Largo Resources Kursrakete
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Jetzt darf sie wieder fallen. Sorry an die Investierten ;)
Wenn die FS-Studie kommt geht das #Ding nochmals richtig ab:
Sogar ein Brokerhaus in Ca. hat Largo jetzt mit einem Kursziel von 4,00 CAD bewertet.
Ab der 19 Minute wirds interessant !!
http://watch.bnn.ca/small-caps/june-2008/...s-june-18-2008/#clip60717
viel glueck
sc
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Der gestrige Anstieg erfolgte wiederum unter hohem Volumen und das geht nun seit 3 Wochen so.
Möglicherweise werden durch den Beitrag noch mehr Anleger aufmerksam und die genannten Zahlen bedeuten noch einen massiveren Anstieg.
Ich glaube das es bis zu 2$ weiterlaufen wird und erst dann eine Konso gibt.
Mal sehen wie heute in Can das Volumen ausschaut.......
Oh mein Gott... War da Angst im Spiel?!
Ich hoffe nur, dass ich dann den Berg mit erklimmen werde, als beim Abstieg zu helfen.
Largo Begins New Drill Program at Northern Dancer Tungsten-Molybdenum Project, Yukon
- Goal is to expand the limits of the higher-grade tungsten and molybdenum zones outlined during the 2006 & 2007 programs
- Looking to upgrade a significant portion of the Inferred and Indicated resource to the Measured and Indicated categories to support a Pre-feasibility Study
- Scoping study expected near end of June
TORONTO, ONTARIO--(Marketwire - June 24, 2008) - Largo Resources Ltd. (TSX VENTURE:LGO) announced today that three drill rigs have begun a 20,000-metre diamond drill program on the Company's 1,500 hectare Northern Dancer Tungsten-Molybdenum property, which straddles the Yukon-British Columbia border 290 kilometres east of Whitehorse.
Northern Dancer hosts widespread tungsten-molybdenum porphyry style mineralization, the core of which has been partially delineated by 94 diamond drill holes and 496 metres of underground workings. This work was done by AMAX Minerals Exploration from 1977 to 1980 (51 holes) and by Largo Resources which completed a 17-hole diamond drill program in 2006 and 26-hole program in 2007.
On April 10, 2008, Largo announced an updated NI 43-101 compliant resource consisting of 140.8 million tonnes grading 0.10% WO3 and 0.026% Mo (Indicated) and 253.2 million tonnes grading 0.10% WO3 and 0.022 % Mo (Inferred). This resource includes a higher grade tungsten zone containing an Indicated resource of 17.1 million tonnes grading 0.17% WO3 and 0.029 % Mo and Inferred resources of 18.7 million tonnes grading 0.16% WO3 and 0.023 % Mo. More drilling is required to further define additional higher grade tungsten and molybdenum resources.
Andy Campbell, Vice-President, Exploration stated: "The 2007 drill program was very successful in upgrading the resource and confirming the significant higher grade tungsten zone. Drill holes were planned based on preliminary pit modeling to eliminate gaps in previous drill coverage and ensure a sufficient density of drilling in the core of the deposit to outline a substantial indicated resource. We also improved our geological understanding of the overall deposit, especially the controls on the higher grade tungsten zone. Plans are at an advanced stage for the 2008 program and I expect that this work will bring the resource base to a stage where a pre-feasibility study could be supported."
The minimum 55-hole diamond drill program is intended to further define the extent of the higher-grade tungsten and molybdenum zones intersected in the 2006 and 2007 programs. This will be done through a series of angled drill hole fences across the deposit to test the higher-grade zones. Historical drill holes (AMAX) were vertical to subvertical and did not adequately test the typically steeply dipping quartz-scheelite veins with which higher tungsten grades are associated. The program is expected to take four to six months to complete with results from the first holes received in about six to eight weeks. Included in the program shall be some holes drilled for metallurgical purposes.
The Northern Dancer deposit is one of the world's largest known tungsten-molybdenum porphyry systems. The mineralization is hosted in fractures, veinlets and veins associated with a northeast-trending sheeted vein structure hosted in calc-silicate (skarn) rocks and spatially related to a felsic intrusion (quartz-feldspar porphyry). The deposit, which has been tested by drilling for 1.2 kilometres along strike, 500 metres vertically and 600 metres in width, remains open along strike to both the northeast and southwest as well as at depth.
At Northern Dancer, tungsten and molybdenum mineralization are concentrated in two zones which partially overlap. In the core of the deposit, there is a higher grade molybdenum zone where molybdenite occurs within and adjacent to the felsic intrusion. Surrounding and partially overlapping the molybdenum zone is a much more extensive tungsten zone where scheelite occurs in northeast-trending sheeted quartz veins structure.
Assaying for the 2007 drill program was carried out by Acme Analytical Laboratories Ltd. an ISO 9000:2000 certified laboratory in Vancouver, British Columbia. The samples are crushed to 70% passing 10 mesh, split to 250 g and pulverized to 95% passing 150 mesh. A 5 g split is analyzed for Mo and W using a phosphoric acid leach followed by ICP-emission spectrometry. A second 5 g split is analyzed for 36 elements by ICP-mass spectrometry using a hot (95 degrees C) aqua regia leach. Routine check assays are performed on sample rejects by SGS. Mr. Andy Campbell, P.Geo. is the Qualified Person as defined under National Instrument 43-101 responsible for the scientific and technical work on the program. Mr. Campbell has reviewed the scientific and technical information within this release.
Option Grant
Largo is also pleased to announce that it has granted an aggregate of 4,050,000 options to acquire Largo common shares under its stock option plan to certain officers, directors and consultants. Each option has an exercise price of $1.50, vests immediately and will expire on June 24, 2013. Shares issuable upon exercise of the options will be subject to a statutory four-month hold period, if they are issued prior to October 25, 2008. This grant of options is subject to approval of the TSX Venture Exchange.
About Largo
Largo Resources is a Canadian natural resource development and exploration company with two advanced stage projects: the Maracas Vanadium-PGM deposit in Brazil and the Northern Dancer Tungsten-Molybdenum deposit in the Yukon. The company is listed on the TSX Venture Exchange under the symbol LGO.
For more information please refer to Largo's website: www.largoresources.com
Disclaimer
Certain statements contained in this news release may contain forward-looking information within the meaning of Canadian securities laws. Such forward-looking information is identified by words such as "estimates", "intends", "expects", "believes", "may", "will" and include, without limitation, statements regarding the company's plan of business operations (including plans for progressing assets), estimates regarding mineral resources, projections regarding mineralization and projected expenditures. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include, among others, metal prices, risks inherent in the mining industry, financing risks, labour risks, uncertainty of mineral resource estimates, equipment and supply risks, title disputes, regulatory risks and environmental concerns. Most of these factors are outside the control of the company. Investors are cautioned not to put undue reliance on forward-looking information. Except as otherwise required by applicable securities statutes or regulation, the company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise
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(LGO-TSX.V, $1.11) 12-Month Target Price: $2.30
Please refer to the final page(s) of this report for required disclosures.
June 18, 2008 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Major Potential in Minor Metals
Highlights
• Near Term Production – Largo is
just two years from potential first
production at the Maracás project in
Brazil; one of the highest grade primary
vanadium deposits in the world. Look for
a series of catalysts in the coming
months to draw increased market
attention to this project.
• Strong Commodity Fundamentals –
Prices for vanadium continue to
strengthen on the back of tight supply
and growing demand. Gaining equity
exposure to the commodity is difficult
with only a handful of pureplay
developers outside of Largo Resources
available for investment.
• Been There Done That – The Largo
team is the same one that founded
Desert Sun Mining, built and sold the
Jacobina gold mine in Brazil to Yamana in
2006 for ~US$650 million. This team is
leveraging its knowledge and connections
in the region to advance the Maracás
project.
• Valuation Upside – Our valuation for
Largo Resources is built on conservative
assumptions and we see significant room
for upside to our numbers from
commodity price increases, capacity
expansion, exploration success and
advancement of secondary assets.
Conclusion and Recommendation
We are initiating coverage with a SPECULATIVE BUY recommendation and a
12-month target price of $2.30 per share.
Valuation (MM) per share
Total Assets $393.1 $2.15
Total Corporate Adjustments $23.4 $0.13
Net Asset Value $416.5 $2.28
Target Multiple 1.0x
Target per Share $2.30
Stock Data
Previous Close $1.11
Potential Return 107%
52-Week High - Low $1.28 - $0.34
Avg. Daily Vol. (3m) 7,455
Shares Outstanding FD (Millions) 177.3
Shares Outstanding Basic (Millions) 136.6
Major Shareholders: Insiders 7.9%
Float (Millions) 108.1
Market Cap (Millions) $151.6
Net Debt (Millions) $0.0
Working Capital (Millions) $10.0
Enterprise Value (Millions) $141.6
Fiscal Year End
Source: Stockwatch.com
31-Dec
June 18, 2008 / p.2 Philip Williams, CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Table of Contents
Investment Thesis............................................................................................................................................................. 3
Valuation ............................................................................................................................................................................. 4
Vanadium Market.............................................................................................................................................................. 7
Projects ............................................................................................................................................................................... 9
People................................................................................................................................................................................17
Risks ...................................................................................................................................................................................18
Conclusion........................................................................................................................................................................18
Appendix A: Comparable Table..................................................................................................................................19
Largo Resources Ltd.
Philip Williams CFA (416) 343-2786 June 18, 2008 / p.3
Angela Lam, Associate (416) 343-4209
Investment Thesis
Since 2001 the demand for steel has grown at an impressive 7-8% per
annum driven primarily by consumption growth in the BRIC (Brazil
Russia, India and China) countries. During this time the major inputs in
steel - iron ore and coking coal - have seen commensurate increases in
demand and pricing. We have also seen strong growth in demand and
pricing for several of the lesser known “minor” metals used in the
production of specialty steels with demand for some of these metals,
vanadium in particular, growing faster than the overall steel market. This
trend is expected to continue for several years, given the need for
strength at lesser weight, supporting a continued higher price for
vanadium and requiring the development of new sources of production
to meet this demand.
Gaining direct exposure to vanadium is difficult as most of the
production comes as a by-product of the steel making process or from
oil residues and spent catalysts. Largo Resources is advancing one of the
few primary vanadium deposits in the world. Its’ Maracás project in Brazil
stands out as one of the highest grade primary vanadium deposits
with a resource grade of 1.26% V2O5 (vanadium pentoxide) including a
high grade zone approaching 2.00% V2O5. The Company is on track to
achieve first production in Q3/2010 having already secured indicative
debt financing terms from Investec Bank and an off-take agreement with
Glencore International. Near term catalysts for development of the
Maracás project include:
• Feasibility Study – July 08
• Complete debt financing – Sept/Oct 08
• Receive implementation license – Nov 08
• Commence construction – Dec 08
Largo still looks cheap despite the recent run-up in the stock price.
On a discounted cash-flow basis we value just the Maracás project at
$358.1 (85.8% basis) or $1.96 per diluted share using relatively
conservative cost and vanadium price assumptions. This value underpins
our $2.30 per share target. Further upside potential from a higher
commodity price and higher throughput assumption as well as
PGM exploration success is substantial. The Company is receiving
little value in the market for its secondary asset Northern Dancer, a large
Tungsten-Moly deposit in the Yukon. We assign a floor value of $0.19 per
share to this asset with visible upside and near term catalysts. Investors
should buy shares of Largo now in advance of positive catalysts
over the next six months.
Largo Resources Ltd.
June 18, 2008 / p.4 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Valuation
We are initiating coverage of Largo Resources with a 12-month target of
$2.30 per share. This target represents a 1.0x multiple to our net asset
value for the company which is derived from a discounted cash flow
analysis of the company’s advanced Maracás vanadium deposit and
comparable valuation for the Northern Dancer Tungsten-Moly project
(Exhibit 1).
Exhibit 1. Valuation Summary
(MM)
Shares O/S 136.6
Diluted Shares for Valuation 182.5
Proforma F.D Shares 210.7
Market Capitalization $157.1 Per
(MM) Share
Project Interest Method
Maracas 85.8% DCF (10%) $358.1 $1.96
Northern Dancer 70% Comp $35.0 $0.19
Total Assets $393.1 $2.15
Total Corporate Adjustments $23.4 $0.13
Net Asset Value $416.5 $2.28
Target Multiple 1.0x
Target per Share $2.30
Source: Clarus Securities
By the end of 2008, we expect the Company to secure both debt and
equity financing for development of the Maracás project which we
estimate to be on the order of $250 million. We assume the the capital
required to build Maracás comes in the form of project debt
($187.5 million), drawn down over the year and a half construction
period, and from warrant exercise and an equity financing. Our corporate
adjustment figure includes current working capital of $10 million, an
equity raise of $50 million at $1.50 per share, $9.4 million from ITM
warrant exercise, offset by $46.0 million in expenditures on project
development from now until the end of 2008.
We have based our key model assumptions for the Maracás project
largely on the preliminary economic assessment (PEA) report for the
project release in December 2007 and discussions with management
(Exhibit 2). Our capital cost estimate of US$250 million is nearly twice
the cost presented in the PEA to reflect across the board cost inflation
not accurately reflected in the initial estimate. We have also boosted our
operating cost assumptions to reflect anticipated higher fuel, power and
labour costs. As shown in the Exhibit below we have modeled two stages
of production. The first sees the company process just the higher grade
magnetite ore for the first 10 years. During this stage the lower grade
Largo Resources Ltd.
Philip Williams CFA (416) 343-2786 June 18, 2008 / p.5
Angela Lam, Associate (416) 343-4209
pyroxenite ore is stockpiled for processing in stage two over the
remaining 15 years of the mine life.
Exhibit 2. Model Summary
Modeled Tonnage Stage 1 Stage 2 Life-of-mine
Mineable Tonnes 000s 6,011 8,622 14,633
Grade (% V2O5) % 1.95 0.84 1.29
Contained (V2O5 lbs) MM 258.0 158.7 417
Equivalent (FeV kg) MM 65.5 40.3 106
Operating Summary
Start-up Q3/10 2021 Q3/11
Throughput (tpd) 1,700 1,700 1,700
Throughput (tpy) 595,000 595,000 595,000
Recovery 63% 63% 63%
Avg Annual Production (FeV kg) MM 4.0 1.7 2.7
Equivalent (V2O5 lbs) MM 16.2 6.9 10.7
Cumulative Production (FeV kgs) MM 40.7 25.0 65.8
Equivalent (V2O5 lbs) MM 163.6 100.6 264.2
Mine Life (yrs) 10.1 14.5 24.6
Financial Summary
Average Realized Vanadium Price (FeV/kg) $41.50 $40.00 $40.94
Gross Revenue MM $1,707 $985 $2,692
Cumulative Operating Costs MM $461 $434 $895
Operating Costs per FeV/kg $11.32 $17.34 $13.61
Total after-tax cash flow MM $1,246 $551 $1,797
Capital Cost MM $250
Project Debt MM $188
Total Discounted Cash Flow (10%) MM $417
Source: Clarus Securities
We have modeled first production from Maracás in early Q3/2010 but
have assumed a production rate of just 50% of capacity during the ramp
up period to the end of 2010. The first full year of production will be
2011 as shown in Exhibit 3.
Exhibit 3. Pro Forma Mine Income Statement
(US$) 2010 2011 2012 2013 2014 2015
Production (FeV kgs 000s) 1,045 4,065 4,065 4,065 4,065 4,065
Gross Revenue (000s) $65,826 $199,321 $160,707 $160,707 $160,707 $160,707
Realized FeV Price/kg $60.00 $50.00 $40.00 $40.00 $40.00 $40.00
Operating Costs (000s) $20,019 $46,127 $46,127 $44,443 $44,443 $44,443
Opex per pound $19.15 $11.35 $11.35 $10.93 $10.93 $10.93
Gross Profit (000s) $39,391 $140,103 $103,420 $105,104 $105,104 $105,104
After Tax Profit (000s) $38,699 $130,851 $97,285 $98,826 $98,826 $98,826
Source: Clarus Securities
Our current model shows robust economics for the project, however,
we see several areas for potentially significant upside to our valuation:
• Higher commodity pricing - Our NAV for Largo is most sensitive to
the vanadium price with a 10% rise in the average realized price
Largo Resources Ltd.
June 18, 2008 / p.6 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
boosting our NAV by nearly $75 million or $0.40 per share
(exhibit 4). Our long-term price of $40/kg FeV is about 50% below
the current spot price and 5 to 10% below both the 5 and 3 year
average prices respectively. We see good potential for the project to
capture higher prices, especially in the first few years of production,
which would positively impact our project NPV and cash-flows.
Exhibit 4. Sensitivity Table
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
-50% -40% -30% -20% -10% 0% +10% +20% +30% +40% +50%
Net Asset Value
Vanadium Price Opex/lb Capex Modeled Resource Throughput
Source: Clarus Securities
• Longer-Life/Larger Throughput – At our modeled production rate of
4,000 tonnes of contained vanadium in FeV per year the total
measured and indicated resource for Maracás could support a
35+ year mine life, however, we have only modeled 25 years.
Preliminary discussions suggest increasing that production rate by
50% is reasonable subject to the ability of the market to absorb the
additional material. Under this expanded through-put scenario,
including a higher capex, our NAV would increase by about
$85 million or $0.50/share.
• PGM exploration – Within the main Maracás resource the Company
has outlined 200,000 ounces of low grade Platinum group metals
(PGMs) (0.30 g/t). Geophysics work on the larger property area has
identified several highly prospective PGM targets which the company
is currently drilling. We have not assigned any value for the PGMs in
our model and success on these drill programs could provide
additional upside to our target.
• Northern Dancer – Our assessment of the value for the Northern
Dancer of $50 million (100% basis) is at the low end of the
comparables range and represents a small fraction of the in-situ value
of the project. Although we have not completed a DCF analysis of
Largo Resources Ltd.
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Angela Lam, Associate (416) 343-4209
the project, a scoping study is to be released in the next few weeks
and will provide first order economics that could support a higher
valuation. We also see upside potential for the project from securing
a major mining or off-take partner.
There are very few pure play primary vanadium producers or developers
to compare Largo against. In appendix A we have presented a table of
developers of vanadium, moly and tungsten projects worldwide. We
would highlight that Largo trades well below the group average on an EV
per in situ resource basis for just the Maracás project. Including the
Northern Dancer resource it trades at the bottom of the group. We
would also highlight the correlation between EV per in-situ resource and
stage of development. Developers with more advanced projects are
realizing high ratios as they become closer to generating positive cash
flow. With Largo less than two years from first production at Maracás we
expect its EV per in-situ resource to climb toward the higher range of
the group presented.
We have also included a comp table of emerging and mid-tier producers
of primarily base and specialty metals including consensus P/E and P/CF
estimates. From this table we would highlight that these names are
generally trading between 4x and 8x 2011 P/E and 3x and 6x 2011 P/CF.
Our analysis shows the Maracás project could generate over $100 million
of cash flow in 2011 suggesting that as the market starts valuing the
company on a forward cash-flow basis additional upside is available
beyond our current target.
Vanadium Market
Vanadium is a silvery-grey, soft and ductile metal that is primarily used to
produce alloys and impart strength, hardness and wear resistance to
steels. Approximately 90% of vanadium is used by the steel-making
industry, although it is also used in the chemicals and catalysts industries
and in the airline industry (titanium alloys). Vanadium is available in
different forms, although it is mostly produced in the form of vanadium
pentoxide (V2O5), which can then be reduced to ferrovanadium, the
form that is most commonly used for steel-making applications.
Demand - As 90% of vanadium is consumed by the steel-making
industry, the demand for vanadium is closely tied to global steel
production, which is estimated to grow at 5.5% annually through 2011
according to CRU Strategies Drivers for vanadium demand include a
specific sub segment of the steel market involving high-strength, low-alloy
(HSLA) and specialty steels that require greater vanadium content, and is
forecasted to grow faster than the overall steel market at 7.8% CAGR
(exhibit 5).
Largo Resources Ltd.
June 18, 2008 / p.8 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Exhibit 5. Vanadium Demand versus Crude Steel Production
40
45
50
55
60
65
70
75
80
85
2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E
Tonnes Vanadium (000s)
800
1000
1200
1400
1600
1800
Tonnes Crude Steel (MM)
Vanadium Consumption Crude Steel Production
Source: CRU Strategies, International Iron and Steel Institute
China has and is expected to continue to have a strong impact on
vanadium demand based on its overall steel demand and an expected shift
in its steel production mix toward more specialized steel alloys with
greater vanadium content. Chinese authorities indicated last year that
they would increase contained vanadium in its steel produced closer to
western levels. Steel produced in China currently averages just 0.02 kg
vanadium/mt while European and North American steel averages
between 0.07 – 0.09 kg vanadium/mt.
Supply – Approximately 60% of vanadium supply is produced from steel
slag (a by-product of steel-making) although it is also produced through
primary production from magnetite ore (24%), as well as through
recovery from oil residue, spent catalysts and to a minor degree from
uranium by-products. Production in 2006 was estimated at 210-220
million pounds of vanadium pentoxide equivalent. Currently production is
concentrated in South Africa, Russia, China and the US. Recently, power
shortages in SA have reduced supply from that country, a situation which
is likely to take several years to rectify, and natural disasters in China
have also impacted short-term deliveries.
Market Dynamics and Vanadium Pricing - World vanadium
consumption experienced a low growth rate of 1% annually through the
1990’s, but from 2002 onward global consumption of vanadium rose
sharply due to high global steel production and higher vanadium content.
This was reflected by a spike in vanadium pricing over 2004-2005 to a
high exceeding US$120/kg ferrovanadium. Supply and demand came close
to balance in 2006 following a corresponding increase in vanadium supply
mainly Chinese steel slag.
...
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Philip Williams CFA (416) 343-2786 June 18, 2008 / p.9
Angela Lam, Associate (416) 343-4209
The spot price has been moving up again recently, now at
US$80–US$81.5 per kg of ferrovanadium, due to the short and medium
term constraints on supply discussed above. With only a small number of
new primary mines coming on stream in the next 5 years and a handful of
expansions planned at existing facilities we expect the market to remain
tight in the near term. Over the longer-term we see the price level
moving back toward US$40/kg ferrovanadium, in line with the current
3 and 5 year average prices of US$46.05/kg and $42.16/kg respectively.
Exhibit 6 provides a historical vanadium price chart and our forward
price estimates. Note vanadium is not an exchanged traded commodity,
its price is quoted by-weekly based on actual spot transactions.
Exhibit 6. Historical vanadium prices and Clarus estimates
US$0/lb
US$10/lb
US$20/lb
US$30/lb
US$40/lb
US$50/lb
US$60/lb
US$70/lb
Jan-95
Jul-95
Jan-96
Jul-96
Jan- 97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan- 08
US$0/kg
US$20/kg
US$40/kg
US$60/kg
US$80/kg
US$100/kg
US$120/kg
US$140/kg
Ferrovanadium
RN NA Transaction
$/lb
Vanadium
RN V2O5 NA Transaction
$/lb
Ferrovanadium
RN European Transaction
$/kg
2009 2010 2011 2012
Long-
Term
US$ per kg FeV $70 $60 $50 $40 $40
Source: Ryan’s Notes, Clarus Securities Inc.
Projects
Largo is advancing two main projects focused on non-traditional metals;
vanadium, tungsten and molybdenum. Prices for all three of these metals
have risen well above historical averages due to significant growth in
global demand and supply side constraints. Both projects could represent
potential long life producers and important new sources of production
for these commodities.
Largo Resources Ltd.
June 18, 2008 / p.10 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Maracás, Bahia state, Brazil
Exhibit 7. Project Location Map
Source: Company Reports
The project consists of two exploration concessions totaling about 2,000
ha located in the municipality of Maracás in eastern Bahia State, Brazil.
The state is well endowed with skilled and experienced mining labour and
the project is located within close proximity to key water, power and
transportation infrastructure. Since the discovery of vanadium in the
region in the 1980’s significant exploration and development activity has
taken place on the Maracás project including geophysical surveys,
prospecting, trenching, diamond drilling programs, geological studies,
resource estimates, petrographic studies, metallurgical studies, mining
studies and economic analyses.
In October 24, 2006 Largo and its partner MFNB entered into an option
agreement to acquire up to a 100% interest in Companhia de Maracás
(“CdM”), the company that holds a 95.38% equity interest in vanadium
mining rights at the Maracás project. The purchase price was
US$18.0 million payable as follows:
Largo Resources Ltd.
Philip Williams CFA (416) 343-2786 June 18, 2008 / p.11
Angela Lam, Associate (416) 343-4209
• US$1.0 million payable on signing of the final agreement – completed
April 30, 2007;
• US$4.0 million to earn 50% plus one share of CdM – completed April
30, 2008;
• US$13.0 million to earn 100% of CdM of – due by November 1, 2008.
Following completion of the final U$$13.0 million payment Largo will
have an effective 85.84% interest in the project with MFNB holding 9.54%
and the Brazilian government holding 4.62%. Largo’s interest could
increase to up to 90% as the government will be required to contribute
its pro-rata portion of the project’s development costs or be diluted.
Since acquiring its option, Largo has completed an infill and twin-hole
drilling campaign focused primarily on the main Gulçari A deposit. This
work has confirmed previous results and supported calculation of the
following resource estimate in December 2007.
Exhibit 8. Gulçari A Resource Estimate
Category Zone Tonnes V2O5
Contained
(V2O5)
Contained
(V2O5)
(%) (t) (lb)
Measured Magnetite Zone 2,450,000 2.17 53,300 117,300,000
Measured Magnetite-Pyroxenite Zone 4,880,000 0.82 40,000 88,000,000
Indicated Magnetite Zone 6,390,000 1.88 120,100 264,200,000
Indicated Magnetite-Pyroxenite Zone 8,820,000 0.81 71,400 157,100,000
Total 22,540,000 1.26 284,800 626,600,000
Source: Company Reports
The vanadium mineralization at Maracás is associated with titaniferous
magnetite bodies hosted within the Rio Jacaré intrusion, a linear sheetlike
structure that strikes north-south for the full 8 km strike length of
the property. Four known vanadium rich locations have been identified;
Gulçari A, Gulçari B, São Jose and Novo Amparo. The entire current
resource is contained just at Gulçari A deposit with none of the other
areas having been drilled suggestion the potential for the Maracás
property to represent a significant vanadium district.
This Gulçari A deposit outcrops over an areas of 400 m in length and up
to 150 m in width. The mineralization starts at surface and has been
intersected to about 350 m down dip and remains open at depth. The
mineralization averages about 40 m in true thickness and thins to the
south (exhibit 9). Two main zones within the resource have been
identified, the Magnetite and Magnetite-Pyroxenite zone with the
Magnetite zone carrying significantly higher vanadium grades
(~2% V2O%).
Largo Resources Ltd.
June 18, 2008 / p.12 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Exhibit 9. Mineralized Cross Section
Source: Company Reports
Exploration potential on the project is good for both vanadium and
PGMs (platinum group metals). In late 2007 the Company completed
magnetic and spectral induced polarization (IP) surveys as well as
lithological and petrographic studies of drill core and identified a number
of high priority PGM targets in areas of elevated sulphide content (exhibit
10). These targets extend virtually the entire 8 km strike length of the
project and are currently being tested by a 20 -25 hole, 5,000 metre drill
program. First results should be released in early August. It is important
to highlight that the results to date show very high platinum to palladium
ratios, up to 4:1, which compares favourably to the richest PGM deposits
in the world located in the Bushveld complex in South Africa
....
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Philip Williams CFA (416) 343-2786 June 18, 2008 / p.13
Angela Lam, Associate (416) 343-4209
Exhibit 10. PGM Priority Targets
Source: Company Reports
The Gulçari A deposit is conducive to open pit mining. Engineering group
Micon International has designed a base case pit that captures 14.6 million
tonnes, of the ultimate open pit design of 22.7 million tonnes, at a strip
ratio of 3.34:1. The proposed processing method is based on
conventional technology, consisting of three stages:
Largo Resources Ltd.
June 18, 2008 / p.14 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
1. Crushing, grinding and magnetic separation to produce a magnetite
concentrate containing about 3.5% V2O5.
2. Roasting of the concentrate followed by leaching to produce
ammonium metavanadate (AMV) which is calcined to produce an
oxide intermediate product (V2O3).
3. An aluminothermic reduction process is then used to produce the
final ferrovanadium product
Based on the current status of Maracás we see good potential for first
production in Q3/2010 (exhibit 11). Aker Solutions is currently working
on a bankable feasibility study with completion expected in late July.
Subject to the results of this study, Investec Bank from the UK has
indicated preliminary terms to arrange up to 75% in debt financing for the
project. Investec is a global leader in mining project finance. Recognizing
the importance of a strong off-take partner for the project, Largo has
completed an agreement with Glencore International, one of the world’s
largest participants in the vanadium market. The agreement calls for
Glencore to take all vanadium products produced at Maracás for an initial
period of 6 years and is renewable for an additional 6 years. The other
major milestones to production expected for the project this year
include receiving the implementation license from Brazilian regulator
Instituto do Meio Ambiente, ordering long lead time equipment and
commencing construction.
Exhibit 11. Timeline to Production
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Feasibility Study
Financing
Implementation License
Construction
Production
2008 2009 2010 2011
Source: Clarus Securities
Largo Resources Ltd.
Philip Williams CFA (416) 343-2786 June 18, 2008 / p.15
Angela Lam, Associate (416) 343-4209
Northern Dancer
Exhibit 12. Project Location Map
Source: Company Reports
In April 2006 Largo acquired optional rights to earn up to a 100 percent
working interest in the Northern Dancer tungsten-molybdenum project
in the Yukon on the border with British Columbia. At the time the
historical work on the project had outlined widespread tungsten and
molybdenum mineralization and a historical resource of 162 million
tonnes grading 0.13% tungsten and 0.052% molybdenum. Largo has
undertaken several phases of drilling which has lead to the completion of
an upgraded resource estimate in April of this year (exhibit 13).
Largo Resources Ltd.
June 18, 2008 / p.16 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Exhibit 13. Northern Dancer Resource Estimate
Indicated
and inferred Tonnes WO3 % Mo%
WO3
MM lbs
Mo
MM lbs
Total 394 0.099 0.024 859.8 205
Higher grade Mo 32.7 0.066 0.047 47.4 34
Higher grade WO3 35.8 0.166 0.026 131.4 20.6
Source: Company Reports
Largo’s work has been not only been successful in more than doubling
the size of the historical resource, but has also delineated higher grade
tungsten and molybdenum zones within the resource area. A scoping
study is near completion for Northern Dancer, which will provide first
order economics on the project and a summer drill program should
provide steady results through-out the fall.
Largo Resources Ltd.
Philip Williams CFA (416) 343-2786 June 18, 2008 / p.17
Angela Lam, Associate (416) 343-4209
People
The Largo team blends business acumen with geological and mining
expertise. With most of the senior members of Largo’s board and
management having an affiliation with Dessert Sun Mining, the group is
very experienced with finding, building and selling a mine in the Bahia
state of Brazil. Under the leadership of Largo Chairman Stan Bharti,
Desert Sun Mining built the Jacobina gold mine and subsequently sold to
Yamana Gold (YRI-T) for about $650 million in YRI shares in 2006.
Exhibit 14. Key Management and Directors
Shares Options Warrants
Mark Brennan,
President, CEO & Director
Founding member of Desert Sun Mining with over 20
years financing experience in North America & Europe.
Founder and principal of Linear Capital and former
President, CEO and Chairman of Admiral Bay Resources.
4,103,500 1,450,000 0
Tim Mann,
Vice President, Engineering
Mining Engineer with extensive international operations
and technical management experience in mine
engineering, mine development and mine operations.
Career spans close to 40 years, including senior
assignments at SNC Lavalin and Goldcorp.
20,000 500,000 0
Andy Campbell,
Vice President, Exploration
Over 25 years experience in the mining & exploration
industry, including LAC Minerals and Noranda.
0 625,000 0
Deborah Battiston,
Chief Financial Officer
C.G.A. with over 20 years of accounting and financial
management experience.
80,000 350,000 0
Tony LaMantia,
Corporate Development
Senior business development consultant with a strong
platform of experience in public and private developmentstage
companies, including the investment industry
(Standard Securities).
610,000 400,000 10,000
Stan Bharti,
Chairman
Has over 25 years experience in operations, public
markets and finance. He was the former founder and
Chairman of Desert Sun Mining.
1,896,500 1,050,000 950,000
Gerald McCarvill,
Director
Co-founder & Director of Desert Sun Mining, and held
senior positions with Wood Gundy; he was formerly
CEO of McCarvill Corp. and CEO of Repadre Capital.
470,000 350,000 0
Bill Pearson,
Director & Technical Advisor
Over 30 years experience in the mining & exploration
industry, and was the former VP Exploration at Desert
Sun Mining.
320,000 425,000 10,000
William Clarke,
Director
Former Ambassador to Brazil and Sweden, and was a
former advisor to Desert Sun Mining.
0 200,000 0
Mike Hoffman,
Director
Professional mining engineer with over 25 years of
experience, and was a former VP at Yamana Gold (DSM).
35,000 150,000 0
Total 7,535,000 5,500,000 970,000
Source: Company Reports, SEDI
Largo Resources Ltd.
June 18, 2008 / p.18 Philip Williams CFA (416) 343-2786
Angela Lam, Associate (416) 343-4209
Risks
We view the geological and technical risks for Largo’s main Maracás
project as relatively low. The project has been subject to significant
evaluation by Largo and previous operators. The ore body is well defined
with the entire current resource categorized as measured and indicated.
The proposed processing methodology is straight forward and comprised
of “off-the-shelf” technology.
Both the financial and permitting risks will be addressed before the end of
the year with a bankable feasibility study to be released in July and the
main implementation license expected to be issued by the IMA in
November. The BFS will provide accurate costs which should provide
Investec Bank with sufficient comfort to go ahead with its indicated term
for 75% of the debt. Further equity dilution is likely, however, the
company could negotiate an advance from its off-take partner or partially
monetize its secondary asset to help fund this requirement. Once the
implementation license is received Largo will be cleared to commence
construction and once the mine is built a final operating license will be
applied for.
Execution is one of the biggest risks for the projects as Largo’s current
team has not previously brought a vanadium project into production. We
believe this risk will be mitigated by the employment of experienced
contractors and mining personnel with vanadium experience. We also
highlight that Largo’s senior management, directors and advisors have a
strong track record of project advancement, particularly in Bahia state
where Maracás is located.
Commodity risk is the other large risk for the company. As shown in our
valuation section the project economics are most sensitive to the
vanadium price. Our analysis suggests that the price will remain strong at
least over the next five years as demand outstrips planned supply. A
dramatic slowdown in perceived steel growth, a new large source of
vanadium supply or more competitively price substitutes could negatively
impact prices and therefore the Maracás project’s economics.
Conclusion
Largo is in the unique position of developing a new mine during a period
of a rising commodity price and strong supply and demand fundamentals.
The market is only just becoming aware of the positive outlook for
vanadium and with a series of important milestones on the horizon for
the Maracás project, we suggest Largo will gain increased market
attention in the coming months. The stock is trading at a substantial
discount to the underlying value of its assets and its comps. We expect
this gap to narrow and investors should buy the stock now in advance of
the coming catalysts.
source : clarus report
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