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Largo Resources Ltd (2)
Symbol LGO
Shares Issued 531,908,422
Close 2020-01-13 C$ 0.98
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Largo Resources produces 10,577 t V2O5 in 2019

2020-01-14 07:22 ET - News Release

Mr. Paulo Misk reports


Largo Resources Ltd. has released its fourth quarter and full-year 2019 production results from its Maracas Menchen mine, highlighted by a new annual production record, with 10,577 tonnes of vanadium pentoxide (V2O5) produced. In 2019, the company performed well operationally, achieving its annual midpoint production guidance of 10,500 tonnes of V2O5 . Management is confident that it will be able to execute on its 2020 production and cost guidance building upon the company's operational successes achieved in 2019.

Total production from the Maracas Menchen mine in 2019 was 10,577 tonnes of V2O5, representing an increase of 8 per cent over 2018. The company also produced 3,011 tonnes of V2O5 in the fourth quarter of 2019, which is an increase of 16 per cent over Q4 2018. Production in Q4 2019 represents the third consecutive quarter of production growth in 2019 and is the strongest quarter of production since commencement of operations in 2014. Increased production in Q3 2019 and Q4 2019 is largely due to the ramp-up and completion of the company's expansion project, which concluded in December, following the commissioning of the pre-evaporator and leaching, desilication, and precipitation tanks.

In Q4 2019, 329,792 tonnes of ore with an effective V2O5 grade of 1.36 per cent were mined, and the crushing unit was fed with 311,148 tonnes with an effective V2O5 grade of 1.20 per cent. The company also produced 100,879 tonnes of concentrate ore with an average V2O5 grade of 3.28 per cent in Q4 2019 compared with 92,190 tonnes produced in Q4 2018 with a grade of 3.27 per cent.

Global V2O5 recovery rates averaged 78.5 per cent in 2019, which is an improvement over the 77.0 per cent averaged in 2018. In Q4 2019, global recoveries averaged 77.3 per cent, which compares favourably with 75.3 per cent averaged in Q4 2018. Global recoveries declined quarter over quarter in 2019 primarily due to some process variability during the expansion ramp-up phase.

A summary of Q4 and 2019 production results from the Maracas Menchen mine is presented in the associated table.

                                                                             2019                                  2018
                                           Q4          Q3          Q2          Q1    Full year          Q4    Full year

Total ore mined (tonnes)              329,792     267,257     308,858     250,109    1,156,016     256,436      822,795
Ore grade mined -- effective grade       1.36        1.52        1.21        1.29         1.34        1.33         1.30
Effective grade of ore milled (%)        1.57        1.44        1.49        1.51         1.50        1.53         1.68
Concentrate produced (tonnes)         100,879      92,629     102,320      86,673      382,501      92,190      343,126
Grade of concentrate (%)                 3.28        3.26        3.30        3.32         3.29        3.27         3.41
Contained V2O5 (tonnes)                 3,310       3,016       3,380       2,874       12,580       3,016       11,718
Crushing recovery (%)                    96.6        96.5        98.0        97.0         97.0        97.4         97.2
Milling recovery (%)                     96.0        97.0        97.9        96.8         96.9        97.9         96.9
Kiln recovery (%)                        89.7        88.8        88.8        89.2         89.1        84.3         86.6
Leaching recovery (%)                    96.7        97.2        95.7        97.7         96.8        96.5         97.2
Chemical plant recovery (%)              96.1        96.7        97.1        97.7         96.8        97.2         97.0
Global recovery (%)                      77.3        78.1        79.1        80.0         78.5        75.3         77.0
V2O5 produced (tonnes)                  3,011       2,952       2,515       2,099       10,577       2,595        9,830
V2O5 produced (equivalent pounds)   6,638,111   6,508,038   5,544,619   4,627,497   23,318,266   5,720,989   21,671,415

Paulo Misk, president and chief executive officer of Largo, stated: "I am very pleased with the company's outstanding operational performance in 2019, further underscoring the dedication demonstrated by the whole Largo team. The company experienced another solid year of production in 2019, following the successful completion of its expansion project, which contributed to a new monthly V2O5 production record of 1,162 tonnes in December. Additionally, as a result of effective cost management, the company expects its 2019 annual average cash operating cost excluding royalties to be lower than its updated 2019 cash cost guidance range of $3.30 (U.S.) to $3.40 (U.S.) per pound V2O5."

He continued: "The company also achieved a new safety record in 2019, operating 238 days (1.5 million man-hours worked) without a lost-time injury (LTI), surpassing its previous LTI safety record of 203 days (1.3 million man-hours worked). Safety remains a top priority at Largo and the company plans to update the market with all of its responsible mining initiatives following the release of its 2019 environmental, social and governance report, which is expected in Q1 2020. We look forward to another solid year in 2020 as we continue our focus on achieving operational targets in addition to advancing our sales and trading business. I remain extremely confident in our team as we continue this momentum in the year ahead."

2020 production, cost and sales guidance

Building on the success of its increased name plate capacity in 2019, the company expects total V2O5 production for 2020 will be in the range of 11,750 and 12,250 tonnes, which is inclusive of high-purity vanadium flake and high-purity vanadium powder production. Additionally, the company expects annual average cash operating cost excluding royalties will be in the range of $3.30 (U.S.) to $3.50 (U.S.)/pound V2O5 in 2020 and anticipates sustaining capital expenditures will be in the range of $9.0-million (U.S.) to $11.0-million (U.S.).

Largo's board of directors has approved the construction of a ferrovanadium conversion plant at the Maracas Menchen mine, subject to available liquidity. The company expects the total capital expenditures for the conversion plant to be in the range of $8.0-million (U.S.) to $10.0-million (U.S.), with $5.0-million (U.S.) to $7.0-million (U.S.) being incurred in 2020. In addition, the company plans to perform cooler refractory maintenance in April, 2020, and anticipates lower production during this month and higher cash operating costs in Q2 2020. The company will also utilize this downtime to perform feed rate improvements on the kiln, which is expected to increase the nameplate production capacity to 1,100 tonnes of V2O5 per month from 1,000. In addition to the company's sustaining capital expenditures for 2020, the expected cost of the kiln feed rate improvement is approximately $1.3-million (U.S.).

Largo's current offtake agreement with Glencore International AG expires on April 30, 2020, and the company will be responsible for its own sales and distribution directly to end-users from May, 2020, onward. Consequently, the company anticipates total sales in 2020 will be in the range of 9,500 to 10,000 tonnes, with approximately 2,000 to 2,500 tonnes of its total V2O5 production in 2020 forming part of inventory working capital due to shipping and delivery lead times. The company's expected total sales in 2020 will consist of V2O5, high-purity V2O5 and ferrovanadium.

A summary of the company's 2020 guidance is listed in the associated table.

                                      2020 GUIDANCE        
Annual V2O5 production guidance                                       11,750-12,250 tonnes
Annual sales guidance                                                  9,500-10,000 tonnes
Average annual cash operating
Cost guidance per pound excluding
royalties                                                        $3.30 (U.S.)-$3.50 (U.S.)
Sustaining capital expenditures                   $9.0-million (U.S.)-$11.0 million (U.S.)
Ferrovanadium conversion plant
Capital expenditures                               $5.0-million (U.S.)-$7.0 million (U.S.)

About Largo Resources Ltd.

Largo is a Toronto-based strategic mineral company focused on the production of vanadium flake, high-purity vanadium flake and high-purity vanadium powder at the Maracas Menchen mine, located in Bahia state, Brazil.

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