Largo Announces Positive Preliminary Assessment From Maracas Vanadium Project
08:45 EDT Thursday, June 07, 2007
TORONTO, ONTARIO--(CCNMatthews - June 7, 2007) - Largo Resources Ltd. (TSX VENTURE:LGO) is pleased to report that a Preliminary Assessment (Scoping Study) has been completed on its Maracas Vanadium-PGM property located 250 kilometres west of Salvador, Bahia, Brazil by Micon International Limited (Micon) of Toronto, Ontario.
The Preliminary Assessment addresses the recovery of vanadium plus the production of feedstock for iron and steel production, but excludes any potential recovery of PGMs or other by-products. A subsequent, revised assessment will address an updated mineral resource and the recovery of PGMs upon completion of on-going metallurgical testwork.
Project Cash Flow
Based on an initial capital cost of US$120.0 million and the milling of 11.8 million tonnes of open pit material at a diluted mineral resource grade of 1.44% V2O5 and the use of a conservative outlook on ferrovanadium prices of US$16.16/kg, the project has an estimated after-tax payback of 5 years and generates cashflows of US$282.8 million over an estimated production life of 21 years. This results in an IRR of 18.8% and an NPV of US$58.7 million at a discount rate of 10% per year. This scenario results in the production of approximately 5,000 tonnes per year (tpa) of 80% ferrovanadium alloy over the first ten years of mine life, after which production decreases to approximately 2,000 tpa.
Cautionary Statement: Mineral resources that are not mineral reserves do not have demonstrated economic viability. This preliminary assessment is preliminary in nature; it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the results of the preliminary assessment will be realized.
Micon's analysis of the historical long-term relationship between the price of ferrovanadium and vanadium pentoxide has been used to establish a long-term average price for ferrovanadium on which the Preliminary Assessment is based. The sensitivities of these outcomes to changes in vanadium price are summarised in the table below:
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Ferrovanadium Base Case at Sensitivity at Sensitivity at
price US$16.16/kg US$23.08/kg US$32.31/kg
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Vanadium pentoxide US$3.50/lb US$5.00/lb US$7.00/lb
historical equivalent
price
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IRR (%) (after tax) 18.8 36.2 56.3
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NPV @10% (after tax) US$58.7 US$200.8 US$390.0
million million million
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Undiscounted cumulative US$282.8 US$655.3 US$1,151.9
cashflow (after tax) million million million
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The current price for ferrovanadium is approximately US$43/kg
Project revenues comprise the sale of ferrovanadium alloy as the primary product and by-product revenue from the sale of leached concentrate pellets as feedstock for iron and steel production.
Micon identified an Upside Scenario where, markets permitting, the production rate of ferrovanadium was increased to 7,500 tpa. Based on the same resource base as the 5,000 tpa option, the IRR increased to 20.1% with an NPV of US$68.7 million at a discount rate of 10% per year. The anticipated expansion of the resource arising from the current programme of diamond drilling (Press Release dated January 31, 2007) could allow additional high-grade material to be milled over the early years of the mine life and further project optimisation.
Mineral Deposit
Micon currently estimates the inferred mineral resources to be 15,030,000 at a grade of 1.35% V2O5, almost identical to the estimate previously reported (Press Release dated November 22, 2006). The portion of these mineral resources within the preliminary open pit mine design were estimated to be 11,820,000 tonnes at a diluted grade of 1.44% V2O5.
Cautionary Statement: Mineral resources that are not mineral reserves do not have demonstrated economic viability.
No titanium or PGM resources have been reported as no significant testwork has been done on their recovery in the vanadium production process examined in previous engineering studies on which the Preliminary Assessment is based. The potential exists for these elements, as well as iron, to be added to the resource estimate pending the successful completion of metallurgical testwork and, in the case of PGMs, more assaying.
Mining and Processing
The deposit outcrops on surface and is amenable to open pit mining. The waste rock scheduled for mining was estimated to be 24,444,000 tonnes, resulting in a strip ratio of 2.07:1. 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 10 years of the mine life. Excluding one year of pre-stripping, the open pit is mined out over 11 years. However, milling of the lower grade material after completion of the milling of higher grade material continues for a further 11 years. The process flowsheet has been based on work carried out by previous investigators in the late 1980s and early 1990s. 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 63.4%.
Capital Costs
Capital costs associated with infrastructure, mining equipment and construction of the process plant are estimated to be US$120.0 million, including a 20% contingency of US$20.0 million. The estimate has an intended level of accuracy of +/-30%.
Conclusions and Recommendations
Micon supports the diamond drill programme currently underway at Maracas (Press Release May 22, 2007) that has the objective of increasing the confidence level of the current inferred resources, expanding the overall resource base and exploring the potential of PGMs. Micon's report notes that the average grade at Maracas "is high when compared to other known vanadium mines of similar geology currently in production." Micon concludes that the Maracas vanadium deposit could form the basis on which to build a viable ferrovanadium production operation. In its view, the potential for incremental value to be added through sales of leached concentrate pellets to the iron and steel industry warrants further investigation. Sales of by-product sodium sulphate, and the recovery of titanium in slags from iron-making, could also be investigated. Similarly, the evidence of PGMs in host rocks gives rise to further potential value should these metals be amenable to metallurgical concentration and recovery.
Micon's recommendations include the continued sampling of historical drill core for more PGM data and support the institution of testwork to establish recovery of PGMs that Largo has recently initiated. Also recommended is that the possibility of recovering titanium with the vanadium recovery process be investigated. Micon further recommends that feasibility and environmental studies be undertaken to advance the project.
As previously reported (Press Release May 22, 2007), it is Largo's intention to update the Preliminary Assessment over the next few months on the basis of an updated, anticipated expanded resource base that will potentially provide more high-grade mill feed in the early years of production, and quantify and potentially establish the metrics of PGM recovery.
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.
Mr. Christopher Jacobs, C.Eng., Mr. B. Terrence Hennessey, P. Geo., Mr. Richard Gowans, P. Eng., and Ms. Jane Spooner, P. Geo. of Micon are independent Qualified Persons responsible for the Preliminary Assessment. Mr. Christopher Jacobs read and approved the contents of this press release.
Option Grant
The Board has granted the following options to purchase common shares of the Company at the price of $0.73 per common share to Mark Brennan (450,000 options), Stan Bharti (450,000 options), William Pearson (175,000 options), Gerald McCarvill (150,000 options), William Clarke (50,000 options), Andy Campbell (175,000 options), Kurt Menchen (175,000 options), Tim Mann (175,000 options), Anthony Lamantia (175,000 options), Deborah Battiston (150,000 options) and Patrick Gleeson (100,000 options).
Largo Resources is a Canadian natural resource development and exploration company with two advanced stage projects: the Northern Dancer Tungsten-Molybdenum deposit in the Yukon and the Maracas Platinum-Vanadium deposit in Brazil. Largo also has a large (60,000 hectare) land position and prospective gold exploration properties in Ecuador; one of which, the 5,000 hectare Macuchi property, is under option to Aur Resources Inc.. The company is listed on the TSX Venture Exchange under the symbol LGO.
Disclaimer
Statements in this release that are not historical facts are "forward-looking statements" within the meaning of applicable securities laws. Readers are cautioned that any such statements are not guarantees of future performance and those actual developments or results may vary materially from those in these "forward-looking statements".
FOR FURTHER INFORMATION PLEASE CONTACT:
Largo Resources Ltd.
Mark Brennan
President & CEO
(416) 861-5886
or
Largo Resources Ltd.
Tony LaMantia
Corporate Development
(416) 861-5882
Website: www.largoresources.com
THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE. |
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