Largo Reports Highlights of Its Q1 2017 Financial and Operating Results
PRESS RELEASE May 15, 2017
LARGO REPORTS HIGHLIGHTS OF ITS Q1 2017 FINANCIAL AND OPERATING RESULTS
TORONTO, May 15, 2017 - Largo Resources Ltd. ("Larg o" or the "Company") today released highlights of i ts financial
results for the quarter ended March 31, 2017, as fi led 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 below excerpt sh ould be read in conjunction
with the Company’s unaudited condensed interim cons olidated financial statements for the three months ended March 31,
2017 and 2016 as well as the management’s discussion and analysis for the three months ended March 31, 2017 (“MD&A”).
Note references in this press release refer to the notes contained in Largo’s unaudited condensed inte rim consolidated
financial statements for the three months ended March 31, 2017 and 2016.
Q1 2017 financial highlights 1
Q1 2017 Q1 2016
$ $
Revenues 29,425 10,048
Direct mine and mill costs 2 20,450 11,441
Cash provided (used) before non-cash working capita l items 5,146 (9,778)
Net cash provided by (used in) operating activities 4,224 (14,490)
1. Financial numbers are reported in thousands of C anadian dollars, except for per share amounts.
2. Refer to note 17.
Mark Smith, President and Chief Executive Officer f or Largo, stated: "Our Q1 2017 financial performanc e continued the
strong results achieved during recent quarters. Rev enues for Q1 2017 exceeded direct mine and mill cos ts by $8,975 and
cash provided before non-cash working capital items for Q1 2017 was $5,146. We are extremely proud of these
achievements and of our operational team at the Maracás Menchen Mine.”
He continued: "Our belief is that our production record, cash operating costs and vanadium prices will continue to strengthen
and enable Largo to deliver improved financial perf ormance during fiscal 2017.”
Maracás Menchen Mine operating results
During Q1 2017 the overall V2O5 recovery was 71.8%, compared to 62.6% in the fourth quarter 2016 and 5 8.9% in the
third quarter 2016. The Company continues to improv e its metal recovery as it actively works to reduce costs and increase
operational efficiencies. Key components of the imp roved recovery level in Q1 2017 include the leachin g recovery, which
increased from 90% in the fourth quarter 2016 to 95 % in Q1 2017 and the magnetic concentration plant r ecovery, which
increased from 90% in the fourth quarter 2016 to 97 % in Q1 2017. The lowest monthly production during Q1 2017 was in
February, with an output of 639 tonnes of V2O5. Thi s was primarily due to low availability in the fusion area.
The planned shutdown initiated in March has been co mpleted and enabled the Company to implement improv ements in a
number of areas, including the replacement of the p rimary crusher to improve utilization, the installa tion of a new kiln feed
system to improve plant stability and the installat ion of a dust cyclone in the de-ammoniator exhaust system to improve
availability. The fusion furnace and flaking wheel were also replaced in order to avoid future production losses, as occurred
in February 2017.
The Company sold 23 tonnes of “high purity” V2O5 in February 2017 and sold a further 80 tonnes in Apri l. In addition, the
Company is proceeding with the installation of the necessary equipment to handle and pack V2O5 powder. The Company’s
“high purity” V2O5 yields a price premium to the Company over and above what is received for V2O5 flake and the Company
anticipates that its V2O5 powder will also yield a price premium.
The cost per pound for Q1 2017 (refer to page 3 of the MD&A) was higher than both the fourth quarter 2 016 and the third
quarter 2016 primarily due to the shutdown in Q1 2017 for the kiln refractory replacement, which resulted in lower production
for the period.
In Q2 2017 the Company expects to realize improveme nts in the metal recovery levels and plant availabi lity following the
implementation of the projects noted above. Following the installation of the new kiln feeding system and kiln refractory, the
Company expects to reduce its specific consumption of sodium carbonate, a key consumable for the plant . In addition, the
Company is working to reduce the temperature of the clean concentrate solution in the chemical plant, which is expected
to reduce the specific consumption of ammonium sulp hate, another key consumable. The revised productio n target will be
27 tonnes of V2O5 per day, for an expected monthly output of 840 tonnes of V2O5 from May 2017 onwards.
Q1 2017 corporate highlights
The Company’s Maracás Menchen Mine produced 2,062 t onnes of V2O5 in Q1 2017, compared to 1,169 tonnes in the
same prior year period.
On January 9, 2017 and January 24, 2017, the Compan y 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 consiste d 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 Funds owned approximately 59.86% of the Compan y’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 10,4 50 units for consideration of $4,703. Refer to not e 9(b) for further
details.
On February 24, 2017, the Company agreed to a new s chedule of payments for its short term loan. Conseq uently, the
Company received waivers, which included the payment of principal and interest on February 28, 2017, to allow the revised
loan documents to be duly executed. In return for r eceiving the waivers, the Company was required to p ay a restructuring
fee of US$100 through the delivery of common shares of the Company by April 24, 2017. This condition w as satisfied in
March 2017. The revised loan documents were duly ex ecuted on March 24, 2017. The new schedule of payme nts for the
short term loan is as disclosed in note 8(f).
On February 27, 2017, the Company announced that it s vanadium pentoxide has been qualified for use by a major North
American producer of master alloys for the aerospac e industry, with further qualification trials under way at master alloy
producers in Europe and Russia.
On March 15, 2017, the Company announced that the c onsortium of three commercial banks in Brazil had a greed to
temporarily waive the requirement that the Company inject a further US$5,000 in working capital into Vanadio by the same
date, a term which the three commercial banks had r equired in connection with the 2017 Facility (see n ote 8(c)). In
connection with the granting of this temporary waiv er, the three commercial banks and the Company agre ed that the
Company will fund certain payment obligations to the three commercial banks which had previously been delayed.
Summary of the Company’s Q1 2017 financial results 3
Mar. 31, 2017 Dec. 31, 2016
$ $
Cash 11,104 758
Total Current Assets 40,264 32,211
Mine properties, plant and equipment 323,215 321,084
Total Assets 363,479 353,295
Total Current Liabilities 94,828 94,082
Total Liabilities 329,367 326,469
Q1 2017 Q1 2016
$ $
Operating costs (29,601) (23,329)
Net loss (9,721) (9,608)
Basic loss per share (0.02) (0.03)
Net cash provided by (used in):
Financing activities 12,011 30,895
Investing activities (5,900) (3,615)
3. References to “Q1 2017” and “Q1 2016” refer to t he three-month periods ended March 31, 2017 and March 31, 2016, respectively, and as reported
in the Company’s unaudited condensed interim consolidated financial statements for the three months ended March 31, 2017 and 2016.
Cash operating costs since the commencement of comm ercial production on October 1, 2015 4
Production Production Pounds Cost per p ound
Tonnes Equivalent CDN$ US$ R$
1st Quarter 2017 2,062 4,545,926 $5.19 $3.90 R$12.31
4th Quarter 2016 2,304 5,079,444 $4.82 $3.60 R$11.90
3rd Quarter 2016 2,182 4,810,481 $4.67 $3.59 R$11.61
2nd Quarter 2016 2,311 5,094,877 $4.19 $3.25 R$11.40
1st Quarter 2016 1,169 2,577,201 $6.52 $4.75 R$18.51
4th Quarter 2015 1,654 3,646,441 $5.97 $4.47 R$17.20
4. Refer to the “Non-GAAP Measures” section of the Company’s MD&A for a discussion regarding the calculation of these Non-GAAP Measures and
additional discussion of cash operating costs elsewhere in the Company’s MD&A.
2017 Production guidance
Annual
Production
High-End
Annual
Production
Low-End
Average
Annual
Production
Estimated Annual
Average
US$/CDN$ Cash
Operating
Costs Per Tonne 1,2,3
Estimated Annual
Average
US$/CDN$ Cash
Operating
Costs Per Pound 1,2,3
2017 2 9,861 tonnes 4,5
~ 21.7 mil. lbs
8,861 tonnes 4,5
~ 19.5 mil. lbs
9,361 tonnes 4,5
~ 20.6 mil. lbs
US$8,396
CDN$11,201
US$3.77
CDN$5.04
1. The cash operating costs reported are on a non-G AAP basis. Cash operating costs include all cash expenditures, the main categories being mining
costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalti es and SG&A. Cash operating costs excludes
depreciation and amortization charges, interest or any other debt servicing costs and commissions on s ales. Refer to the “Non-GAAP Measures”
section of the MD&A. See also 3. below. The estimat ed average annual R$/US$ and CDN$/US$ exchange rate s used for 2017 are approximately
3.16 and 1.33 respectively.
2. Excludes corporate SG&A or CAPEX (Capital Expend itures).
3. The reader is cautioned that the cash operating costs presented are intended to serve as a guide to the magnitude of the Company’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 expens e, accretion, share-based payments, or foreign exch ange 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 definition of GAAP. Refer
to the “Non-GAAP Measures” section of the MD&A.
4. Conversion of tonnes to pounds, 1 tonne = 2,204. 62 pounds or lbs.
5. A total CAPEX of approximately $11.0 million is expected to be required during the remaining three quarters of 2017. The Company periodically
reviews its CAPEX needs and will update the market when its estimates change by a material amount.
Significant events and transactions subsequent to Q 1 2017
On April 12, 2017, the Company announced it had entered into a US$2,000 six-month short term loan at an interest rate of
9% per annum. US$1,000 was drawn down on April 12, 2017, with US$500 to be drawn down on each of May 1, 2017 and
June 1, 2017. Pursuant to the terms of the loan, the Company issued 400 common share purchase warrants to the lenders
with each warrant being exercisable to acquire one common share of the Company at a price of $0.50 unt il December 31,
2020.
About Largo
Largo Resources Ltd. is a growing strategic mineral company focused on the production of vanadium pent oxide at its
Vanadio de Maracás Menchen Mine. Vanadium is primar ily used as an alloy to strengthen steel and reduce its weight.
Vanadium enhanced steels are used in a vast and gro wing range of products that are used and encountere d 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 vanadium is expected to grow over the mediu m and long term.
Largo also has interests in a portfolio of other pr ojects, including: a 100% interest in the Currais N ovos Tungsten Tailings
Project in Brazil; a 100% interest in the Campo Ale gre 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", "expec ts" or "does not
expect", "is expected", "budget", "scheduled", "est imates", "forecasts", "intends", "anticipates" or " does not anticipate", or
"believes", or variations of such words and phrases or statements that certain actions, events or resu lts "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 forwa rd looking information. Forward-looking statements are subject to known
and unknown risks, uncertainties and other factors that may cause the actual results, level of activit y, performance or
achievements of the Largo to be materially differen t from those expressed or implied by such forward-l ooking 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 stateme nts are based on the opinions and estimates of mana gement as of
the date such statements are made. Although managem ent of Largo has attempted to identify important fa ctors 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 o r intended. There can be no assurance that such sta tements 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 relianc e on forward-looking statements. Largo does not und ertake 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 th e adequacy
or accuracy of this release.
CONTACT INFORMATION:
For more information, please contact:
Largo Investor Relations