19.3 mil. lbs
9,277 tonnes 4,5
~ 20.5 mil. lbs
US$8,065
CDN$10,767
US$3.66
CDN$4.88
1. The cash operating costs reported are on a non-GAAP basis. Cash operating costs include all cash expenditures, the main categories being mining
costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalties and SG&A. Cash operati ng costs excludes
depreciation and amortization charges, interest or any other debt servicing costs and commissions on sales. Refer to the “Non-G AAP Measures”
section of this MD&A. See also 3. below. The estimated av erage annual R$/US$ and CDN$/US$ exchange rates used for 2017 are appr oximately
3.34 and 1.34 respectively.
2. Excludes corporate SG&A or CAPEX (Capital Expenditures).
3. The reader is cautioned that the cash operating costs presented are intended to serve as a guide to the magnitude of the Com pany’s monthly
operating expenditures on a cash basis and excludes financing costs associated with the operations and non-cash accounting charges (including but
not limited to depreciation and amortization expense, accretion, share-based payments, or foreign exchange and derivative gains or losses). The
measure may therefore not be comparable to other companies or the results of similar operations and does not meet any definitio n of GAAP. Refer
to the “Non-GAAP Measures” section of this MD&A.
4. Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
5. A total CAPEX of approximately $9.9 million is expected to be required during 2017. The Company periodically reviews its CAP EX needs and will
update the market when its estimates change by a material amount.
2016 Highlights
The Company’s Maracás Menchen Mine produced 7,966 tonnes of V2O5 in 2016. The Company’s Maracás Menchen Mine
achieved a new record production level of 828 tonnes of V 2O5 in December 2016, which included new weekly and daily
production records of 219 and 39 tonnes, respectively.
On March 2, 2016, the Company announced t hat it had entered into definitive agree ments with the consortium of three
commercial banks in Brazil for a new debt facility (the “2016 Facility”) (see note 9(b)) and the restructuring of its export credit
facilities (see note 9(e)).
Concurrently with the New Facility, t he Company agreed to new commercial terms for its US$3,952 short term loan (see
note 9(f)). In addition, the Company agreed terms for an additional facility of up to R$80,000 to close out its foreign currency
swap contract that indexes a portion of the BNDES facility (see note 9(d)) to the US dollar.
On January 12, 2016, the Company announced it had reached an agreement to restructure the timing of amounts due under
the arbitration settlement (refer to note 9(h)). Under the terms of the restruct uring, the Company made a payment of
US$4,000 on January 29, 2016, with further payments deferred to commence on January 15, 2017.
On January 29 and March 3, 2016, the Company announced the closing of the first and second tranches of a non-brokered
offering of units. The Company received gross proceeds of $36,644 from the sale of 209,393 units of the Company. Each
unit was sold at a price of $0.175 and consisted of one common share of the Company and one-half of one common share
purchase warrant. Each whole warrant will be exercisable into one common share at a price of $0.29 per share for a period
of five years from closing of the offering. Funds managed by Arias Resource Capital Management LP (the “ARC Funds”)
purchased an aggregate of 153,333 units for consideration of $26,834. Prior to the offering, the ARC Funds owned
approximately 46.30% of the Company’s issued and outstanding common shares and following the closing of the offering,
the ARC Funds owned approximately 59.96% of the Company’s then issued and outstanding common shares. In addition,
Mr. Mark Smith subscribed for an aggregate of 4,218 units. Refer to note 11 for further details.
On May 10, 2016, the Company announced that it had received approval for listing of its common shares for trading on the
OTCQB Venture Market (“OTCQB”). The Company commenced trading on the OTCQB under the symbol LGORF at market
open on May 10, 2016.
On May 26, 2016, the Company announced a significant increa se in the mineral reserves at its Maracás Menchen Mine.
Refer to the Operations, Maracás Menchen Mine section of Largo’s MD&A for further details.
On June 29, 2016, the Company announced that it had received approval for the listing of its common shares on the TSX.
The common shares commenced trading on the TSX effective July 4, 2016.
On July 18, 2016, the Company announced that it had entered into a non-binding memorandum of understanding (“MOU”)
with Vionx Energy Corporation (“Vionx”), a company which develops, produces and sells vanadium redox flow batteries
(“VRBs”) for utility grid applications. The MOU summarizes the principal terms upon which Largo and Vionx will continue
discussions that may lead to the supply by Largo of vanadium electrolyte to Vionx to further the research and development
of advanced VRBs utilizing VNX Grid Energy Storage Systems. The MOU is conditional upon a number of items as set out
in the Company’s press release dated July 18, 2016.
On September 7, September 12 and Octobe r 4, 2016, the Company announced the cl osing of the first, second and third
tranches of a non-brokered offering of units. The Company received gross proceeds of $5,000 from the sale of 11,111 units
of the Company. Each unit was sold at a price of $0.45 and consisted of one common share of the Company and one-half
of one common share purchase warrant. Each whole warrant will be exercisable into one common share at a price of $0.65
per share for a period of three years from closing of eac h tranche. Funds managed by the ARC Funds purchased an
aggregate of 6,228 units for consideration of $2,803. Prior to the offering, the ARC Funds owned approximately 59.96% of
the Company’s issued and outstanding common shares and follo wing the closing of the offering, the ARC Funds owned
approximately 59.86% of the Company’ s then issued and outstanding common shares. In addition, Mr. Mark Smith
subscribed for an aggregate of 556 units and an entity controll ed by Mr. Alberto Beeck, a director of the Company,
subscribed for an aggregate of 556 units. Refer to note 11 for further details
On December 28, 2016, the Company announced it had entered into definitive agreements with the consortium of three
commercial banks in Brazil for a new debt facility (the “2017 Fac ility”) (see note 9(c)) and the restructuring of its existing
facilities.
Significant events and transactions subsequent to 2016
On January 9, 2017 and January 24, 2017, the Company announced the closing of the first and second tranches of a non-
brokered offering of units. The Company received gross proceeds of $16,083 from the sale of 35,740 units of the Company.
Each unit was sold at a price of $0.45 and consisted of one common share of the Company and one common share
purchase warrant. Each whole warrant will be exercisable into one common share at a price of $0.65 per share for a period
of three years from closing of the offering. Funds managed by the ARC Funds purchased an aggregate of 14,396 units for
consideration of $6,478. Prior to the offering, the ARC Fund s owned approximately 59.86% of the Company’s issued and
outstanding common shares and following the closing of the offering, the ARC Funds owned approximately 58.62% of the
Company’s then issued and outstanding common shares. In addition, an entity controlled by Mr. Alberto Beeck, a director
of the Company, subscribed for an aggregate of 10,450 units for consideration of $4,703. Refer to note 22 for further details.
On February 27, 2017, the Company announced that its v anadium pentoxide has been qualified for use by a major North
American producer of master alloys for t he aerospace industry, with further qualific ation trials underway at master alloy
producers in Europe and Russia.
On March 15, 2017, the Company announced that the consorti um of three commercial banks in Brazil had agreed to
temporarily waive the requirement that the Company inject a further US$5,000 in working capital into Vanadio, a term which
the three commercial banks had required in connection with the 2017 Facility (see note 9(c)). In connection with the granting
of this temporary waiver, the three commercial banks and the Company are in discussions for the Company to fund certain
payment obligations to the three commercial banks which had previously been delayed.
Restructuring of short term loan
The Company is also pleased to announce that it has agreed to a new schedule of payments for its short term loan with a
Brazilian commercial bank. As a result of the initial agreement, the Company received a waiver, which included a waiver for
the payment of principal and interest previously due on February 28, 2017, to allow the revised loan documents to be
negotiated and duly executed. In return for receiving this waiver, the Company was required to pay a restructuring fee equal
to US$100 to be satisfied through the delivery of common shares of the Company. The revised loan documents were duly
executed on March 24, 2017. The new schedule of payments for the short term loan are as disclosed in note 22.
About Largo
Largo Resources Ltd. is a growing strategic mineral comp any focused on the production of vanadium pentoxide at its
Vanadio de Maracás Menchen Mine. Vanadium is primarily used as an alloy to strengthen steel and reduce its weight.
Vanadium enhanced steels are used in a vast and growing rang e of products that are used and encountered every day;
including, rebar, automobiles, transport infrastructure etc. As trends in the steel industry now demand increasingly stronger
and lighter products for advanced applications, the use of va nadium is expected to grow over the medium and long term.
Largo also has interests in a portfolio of other projects, in cluding: a 100% interest in the Currais Novos Tungsten Tailings
Project in Brazil; a 100% interest in the Campo Alegre de Lourdes Iron-Vanadium Project in Brazil; and a 100% interest in
the Northern Dancer Tungsten-Molybdenum property in the Yukon Territory, Canada. For more information, please visit
www.largoresources.com.
Cautionary Notes:
This press release contains forward-looking information under Canadian securities legislation. Forward-looking information
includes, without limitation, statements with respect to completion of a listing on a U.S. stock exchange. Generally, 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 word s and phrases or statements that certain actions, events or results "may", "could",
"would", "might" or "will be taken", "occur" or "be achieved". All information cont ained 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 fa ctors that may cause the actual results, level of activity, performance or
achievements of the Largo to be materially different from those expressed or imp lied by such forward-looking statements,
including but not limited to those risks de scribed 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 th at such statements will prove
to be accurate, as actual results and future events could di ffer 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.
Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility for the adequacy
or accuracy of this release.
CONTACT INFORMATION:
For more information, please contact:
Largo Investor Relations