Aug 12, 2008 17:53 ET
Largo Reports Robust Projected Economics From Feasibility Study for Maracas Vanadium Project (Brazil)
- Pre-tax IRR of 43.9% and pre-tax NPV of $488.9 million at a discount rate of 10% per year
- Estimated payback of 1.9 years; after tax cash flows of $1,329.0 million over an estimated production life of 23 years based on long term price of US$45.86 per kg for ferrovanadium with federal tax incentives
- Mineral reserve estimated to be 13.1 million tonnes grading 1.35%
- Resource allows 8 years of milling of higher grade material (1.94% vanadium pentoxide)
- Conference call to be held on Wednesday, August 13 at 11:00 am Eastern Time.
TORONTO, ONTARIO--(Marketwire - Aug. 12, 2008) - Largo Resources Ltd. (TSX VENTURE:LGO) is pleased to report the results of a new NI 43-101 compliant Feasibility Study (the "Feasibility Study") on the Gulcari A deposit at its Maracas Vanadium-PGM property in Bahia, Brazil by Aker Metals, a division of Aker Solutions Canada Inc. (Aker Solutions). A corresponding technical report will be filed under the profile of the Company on SEDAR once available.
The results of the Feasibility Study are positive. Basic and detailed engineering and procurement are scheduled to commence in the third quarter of 2008.
The Feasibility Study is based on the Technical Report entitled "An Updated Mineral Resource Estimate for the Maracas Vanadium Project, Municipality of Maracas, Bahia State, Brazil" prepared by Micon International Limited (Micon) dated December 21, 2007 (the "Micon Resource Report"). Mr. B. Terrence Hennessey, P. Geo., a qualified person in accordance with the requirements of National Instrument (NI) 43-101 authored the Micon Resource Report.
Projected Cash Flows and Economic Results
Based on an estimated initial capital investment of US$270.6 million and the milling of 13,079,000 tonnes of ore at a diluted grade of 1.34 % vanadium pentoxide, the Maracas project is projected to have a discounted payback of 1.9 years and generate cash flows of US$1,329.0 million over an estimated production life of 23 years on an after-tax basis that assumes the available federal corporate tax incentives are granted. This results in an after-tax IRR of 41.7% and an after-tax NPV of US$450.7 at a discount rate of 10% per year. This scenario results in the production of approximately 4,431 tonnes per year (tpa) of vanadium contained in 80% ferrovanadium alloy ("ferrovanadium") over the first eight years of mine life after which production gradually decreases to stabilize at 1,748 tpa from year 14 to year 22 with year 23 being a partial year of production.
Projected revenues are based on the sale of ferrovanadium as the sole product.
Price forecasts for vanadium pentoxide have been provided by CPM Group of New York, USA. Their forecast indicates the long-term price of ferrovanadium will stabilise at approximately $45.86 per kg, which is equivalent to V2O5 price of $8.00 per lb, after a steady decrease from current levels. The current prices for ferrovanadium and vanadium pentoxide are approximately US$66 per kg and US$17 per lb, respectively.
A table summarizing the ferrovanadium prices in 2007 dollars used in the cashflows from 2010 to 2018 as forecast by CPM Group is provided below.
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Year 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Ferro-
vanadium
Price
(US$/kg) 73.30 65.04 59.97 58.75 56.22 52.47 51.04 48.17 45.86
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Prices beyond 2018 are forecast to be $45.86 per kg.
Corporate tax incentives are available through a Brazilian federal government agency known as SUDENE. The mission of SUDENE is to promote sustainable development through tax incentives and other means in the Brazilian "Nordeste" in which the State of Bahia is located. The tax incentives currently include a reduction in corporate tax of 75%.
The economic results of the Feasibility Study (i) on a pre-tax basis, (ii) on a regular tax basis with no tax incentives, and (iii) with corporate tax incentives, are summarised in the following table.
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Pre-Tax No Corporate Tax With Corporate Tax
Incentives Incentives
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IRR (%) 43.9 34.9 41.7
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NPV @10% US$489.0 million US$335.9 million US$450.7 million
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Undis-
counted
cumulative
cashflow US$1,422.2 million US$1,049.4 million US$1,329.0 million
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The Feasibility Study was based on work carried out by Peimeng Ling, P. Eng. Of Aker Solutions and other consulting firms including NCL Brasil of Nova Lima, Bahia, Brazil (NCL); ECM S.A. of Belo Horizonte, Bahia, Brazil (ECM); VOGBR Recursos Hidricos & Geotecnia of Nova Lima, Bahia, Brazil (VOGBR); Brandt Meio Ambiente of Nova Lima, Bahia, Brazil (Brandt); Integratio of Nova Lima, Bahia, Brazil (Integratio); and SGS Mineral Services of Lakefield, Ontario (SGS) with Aker Solutions taking overall responsibility for compiling the study. The primary scope of work responsibilities of these consultants was as follows:
- Aker Solutions: hydrometallurgical process, overall capital cost estimation, economic analysis and compilation of reports
- NCL: mining
- ECM: process beneficiation and site infrastructure
- VOGBR: tailings management facility, site water management and control and geotechnical investigations
- Brandt: environmental issues including environmental submissions to the Bahia state environmental agency, Instituto de Meio Ambiente, (IMA)
- Integratio: environmental support and community engagement issues
- SGS Mineral Services: metallurgical testwork
Estimated Mineral Resources and Mineral Reserves
The Measured and Indicated Mineral Resource as reported by Micon in the Micon Resource Report were estimated to be 17.26 million tonnes at a grade of 1.44 % vanadium pentoxide. The estimated resources were based on a US$3.50 Whittle pit shell and a V2O5 cut-off of 0.66%. The mineral resource also contained platinum at a grade of 0.21 g/t and palladium at a grade of 0.09 g/t (see Press Release dated November 7, 2007).
In the Feasibility Study, NCL estimated the mineral reserves to be 13,079,000 tonnes grading 1.34% vanadium pentoxide. Carlos Guzman MAusIMM, of NCL, a qualified person in terms of NI 43-101 who is independent of Largo, prepared the estimate.
The following table outlines the mineral reserve estimates, as at August 12, 2008. The mineral reserve terms used herein have the meaning ascribed thereto in the CIM Definition Standards.
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Contained V in
Reserve Grade ferrovanadium
Classification Tonnes (V2O5 %) (tonnes)
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Proven 7,341,000 1.28 33,451
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Probable 5,738,000 1.42 29,050
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Total Mineral Reserve 13,079,000 1.34 62,502
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The estimation of mineral reserves was based on a mine design developed using Lerch-Grossman pit optimization techniques. The inputs to the optimization were generally drawn from the Micon Resource Report and the estimated mineral reserves are included in the mineral resources described above. The optimization parameters are listed below:
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Parameter Value
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Price of V2O5 US$5.00 per lb
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Price of vanadium in ferrovanadium US$23.08 per kg
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Overall recovery from ore to product 63.4%
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Waste mining cost US$1.39 per tonne
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Ore mining cost US$1.42 per tonne
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Processing to V2O5 US$30.66 per tonne
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Processing to ferrovanadium US$0.35 per lb of V2O5
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General and Administrative US$2.12 per tonne
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Pit slope angle 45 degrees
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The pit design was based on a pit shell using a US$12.93 per kg price assumption. A range of pit shells over a price range of US$6.92 to US$34.62 per kg were generated. The US$12.93 per kg pit shell was selected because it contains approximately 65% of the vanadium but just 26% of the waste rock tonnage compared to the US$23.08 per kg pit shell. This selected scenario defines a project life of 23 years at the proposed processing capacity.
Drilling continues on the Maracas property with other exploration targets being investigated. A priority vanadium target is the Nova Amparo zone contained within the property boundary. The possible future development of this zone as an additional source of mill feed from open pit mining has been included in the application for environmental licensing currently in progress through the Bahia state environmental agency (Instituto de Meio Ambiente). The presence of several other vanadium-bearing structures within the property, including Nova Amparo (see the Micon Resource Report), provides confidence regarding the longevity and potential, future expansion of the project.
Project Description
The deposit outcrops on surface and is amenable to open pit mining. The waste rock scheduled for mining is estimated to be 29,108,000 tonnes, resulting in a Life-of-Mine strip ratio of 2.23:1. Open pit mining proceeds at a faster rate than milling in order to supply the mill with higher-than-average-grade feed for the first 13 years of the mine life. The grade is projected to be highest in the first eight years when the mill feed averages 1.94%. Excluding one year of pre-stripping, the open pit is forecast to be mined out over 13 years. However, milling of the lower grade material is projected to continue for a further ten years after completion of the milling of the higher grade material. Largo believes there is an opportunity to further optimise the mine plan, through additional phases of mining to exploit the deeper parts of the resource. The pit was designed based on a vanadium pentoxide price of US$3.40 per lb as this approach provided economically favourable results for the purposes of the Feasibility Study. The surface structures adjacent to the pit have been located beyond the anticipated surface expression of deeper pits to allow for subsequent pit deepening if determined to be economically justified in the future.
The process flowsheet has been based on work carried out by SGS and others. The flowsheet comprises the following steps: comminution, concentration by magnetic separation, roasting, leaching, precipitation and production of ferrovanadium. Mill throughput is 581,000 tpa. Overall vanadium recovery is estimated to be 71.6%. The ferrovanadium produced will be sold to Glencore under an off-take agreement, as previously announced (see Press Release dated May 14, 2008).
The execution schedule for implementation of the project prepared by Aker Solutions indicates ramp-up of production after commissioning occurring in the fourth quarter 2010 with commencement of site work scheduled for the first quarter of 2009, subject to prior receipt of the environmental licence required to commence construction. The implementation schedule has been accelerated by the identification of long-lead items, the orders for which are currently being negotiated.
Costs
Capital costs associated with infrastructure, mining equipment and construction of the process plant are estimated to be US$270.6 million, including a contingency of US$45.8 million. The estimate has an intended level of accuracy of +/-15%.
Operating costs before payment of royalties over the first eight years of production are estimated to be US$15.49 per kg of vanadium contained in ferrovanadium. Life-of-mine costs are estimated to be US$19.26.
Conclusions and Recommendations
The average grade at Maracas is high when compared to other known vanadium mines of similar geology currently in production. In the Feasibility Study, Aker Solutions concluded that the Maracas vanadium deposit could form the basis on which to build a viable ferrovanadium production operation.
Largo President and CEO Mark Brennan commented: "we are delighted with the results of the Feasibility Study by Aker Solutions. I believe it sets apart Maracas as a robust vanadium deposit with the metrics from the Feasibility Study singling out the project as having the potential to become one of the world's lowest cost primary producers of vanadium. Key milestones that will be pursued in the weeks ahead include formal commencement of basic and detailed engineering, placement of orders for long-lead items, continued build-up of Largo's team to be based in Maracas, completion of key elements of the licensing process and the finalization of the project financing. The potential for expansion of the project is also very exciting."
Conference call:
Largo Resources will hold a conference call for investors focusing on the financial results of the Feasibility Study at 11:00AM (ET) on Wednesday, August 13th.
The conference call information is as follows:
Local # 416-695-7848
North America# 1-800-952-6845
International# +1-416-695-7848
This press release was reviewed by Tim Mann, P.Eng., Largo's VP of Engineering and a Qualified Person as per National Instrument 43-101 who has the ability and authority to verify the authenticity and validity of information provided herein.
Aker Solutions which is responsible for delivery of the Feasibility Study has reviewed this Press Release.
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. Largo also has a large (60,000 hectare) land position and prospective gold exploration properties in Ecuador. 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
This press release contains forward-looking statements under Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the Largo's development potential and timetable of the Maracas project; the Largo's ability to raise additional funds necessary to complete the project; the future price of ferrovanadium and vanadium pentoxide; the estimation of mineral reserves and mineral resources; conclusions of economic evaluation; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; capital and operating expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. 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 words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Estimates regarding the anticipated timing, amount and cost of mining at the Maracas project are based on assumptions underlying mineral reserve and mineral resource estimates and the realization of such estimates; detailed research and analysis completed by independent consultants; research and estimates regarding the timing of delivery for long-lead items; knowledge regarding the factors involved in building a mine in Brazil and other factors that will be described in the technical report summarizing the Feasibility Study that will be filed under the profile of the Company on SEDAR. Capital and operating cost estimates are based on extensive research of the Largo and independent consultants, recent estimates of construction and mining costs and other factors that are set out in the Feasibility Study. Production estimates are based on mine plans and production schedules, which have been developed by the Largo's personnel and independent consultants. Forward-looking statements 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 Largo to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to: unexpected events and delays during construction, expansion and start-up; variations in ore grade and recovery rates; receipt and revocation of government approvals; timing and availability of external financing on acceptable terms; actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of ferrovanadium; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry. Although management of the 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 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. The Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.
THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE. |
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