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Largo Resources Announces Record Q4 and Full Year 2018 Production Results and Provides 2019 Guidance

January 09, 2019
  • Record production of 2,595 tonnes of V2O5 in Q4 2018, a 2% increase over Q4 2017
  • Record FY 2018 production of 9,830 tonnes of V2O5, exceeding midpoint guidance of 9,650 tonnes by 2% and a 6% increase over FY 2017
  • 2019 Guidance: Annual V2O5 production of 10,000-11,000 tonnes; Average annual cash operating costs excluding royalties1 of US$3.45-3.65 /lb V2O5; Sustaining capital expenditures of US$10-14 million; Expansion capital expenditures of US$10-14 million

TORONTO, Jan. 9, 2019 /CNW/ - Largo Resources Ltd. ("Largo" or the "Company") (TSX: LGO) (OTCQX: LGORF) is very pleased to report fourth quarter and full year 2018 production results from its Maracás Menchen Mine highlighted by a new quarterly production record of 2,595 tonnes of vanadium pentoxide ("V2O5") and record full year production of 9,830 tonnes of V2O5. Largo delivered strong operational performance in 2018 exceeding the Company's midpoint guidance of 9,650 tonnes of V2Oat record production rates. Management is confident in its ability to deliver continued operational success through its production and cost guidance for 2019.

Total production from the Maracás Menchen Mine in 2018 was 9,830 tonnes of V2O5, exceeding the Company's midpoint of guidance by 2%. This represents an increase of 6% over FY 2017 and is the strongest full year of production from the mine since operations commenced in 2014. The Company also achieved a new quarterly production record in Q4 2018 with 2,595 tonnes of V2O5 produced, up 2% from the previous quarter and representing the fourth consecutive quarter of production growth during 2018.

Global V2O5 recovery rates averaged 77.0% in 2018 representing an increase of 2% over the year prior. Recoveries of 75.3% in Q4 2018 averaged somewhat lower when compared to 77.1% in Q3 2018 due to issues with kiln stability. Following the kiln refractory replacement in Q1 2019, the Company expects recoveries to stabilize throughout the year as it continues its focus on established maintenance programs and best production practices at the mine.

A summary of Q4 and FY 2018 production results from the Maracás Menchen Mine is presented below:

Maracás Menchen Mine Production

Q4 2018

Q3 2018

Q2 2018

Q1 2018

FY 2018







Global recovery2 (%)

75.3%

77.1%

79.2%

75.9%

77.0%

Concentrate produced (tonnes)

92,190

88,075

85,639

77,222

343,126

Grade of concentrate (% V2O5)

3.27%

3.48%

3.37%

3.56%

3.41%

Contained V2O5 (tonnes)

3,016

3,065

2,889

2,747

11,717

V2O5 flake produced (flake + powder) (tonnes)

2,595

2,563

2,458

2,214

9,830

V2O5 produced (equivalent pounds)3

5,721,000

5,650,000

5,419,000

4,881,000

21,671,000

 

Mark Smith, Chief Executive Officer of Largo, stated: "Largo's ability to consecutively increase its production at the mine is a testament to the very skilled operations team at Maracás and has enabled the Company to exceed its midpoint guidance of 9,650 tonnes of V2O5 for the year. We are also very proud to report yet another quarterly production record from the Maracás Menchen Mine in addition to a new record of full year production for 2018."

He continued: "During the year ahead, Largo will continue its focus on profitability and looks forward to reaping the benefits of the increased production rate as a result of the Company's ongoing expansion project. The expansion project to increase nameplate production capacity to approximately 1,000 tonnes of V2O5 per month is progressing on time and the Company expects to reach the new nameplate capacity rate in Q3 2019."

2019 Production and Cost Guidance – Continued Profitability Underscored by Low-Cost Production

Largo Resources experienced a solid year of production growth at the Maracás Menchen Mine setting multiple production records during the year. Building on the operational successes throughout 2018, management expects to continue this momentum in 2019 as it increases its nameplate production rate by way of its expansion plan. The Company anticipates the expansion ramp up to be completed in Q3 2019 and expects to reach the increased nameplate production rate of 1,000 tonnes of V2O5 per month in the same quarter.

Additionally, the Company plans to replace the kiln refractory in Q1 2019 which will result in approximately 17 days of down time affecting production rates and cash operating costs4 for the quarter. As a result of the kiln refractory maintenance, the Company now anticipates lower production during the month of March and higher cash operating costs5 in Q1 2019. The Company's V2O5 total production for 2019 will range between 10,000 and 11,000 tonnes which is inclusive of high-purity vanadium flake and high-purity vanadium powder production.

The Company has also provided an annual average cash operating cost6 guidance for the year excluding royalties as it believes this guidance more fully represents the total costs associated with producing vanadium. Current cash operating costs include royalties which vary based on the price of V2O5 and in Largo's view does not completely reflect the operational performance undertaken at the mine. In 2019, the Company expects an annual average cash operating cost excluding royalties of US$3.45 – 3.65/lb V2O5.

A summary of 2019 production, cost and capital expenditure guidance are included in the table below:

2019 Production and Cost Guidance



Annual V2O5 Production Guidance

10,000 – 11,000 tonnes

Average Annual Cash Operating Cost7 Guidance Per
Pound Excluding Royalties

US$3.45 – 3.65

Sustaining Capital Expenditure8

US$10 – 14 million

Expansion Capital Expenditure9

US$10 – 14 million

Vanadium Outlook Update

On the back of the Company's solid production growth in 2018, vanadium prices soared approximately 156% but have recently receded to the range of US15.50-16.00/lb10. This reported price range for vanadium is presently up 38% when compared to the same period last year and Largo continues to believe as a result of the structural supply deficit, an elevated pricing environment should remain for the metal in the short-term.

About Largo Resources

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 Maracás Menchen Mine located in Bahia State, Brazil. The Company's common shares are principally listed on the Toronto Stock Exchange under the symbol "LGO". For more information on Largo, please visit our website at www.largoresources.com.

Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility for the adequacy or accuracy of this press release.

Cautionary Note:

Readers are cautioned that Metal Bulletin pricing should be considered only as indicative pricing for the global vanadium market, Metal Bulletin pricing does not directly reflect the price realized by the Company for a corresponding period.

 Forward-looking Information:

This press release contains forward-looking information under Canadian securities legislation, some of which may be considered "financial outlook" for the purposes of application Canadian securities legislation ("forward-looking statements"). Forward looking information in this press release includes, but is not limited to, statements with respect to timing for and completion of the Maracás Menchen Mine expansion project and the costs associated therewith; the duration of the planned kiln shutdown; the timing and amount of estimated future production; costs of future activities and operations; and the extent of capital and operating. 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". All information contained in this news release, other than statements of current and historical fact, is forward looking information. 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 those risks described in the annual information form of Largo and in its public documents filed on SEDAR from time to time. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Although management of 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. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo's annual and interim MD&As which also apply.

Future Oriented Financial Information:

Any financial outlook or future oriented financial information contained in this press release, as such term is defined by applicable securities laws, has been approved by management of Largo as of the date hereof and is provided for the purpose of providing information about management's current expectations and plans relating to the Company's 2019 production guidance. Readers are cautioned that any such future oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective financial information as to the Company's anticipated 2019 production guidance has been prepared on a reasonable basis, reflecting management's best estimates and judgments. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.

Non-GAAP Measures

The Company uses certain non-GAAP financial performance measures in this press release, which are described in the following section.

Cash Operating Costs

The Company's press release refers to cash operating costs per pound produced, a non-GAAP performance measure, in order to provide investors with information about a key measure used by management to monitor performance. This information is used to assess how well the Maracás Menchen Mine is performing compared to plan and prior periods, and also to assess its overall effectiveness and efficiency.

Cash operating costs includes mine site operating costs such as mining costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalties and sales, general and administrative costs, but excludes depreciation and amortization, share-based payments, foreign exchange gains or losses, commissions, reclamation, capital expenditures and exploration and evaluation costs.  These costs are then divided by the pounds of production from the Maracás Menchen Mine to arrive at the cash operating costs per pound produced.

The measure, along with revenues, is considered to be one of the key indicators of the Company's ability to generate operating earnings and cash flow from its Maracás Menchen Mine. These cash operating costs do not have any standardized meaning prescribed by IFRS and differ from measures determined in accordance with IFRS. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

____________________________________________
1
 Largo reports non-GAAP measures such as "Cash Operating Costs".  Please see information on this non-GAAP measure in the "Non-GAAP Measures" section of this new release.

2 Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery.

3 Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.

4 Refer to footnote 1.

5 Refer to footnote 1.

6 Refer to footnote 1.

7 Refer to footnote 1.

8 Excludes capitalized waste stripping costs.

9 Excludes capitalized waste stripping costs.

10 European Metal Bulletin vanadium price range as reported during the week of January 4, 2019.

SOURCE Largo Resources Ltd.

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