Largo Resources Corporate Presentation - October 2013
-
Upload
largoresources -
Category
Business
-
view
526 -
download
2
Transcript of Largo Resources Corporate Presentation - October 2013
TSXV: LGO
Best Mining Deal
www.largoresources.com
Near Term VANADIUM Producer
October, 2013
CORPORATE PRESENTATION
Metals and Mining Deal of the Year
TSXV: LGO
Forward Looking Statements
The information presented contains “forward-looking statements,” within the meaning of the United States Private Securities Litigation Reform Act of 1995, and
“forward-looking information” under similar Canadian legislation, concerning the business, operations and financial performance and condition of the Company.
Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to the estimation of mineral reserves and mineral
resources; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; metal prices and demand for
materials; capital expenditures; success of exploration and development activities; permitting time lines and permitting, mining or processing issues; government
regulation of mining operations; environmental risks; and title disputes or claims. Generally, forward-looking statements and forward-looking information 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,”, “projects” or variations of such words and phrases or state that certain actions, events or results
“may,” “could,” “would,” “might” or “will be taken,” “occur” or “be achieved.” Forward-looking statements and forward-looking information are based on the opinions
and estimates of management as of the date such statements are made, and they are subject to known and unknown risks, uncertainties and other factors that may
cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-
looking statements or forward-looking information, including, but not limited to, unexpected events during operations; variations in ore grade; risks inherent in the
mining industry; delay or failure to receive board approvals; timing and availability of external financing on acceptable terms; risks relating to international operations;
actual results of exploration activities; conclusions of economic valuations; changes in project parameters as plans continue to be refined; and fluctuating metal prices
and currency exchange rates. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially
from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements 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 reliance on forward-looking statements and forward-looking information. The Company does not
undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except in accordance with applicable
securities laws.
Investors are advised that National Instrument 43-101 of the Canadian Securities Administrators requires that each category of mineral reserves and mineral resources
be reported separately. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated or Inferred Resources
The information presented uses the terms “measured,” “indicated” and “inferred” mineral resources. United States investors are advised that while such terms are
recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize these terms. “Inferred mineral
resources” have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of
feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be
converted into mineral reserves. United States investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically
or legally mineable.
2
TSXV: LGO 3
Production in sight.
As at October 10, 2013
TSXV: LGO
Maracas Vanadium Project
Vanadium Project in Brazil
Highest grade/quality; lowest cost project
Funded and in construction
Production to begin in Q1, 2014
Glencore Off-take: 100% Take-or-Pay
4
Metals and Mining
Deal of the Year
Best Mining Deal
TSXV: LGO
Vanadium – a Strategic Metal
Most used alloy to strengthen steel
Significantly increases tensile strength
Resistant to: seismic, corrosion, abrasion
Proven process for separation
5
Makes steel stronger, tougher and lighter
Source: vanitec.org/Roskill, 2013
TSXV: LGO
Vanadium – Few Substitutes
6
2lbsV 1 Tonneof Steel =2X
Strength
Highest strength to weight ratio of any alloy
Source: vanitec.org
TSXV: LGO
Demand Drivers
Increased use in steel production
Growth in applications containing V
Higher quality steel standards in BRICs
7
Strong growth profile
Growth Rate (CAGR)
Source: Roskill, 2013
TSXV: LGO
Growth Example
8Source: Les Ford Vanadium and Steel presentation, PDAC 2010Source: Roskill 2013
% of Vanadium Used per Tonne of Steel by Region
Tota
l To
nn
es
by R
eg
ion
(V
2O
5 E
qu
iv.)
Projected Impact of China’s Increased Rebar Standards
Actual Consumption 2010
Projected Impact of China’s 2013 Rebar Standards
Japan
Europe
China
TSXV: LGO 9
• Rebar for construction
• Buildings, bridges, tunnels
• Automotive parts
• Pipelines
• Aviation and aerospace
• Power lines and power pylons
• Chemical plants, oil refineries, offshore-platforms
• Various tools and dies
• High strength steel structures
• Construction machinery and equipment
• Cast iron used for rolls in steel mills
Vanadium is Everywhere
Source: Vanitec
TSXV: LGO
Supply is Concentrated
10
Brazil production provides stability of supply
Source: Roskill, 2013
Of global supply
China 70,000 Tonnes (V2O5 Equiv)
South Africa 35,000 Tonnes (V2O5 Equiv)
Russia 14,000 Tonnes (V2O5 Equiv)
Total Supply 127,000 Tonnes (V2O5 Equiv)
Total Demand 136,000 Tonnes (V2O5 Equiv)
*Tonnage calculated in V2O5 Equivalent
TSXV: LGO
Vanadium Historical Pricing
11
$0.00
$5.00
$10.00
$15.00
$20.00
Historical Vanadium Price
Consistent floor at $5.00 per lb
Largo Operating Costs
TSXV: LGO
Maracas – Ideal Location
12
Safe, mining friendly jurisdiction
Government and local support
Arid climate, ideal topography
Management with regional experience
Metals and Mining
Deal of the Year
Best Mining Deal
TSXV: LGO
Magnetite deposit
Mineralization at surface
Highest grade and quality ore
Contains Platinum Group Metals
Maracas - Mineralization
13
Long strike zone
Significant opportunity for future expansion
TSXV: LGO
Concessions and Mineralization
= Gulcari “A” Deposit (first 12 Years)
Maracás concessions
and strike length
14
TSXV: LGO
Mineral Resources
15
0 10 20 30 40
Million Tonnes
Mineral Reserve
Measured & Indicated
Inferred
1.34% V2O5
1.11% V2O5
13.1 Million Tonnes
0.83% V2O5
+2 Times Industry Average Grade
30.4 Million Tonnes
24.6 Million Tonnes
Gulcari “A” Deposit
TSXV: LGO
Gulcari “A” Cross Section
16
TSXV: LGO
Cost Advantage
*Average grade comparisons compiled by Les Ford, presentation March 8, 2011 17
Highest Grade/Quality Vanadium Deposit in the World
Ore V2O5% Concentrate SiO2%Concentrate V2O5%
Higher head-grade and higher iron content
Concentrate has much higher V2O5
Concentrate has fewer
contaminants like silica
=LOWEST
COST PRODUCTIO
N
Higher Recoveries
Less Energy Required
Lower reagent costs
Results in
TSXV: LGO
Maracas Project Economics
18*including iron ore byproduct credit – OPEX without credit is $3.18 (still lowest cost producer)**Average years 1-15
Net Present Value $554 million
After tax IRR 26.3%
Discount rate 8%
Exchange rate (BRL:USD) 2:1
Average Production 11,400 t V2O5 equiv
Mine life 29 Years
Initial CAPEX 235 million
OPEX $2.10*
V2O5 price – 3 year avg $6.37
Average annual cashflow $89 million**
Includes taxes, royalties, and sustaining capex
TSXV: LGO
Low Cost Environment
Open pit mining
At surface deposit
Highly magnetic ore
Few contaminants
Water leaching process
19
OPEX costs*
Ore provides better recoveries and reduces input costs
*including iron ore byproduct credit - OPEX without credit is $3.18 (still lowest cost producer)
TSXV: LGO
Low Cost with Potential to Improve
Lower mining costs
Lower power costs
In-house crushing
Depreciation of the Real
20
Potential reductions in operating costs
*including iron ore byproduct credit - OPEX without credit is $3.18 (still lowest cost producer)
OPEX costs*
TSXV: LGO
Vanadium Historical Pricing
21
$0.00
$5.00
$10.00
$15.00
$20.00
Historical Vanadium Price
Profitable at historic lows
Largo Operating Costs
TSXV: LGO
Process Flow Sheet
22
Proven, industry tested process
TSXV: LGO
Production Profile
23
Phase 1(10,000 Tonnes Capacity)
Initial Ramp Up, Implementing Expansion & FeV Plant
Phase 2(14,000 Tonnes Capacity)
Expanded Production rates & FeV
TSXV: LGO
Year 1 Ramp-up Projections
24
Conservative Ramp-Up Projections with Opportunity to Improve
Year 1 Total: 5,511 Tonnes V2O5Year 2 Total: 9,689 Tonnes V2O5
Plant Capacity: 10,000 Tonnes V2O5
100%
% C
apac
ity
TSXV: LGO
Strong Partners
Glencore International Plc.
Largest trader of Vanadium
Take-or-pay agreement
100% of all material produced
25
Off-take agreement
De-risked product sale
TSXV: LGO
Strong Management
26
Mark Brennan President & CEO 20+ years experience in capital markets
Tim Mann Chief Operating Officer 30+ years mining engineering experience
designing, building, operating, managing mines
Les Ford Technical Director Vanadium expert. 40+ years experience building/designing vanadium plants
Kurt Menchen Country Manager & Maracas Project Manager
30+ years mining engineering experience operating mines in Brazil
Douglas Herbst Maracas Construction Manager
30+ years mining engineering experience building mines
Andy Campbell VP Exploration 30+ years of mining exploration experience
Ernest Cleave Chief Financial Officer 10+ years experience in financial management
Andrew Hancharyk Chief Legal Officer 10+ years experience in corporate Law
TSXV: LGO
Maracas Project Schedule
27
Engineering
Procurement Services
Civil Works
Crushing System Erection
Milling System Erection
Kiln System Erection
Sulphate Salt Recovery System Erection
Deammoniator/ FurnaceErection
Utilities System Erection
Equipment Fabrication
Eletrical Line Contract
Water Pipeline Erection
COMPLETE
COMPLETE
Q1 Q2 Q3 Q4Q4Q3Q2
COMPLETE
COMPLETE
Q1 Q2
2012 2013 2014
COMPLETE
TSXV: LGO
Maracas Environment
28
Gulcari “A” Deposit and Open Pit
Concrete PlantMain Access RoadAdmin Facilities
Processing Plant
Crushing and Milling
TSXV: LGO
Maracas Deposit Outcrop
29
25 meters of ore at surface
150 meters
Magnetite(ore)
Gabbro (waste)
◦Dips at 65
TSXV: LGO
Maracas Plant Overview
30
Project as at September 16, 2013
TSXV: LGO
Corporate Structure
31
Stock symbol: LGO – TSX-V
Share price (Oct 17, 2013): $0.195
Shares issued (Basic): 897 million
Market Cap C$174 million
52-week High/Low: $0.245 / $0.155
Management & Institutions: 75%
Warrants & Options (Basic): 251 million
Institutional Shareholders
Arias Resource Capital-19.9%
Mackenzie Investments-15.9%
Eton Park Capital Management-12.5%
Ashmore Investment Management-12.5%
Shareholders & Project Partners
Project Finance Deal of the Year Awards - March 2013
Project Partners
Glencore International 100% 6 yr take-or-pay off-take for Maracas
Business Development Bank of Brazil
Bank Itau, Votorantim, Bradesco
TSXV: LGO
Secondary Projects
32
Project Jurisdiction Metal Stage
Currais Novos Brazil Tungsten Development – care and
maintenance due to drought
Northern Dancer Yukon, Canada Tungsten PEA Complete
Campo Alegre
de Lourdes
Brazil Iron, Titanium,
Vanadium
Exploration
Blue sky potential to add value
TSXV: LGO
Investment Summary
Project funded, permitted and in construction
Advancing towards production in Q1, 2014
High grade, low cost production project
Significant cash-flow potential in near-term
Exposure to commodity with strong growth profile
Experienced management
Pipeline of projects in place for growth
33
Substantially de-risked flagship project with near term cash flow
Under-Valued
Near-Term Producer
TSXV: LGO 3434
LARGORESOURCES.COM
Darcie LaddBusiness Development Manager
416-861-9406
Mark BrennanPresident and CEO
416-861-9797
Largo Resources
LargoResources1
LargoResources
largoresources
TSXV: LGO
Appendix
Board of Directors
Photos: Recent Construction Milestones
Useful equations for Vanadium
Maracas Mining Process
Tungsten
Currais Novos
Northern Dancer
Campo Alegre de Lourdes
35
TSXV: LGO
Appendix: Strong Board
36
Mark Brennan Director Largo Resources President & CEO
Dirk Donath Director Managing director Eton Park Capital Management
Alberto Arias Director Founder & President Arias Resource Capital
Dan Ioschpe Director CEO of Lopche-Maxion
David Brace Director CEO of Karmin Exploration. Formerly with AurResources
Wayne Egan Director Partner at Weir Foulds LLP
Dr. Alan Alper Director Tungsten expert. Formerly with Osram Sylvania
TSXV: LGO
Recent Construction Milestones
37
Main Ball Mill Placed on its Foundation – August 2013
TSXV: LGO
Recent Construction Milestones
38
Evaporator Placed on into its Structure – September 2013
TSXV: LGO
Recent Construction Milestones
39
AMV Filter Placed on its Structure – August 2013
TSXV: LGO
Recent Construction Milestones
40
Kiln Assembly Commences – Sept 2013
Assembly of 90m Kiln Commences – September 2013
TSXV: LGO
Useful Equations for Vanadium
41
Question: Equation:
Conversion of V2O5 to FeV Equivalent V2O5 x 0.5602 / 0.945 = V contained in FeVOr,1 lb V205 = .1811 Kg Contained V in FeV
Converting Tonnes V contained into V2O5 Equivalent
Tonnes V x 1.7851 = V2O5 Equivalent
Rough Equation to Calculate FeV (kg) price from V2O5 (lb) Equivalent
V2o5 price x 4 + 2 = FeV
Vanadium is sold in two forms –Ferro Vanadium (FeV) and, Vanadium Pentoxide (V2O5).
Largo will produce Vanadium Pentoxide only for the first three years of production.
For the purposes of this presentation we have converted all tonnage of vanadium in Vanadium
Pentoxide equivalent.
Often, in other sources, Vanadium is reported in tonnes of FeV or in tonnes V contained in FeV
Below are some helpful equations to convert tonnes of V2O5 into V equivalent.
TSXV: LGO
Appendix: Maracas Mining Process*
42
• Deposit outcrops at surface
• Less than 1 meter pre-stripping
• High grade material from
surface continues to depth
Simple, Cost-Effective Open
Pit Mining Process
Unit Mining
Cost
Total
OPEX
Revenue
Tonne of ore $14.29 $61.50 $129.97
Per lb V2O5 /equiv.** $0.82 $2.10 $6.09
*See press release dated Jan 18, 2013**Includes all royalties less credit Iron Ore byproduct
TSXV: LGO
Appendix: Tungsten
43
Tungsten [W74]
Tungsten is unique in its extreme
qualities and difficult to replace
Source: Roskill, 2011Source: Minor Metals Trade Association
Cemented Carbide Usage• Only diamonds are harder• 100X harder than steelVery Hard
• Highest melting point• Lowest expansion
Very Heat Resistant
• Greater than lead or uraniumVery Dense
Tungsten is….
TSXV: LGO
Appendix: Tungsten
44Source: British Geological Survey’s Risk List, 2011 Source: US Gelological Survey
Supply Demand
Source: Roskill, 2011/Europacific Canada, April 12, 2012
Production
17%
Tungsten Scored 4th
Most at Risk out of 52 Elements
67,000 Tonnes(2011)
95,000 Tonnes(2015)
Growingat 7%
per year
Consumption
Supply
TSXV: LGO
Appendix: Currais Novos
Historical production district
Significant production from 1940s to 1970s
(approx 8% of global supply)
Numerous potential acquisitions in
immediate vicinity – both underground and
tailings
Provides significant expansion potential
Preliminary exploration underway with goal
of defining additional resources
45
TSXV: LGO
Appendix: Currais Novos
46
Production Commenced December 2011
90 tonnes of concentrate shipped
Initially commissioned without mill due to
importation delay at port
Mill commissioned in February
Plant optimization proceeded to adjust milling
circuit
3 additional screens were added in order to
increase yields
Screens commissioned in Q3
Modifications to plant are ongoing
Production temporarily suspended due to severe
regional drought
Currais NovosSite Visit – August 2012
TSXV: LGO 47
Appendix: Northern Dancer Project
Northern Dancer Resource Estimate
223.4 MT grading 0.102% WO3 and
0.029% Mo (M&I)
Higher-grade tungsten and molybdenum zone: 60.3
MT of 0.14% WO3 and 0.045% Mo (M&I)
201.2 MT grading 0.09% WO3 and
0.024% Mo (I)
Development Milestones
PEA complete
Environmental permitting under way
Discussions with off-take partners and
JV partner
TSXV: LGO
Appendix: Northern DancerPEA Highlights
Tungsten (US$ per MTU)
Moly(US$ per lb)
IRR (%)NPV @ 8%(US$ millions)
$275 $17.50 20.0 918
$300 $17.50 22.2 1,110
$325 $17.50 24.4 1,302
$350 $17.50 26.5 1,494
$365 $17.50 27.8 1,769
* The PEA is preliminary in nature, and includes inferred resources that are too speculative geologically to have economic considerations applied to them.
There is no certainty that the PEA will be realized.48
Low cash cost producer: US$116 per MTU
49 year mine life
Pre-production capital costs: $645 million
Cumulative cash flow US$4.8 billion
Average annual production of 833,000 MTU tungsten
(18.3 million pounds) and 5,959,000 pounds
molybdenum over initial 23 years
Current trading price of US$300 MTU
Attractive economics at current tungsten prices
Strategic asset for long term supply of tungsten
TSXV: LGO 49
Appendix: Campo Alegre Project
Non NI 43-101 Resource:
133 Million Tonnes Grading 50% Fe,
21% TiO2, 0.75% V2O5*
100% owned iron, titanium, and vanadium
deposit - seven concessions covering 9,274.66
hectares
Purchased in 2009 for USD $250,000.00 from
Bahia State Mining Development Agency
(CBPM)
Preliminary metallurgical testwork completed in
2011 suggested potential for titanium dioxide
(TiO2) project
Further metallurgical testing underway in 2012
* Historical resource provided by CBPM (Bahia State Mining Development Agency)