Largo Reports Highlights of Its Q2 2017 Financial and Operating Results
PRESS RELEASE August 14, 2017
LARGO REPORTS HIGHLIGHTS OF ITS Q2 2017 FINANCIAL AND OPERATING RESULTS
• Operating cash flows before changes in non-cash wo rking capital items increased to $11.0 million, fro m $5.2 million in
Q1 2017 and negative $4.5 million in Q2 2016.
• V2O5 production increased to 2,182 tonnes in Q2 20 17 from 2,062 tonnes in Q1 2017, but was below Q2 2016 at 2,311
tonnes, due to the planned kiln refractory relining refurbishment undertaken during March 2017 and completed by April
9, 2017.
• Revenues increased to $35.8 million in Q2 2017 fro m $29.4 million in Q1 2017 and from $18.9 million i n Q2 2016,
mainly driven by higher V2O5 prices.
• Overall metallurgical V2O5 recovery increased to 7 4.3% in Q2 2017, from 71.8% in Q1 2017. The Company expects
higher recoveries due to recent operational improvements which led to a production of 807 tonnes in Ju ly 2017.
• Cash costs declined to US$3.56/lb of V2O5 from US$ 3.90 in Q1 2017 but increased from US$3.25 in Q2 20 16, in part
due to the kiln refractory relining impact on production and the impact of foreign exchange.
• Cash and restricted cash increased to $12.4 millio n and $8.3 million, respectively, in Q2 2017 versus $0.8 million and
$2.1 million, respectively, at the end of 2016.
TORONTO, August 14, 2017 - Largo Resources Ltd. ("L argo" or the "Company") today released highlights o f its financial
results for the quarter ended June 30, 2017, as fil ed 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 and six months ended
June 30, 2017 and 2016 as well as management’s disc ussion and analysis for the three and six months en ded June 30,
2017 (“MD&A”). Note references in this press releas e refer to the notes contained in Largo’s unaudited condensed interim
consolidated financial statements for the three and six months ended June 30, 2017 and 2016.
Q2 2017 financial highlights 1
Q2 YTD
2017 2016 2017 2016
$ $ $ $
Revenues 35.8 18.9 65.2 29.0
Direct mine and mill costs 2 20.0 18.1 40.8 33.5
Cash provided (used) before non-cash working capita l items 11.0 (4.5) 16.1 (14.3)
Net cash provided by (used in) operating activities 7.7 (6.0) 12.0 (20.5)
1. Financial numbers are reported in millions of Ca nadian dollars, except for per share amounts.
2. Refer to note 17.
89% increase in Q2 revenues, driven mainly by higher V2O5 prices
Revenues for Q2 2017 represent an 89% increase over Q2 2016 and year-to-date revenues represent a 125% increase
over the corresponding period last year.
Significant increase in cash generation
Revenues for Q2 2017 exceeded direct mine and mill costs by $15.7 million and cash provided before non -cash working
capital items for Q2 2017 was $11.0 million, representing increases of $14.9 million and $15.5 million respectively over Q2
2016.
Mark Smith, President and Chief Executive Officer f or Largo, stated: "Our Q2 2017 financial performanc e improved on the
good results of the previous quarter and represents a significant improvement over the corresponding q uarter last year.
Vanadium prices have strengthened considerably rece ntly and we anticipate that the increasing vanadium price, coupled
with strong production and cost performance will dr ive further increases in cash flow from operations. Largo is very well
poised to benefit from the higher V2O5 price environment and the stronger vanadium market fundamentals .”
Maracás Menchen Mine operating results
During Q2 2017 the overall V2O5 recovery was 74.3%, compared to 71.8% in the first quarter 2017. The Company continues
to improve its metal recovery as it actively works to reduce costs and increase operational efficiencies. Key components of
the improved recovery level in Q2 2017 include the leaching recovery, which increased from 95% in the first quarter 2017
to 96% in Q2 2017 and the chemical plant recovery, which increased from 96% in the first quarter 2017 to 97% in Q2 2017.
The lowest monthly production during Q2 2017 was in April, with an output of 645 tonnes of V2O5. The p lanned kiln shut-
down and refurbishment in March 2017 was completed on April 9, 2017, which impacted production for those nine days and
operating costs for Q2 2017.
The Company sold 82 tonnes of “high purity” V2O5 in Q2 2017. In addition, the Company is proceeding with the installation
of the necessary equipment to handle and pack V2O5 powder. Both “high purity” V2O5 and V2O5 powder yie lds a price
premium to the Company over and above what is recei ved for V2O5 flake.
The cost per pound for Q2 2017 (refer to page 4 of the MD&A) was 7.5% lower than the first quarter 201 7 primarily due to
higher production (6%) and higher global metal reco very during Q2 2017. These results are due to the i mprovements
implemented during the kiln refractory shutdown in March and April 2017. Partially offsetting these im provements was the
higher than anticipated consumption of ammonium sul phate of 6%.
In Q3 2017 the Company expects to maintain the high er metal recovery levels achieved in Q2 2017 and to further improve
the performance of the deammoniator to achieve the targeted production level of 840 tonnes of V2O5 per month. In addition,
the Company has implemented improvement projects to address the consumption level of ammonium sulphate, to increase
leaching recoveries to above 96% and to increase gl obal recoveries to above 75%. The Company produced 807 tonnes of
V2O5 in July 2017.
The Company’s Maracás Menchen Mine produced 2,183 t onnes of V2O5 in Q2 2017, compared to 2,311 tonnes in the
same prior year period, in part due to impact on production of the shutdown.
Financing highlights during Q2 2017
On April 12, 2017, the Company announced it had ent ered into a US$2.0 million six-month short term loa n at an interest
rate of 9% per annum. US$1.0 million was drawn down on April 12, 2017, with US$0.5 million drawn down on each of May
1, 2017 and June 1, 2017. Pursuant to the terms of the loan, the Company issued 0.4 million common sha re purchase
warrants to the lender with each warrant being exer cisable to acquire one common share of the Company at a price of
$0.50 until December 31, 2020.
During the six months ended June 30, 2017, 13.3 million warrants were exercised, resulting in proceeds to the Company of
$3.8 million (refer to note 10).
Summary of the Company’s Q2 2017 financial results 3
Jun. 30, 2017 Dec. 31, 2016
$ $
Cash 12.4 0.8
Restricted Cash 8.3 2.1
Total Current Assets 47.9 32.2
Mine properties, plant and equipment 301.4 321.1
Total Assets 349.3 353.3
Total Current Liabilities 107.5 94.1
Total Liabilities 324.5 326.5
Q2 YTD
2017 2016 2017 2016
$ $ $ $
Operating costs 29.9 29.7 59.5 53.1
Net loss 13.9 9.7 23.6 19.3
Basic loss per share 0.03 0.02 0.05 0.05
Net cash (used in) provided by:
Financing activities (2.1) (1.8) 9.9 29.1
Investing activities (3.9) (4.4) (9.8) (8.0)
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$
2nd Quarter 2017 2,183 4,812,685 $4.80 $3.56 R$11.46
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$17.20
3. Refer to the “Non-GAAP Measures” section of the Company’s MD&A for a discussion regarding the calculation of these Non-GAAP Measures and
additional discussion of cash operating costs elsewhere in the Company’s MD&A.
2017 Production guidance
Annual
Production
High-End
Annual
Production
Low-End
Average
Annual
Production
Estimated Annual
Average
US$/CDN$ Cash
Operating
Costs Per Tonne 1,2,3
Estimated Annual
Average
US$/CDN$ Cash
Operating
Costs Per Pound 1,2,3
2017 2 9,700 tonnes 4
~ 21.4 mil. lbs
8,700 tonnes 4
~ 19.2 mil. lbs
9,200 tonnes 4
~ 20.3 mil. lbs
US$8,391
CDN$11,471
US$3.81
CDN$5.20
1. The cash operating costs reported are on a non-G AAP basis. Cash operating costs include all cash expenditures, the main categories being mining
costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalti es and SG&A. Cash operating costs excludes
depreciation and amortization charges, interest or any other debt servicing costs and commissions on s ales. Refer to the “Non-GAAP Measures”
section of the MD&A. See also 3. below. The estimat ed average annual R$/US$ and CDN$/US$ exchange rate s used for 2017 are approximately
3.25 and 1.37 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.
Significant events and transactions subsequent to Q 2 2017
On July 12, 2017, the Company announced that effect ive June 30, 2017, the syndicate of Brazilian comme rcial lenders
under the Company’s existing debt facilities have a greed to (i) terminate the US$5.0 million March 201 7 capital injection
requirement which has been the subject of a temporary waiver since March 15, 2017 and (ii) postpone the additional US$5.0
million June 2017 capitalization requirement until December 31, 2017. The March 2017 and June 2017 ca pitalization
requirements had initially been required by the com mercial lenders in connection with the 2017 Facilit y. The commercial
lenders have further agreed that if the Company com plies with the required payment obligations then on December 31,
2017, the June 2017 capitalization requirement will also be terminated.
On July 24, 2017, the Company announced that it, along with its operating subsidiary Vanádio de Maracás S.A. (“Vanádio”),
have entered into a non-binding term sheet for the restructuring and conversion of the existing short term loan (refer to note
8(f)) and Swap Facility (refer to note 8(d)). Highlights of the proposed arrangement include: (i) conversion of the short-term
loan into common shares of the Company to be issued within 60 days from the date of the definitive agr eement and (ii)
renegotiation of the repayment schedule for the Swa p Facility and accrued interest and, upon fulfilmen t of certain payment
milestones, the long-term restructuring of the Swap Facility and accrued interest. Refer to the Compan y’s press release
dated July 24, 2017 for further details.
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