Largo Corporate Presentation March 2014

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  • 1. TSXV: LGO Near Term VANADIUM Producer Metals and Mining Deal of the Year Best Mining Deal CORPORATE PRESENTATION March 2014 www.largoresources.com
  • 2. 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 forwardlooking 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. TSXV: LGO 2
  • 3. Production in sight. TSXV: LGO As at October 10, 2013 3 Project as at February 20, 2013
  • 4. Maracas Vanadium Project  Vanadium Project in Brazil  Highest grade, quality; lowest cost project  Funded and in construction  Commissioning in Q1, 2014  Glencore Off-take: 100% Take-or-Pay Recent Construction Milestones  Electrical power line commissioned Oct/13  Crushing commissioned Oct/13 Metals and Mining Deal of the Year TSXV: LGO Best Mining Deal  Milling & beneficiation commissioned Feb/14 4
  • 5. Vanadium – a Strategic Metal     Most used alloy to strengthen steel Significantly increases tensile strength Resistant to: seismic, corrosion, abrasion Proven process for separation Makes steel stronger, tougher and lighter TSXV: LGO Source: vanitec.org/Roskill, 2013 5
  • 6. Vanadium – Few Substitutes 1 Tonne of Steel 2lbsV 2X Strength Highest strength to weight ratio of any alloy TSXV: LGO Source: vanitec.org 6
  • 7. Uses of Vanadium Uses of Vanadium Steel is the largest enduse for vanadium Vanadium in Steel High Strength Low Alloy Steels are the leading market for vanadium in the steel industry TSXV: LGO Source: Roskill, 2013 7
  • 8. Vanadium is Everywhere   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  Source: Vanitec Buildings, bridges, tunnels  TSXV: LGO Rebar for construction Cast iron used for rolls in steel mills 8
  • 9. Vanadium Demand Drivers  Increased use in steel  Growth in applications containing V  Higher quality steel standards in BRICs Strong growth profile TSXV: LGO Source: Roskill, 2013 9
  • 10. Growth Example: Asia Developing   Source: Roskill, 2013 Source: Vanitec Chinese construction sector will expand between 4.5% - 7.5% between 2016 - 2021  TSXV: LGO By 2020 Asian construction spending is forecast at 46% of global – outstripping European spending by 24% Strongest construction spending growth expected to be in China, followed by India and Indonesia 10
  • 11. Growth Example: China  The Chinese government implemented Code for Design and Concrete Structures in 2010 and an Update on the Code in 2011.  This policy seeks to restrict and gradually eliminate the use of lower strength bars by 2015 and implement an increase in Vanadium content in steel rebar. “Vanadium-enhanced rebar provides buildings with the improved structural support necessary to better withstand the higher magnitude earthquakes so frequently seen in China,” “It is extremely important that an earthquake-prone country like China is well informed about the overall benefits of vanadiumenhanced steel as it relates to the country’s seismic precautions moving forward.” -- Robert Glodowski, Director of Technical Services at East Metals North America and a member of Vanitec. http://www.asminternational.org TSXV: LGO (Global Steel 2013, Ernest&Younge) 11
  • 12. Total Tonnes by Region (V2O5 Equiv.) Growth Example: China Projected Impact of China’s Increased Rebar Standards China Projected Impact of China’s 2013 Rebar Standards Europe Japan Actual Consumption 2010 % of Vanadium Used per Tonne of Steel by Region TSXV: LGO Source: Les Ford Vanadium and Steel presentation, PDAC 2010 Source: Roskill 2013 12
  • 13. China/U.S. Construction Trends China and USA: Forecast Growth in Construction 2012 - 2021 China and USA: Forecast Growth in Construction TSXV: LGO Source: Roskill, 2013 Source: Oxford Economics 13
  • 14. Growth Example: Automobiles Volkswagen Lowering Costs and Increasing Efficiency In 2013 VW announced plans to use new high-strength steel to make its cars lighter and also to comply with the strict emissions regulations. VW chose to replace aluminum with light weight steel to make to improve fuel efficiency. “VW…is giving up aluminum for the high tensile steel, which is up to six times stronger than conventional steel. The new material not only made the new Golf with about 100kg lighter, but also helped the company reduce costs.” (Reuters) Ford Reducing Weight In 2013 Ford announced that the F-150 pickup will soon be 250 to 750 pounds lighter. A recent study showed that the material is not only cheaper to use but also safer, the vehicles tested showing an outstanding crash performance. Ram Increasing Strength Ram’s 2013 3500 pickup 7,000 pounds additional towing capacity than previous version, all thanks to high-strength steel. TSXV: LGO Source: www.autosteel.org 14
  • 15. Projected Growth in Automotive USA: Consumption Growth of High-Strength Steels in Automobiles % 12% 78% 50% 41% 10% 47% 40% 22% TSXV: LGO Source: Roskill, 2013 Source: US Steel 15
  • 16. Growth Example: Aircraft  Aircraft usages presently accounts for approx. 7% of vanadium market and is growing rapidly   Aircraft manufacturers using increasing amounts of titanium-vanadium alloy   TSXV: LGO Demand projected to double by 2016 Boeing's new 787 Dreamliner and the Airbus 380 each contain more than 100 tonnes of the alloy, more than double that in a Boeing 747 Air traffic is forecast to double over the next 15 years Source: Largo Source: www.asiaminer.com Source: TTP Squared 16
  • 17. Projected Growth in Aircraft TSXV: LGO Source: Roskill, 2013 Source: Airline Monitor 17
  • 18. Supply is Concentrated 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) Brazil production provides stability of supply TSXV: LGO Source: Roskill, 2013 *Tonnage calculated in V2O5 Equivalent 18
  • 19. Vanadium Historical Pricing Largo Operating Costs Consistent floor at $5.00 per lb TSXV: LGO 19
  • 20. Maracas – Ideal Location      Government and local support Arid climate, ideal topography Management with regional experience Strong tax incentives Local familiarity with mining Best Mining Deal Metals and Mining Deal of the Year Mining friendly jurisdiction TSXV: LGO 20
  • 21. Concessions and Mineralization = Gulcari “A” Deposit (first 12 Years) Maracás concessions and strike length TSXV: LGO 21
  • 22. Mineral Resources +2 Times Industry Average Grade Gulcari “A” Deposit 24.6 Million Tonnes 30.4 Million Tonnes TSXV: LGO 22
  • 23. Gulcari “A” Cross Section TSXV: LGO 23
  • 24. Cost Advantage Highest Grade/Quality Vanadium Deposit in the World Higher head-grade and higher iron content Concentrate has much higher V2O5 Concentrate has fewer contaminants like silica Results in Higher Recoveries Less Energy Required Lower reagent costs = Ore V2O5% TSXV: LGO Concentrate V2O5% *Average grade comparisons compiled by Les Ford, presentation March 8, 2011 Concentrate SiO2% LOWEST COST PRODUCTION 24
  • 25. Maracas Project Economics* 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 *As outlined in 2013 Preliminary Economic Assessment **including iron ore byproduct credit – OPEX without credit is $3.18 (still lowest cost producer) ***Average years 1-15 25
  • 26. Low Cost Environment      Open pit mining At surface deposit Highly magnetic ore Few contaminants Water leaching process Ore provides better recoveries and reduces input costs TSXV: LGO *including iron ore byproduct credit - OPEX without credit is $3.18 (still lowest cost producer) 26
  • 27. Low Cost with Potential to Improve Expected reductions in operating costs OPEX costs* TSXV: LGO *including iron ore byproduct credit - OPEX without credit is $3.18 (still lowest cost producer)     Lower mining costs Lower power costs In-house crushing Depreciation of the Real 27
  • 28. Vanadium Historical Pricing Largo Operating Costs Profitable at historic lows TSXV: LGO 28
  • 29. Process Flow Sheet Proven, industry tested process TSXV: LGO 29
  • 30. Production Profile Phase 1 Phase 2 (10,000 Tonnes Capacity) Initial Ramp Up, Implementing Expansion & FeV Plant TSXV: LGO (15,000 Tonnes Capacity) Expanded Production rates & FeV *As outlined in 2013 Preliminary Economic Assessment **Does not include debt repayment 30
  • 31. Year 1 Ramp-up Projections % Capacity 100% Conservative Ramp-Up Projections with Opportunity to Improve Plant Capacity: 10,000 Tonnes V2O5 TSXV: LGO Year 1 Total: 5,511 Tonnes V2O5 Year 2 Total: 9,689 Tonnes V2O5 31
  • 32. Strong Partners Glencore International Plc.  Largest trader of Vanadium  Take-or-pay agreement  100% of all material produced De-risked product sale TSXV: LGO 32
  • 33. Strong Management Mark Brennan President & CEO 20+ years experience in capital markets Michael Mutchler Chief Operating Officer 20+ years mining engineering experience operating and 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 Significant experience constructing and operating mines TSXV: LGO 33
  • 34. Maracas Environment Tailings Roasting (kiln) Tailings Crushing Milling 1 km Leaching Admin Facilities Desilication Precipitation Final Product Main Access Road Gulcari “A” Open Pit TSXV: LGO Project as at December 11, 2013 34
  • 35. Maracas Deposit Outcrop 150 meters Magnetite (ore) 25 meters of ore at surface Dips at 65 ◦ Gabbro (waste) TSXV: LGO 35
  • 36. Maracas Construction Project as at February 20, 2013 TSXV: LGO 36
  • 37. Recent Construction Milestone Crushing Circuit successfully commissioned Above: Crushed ore stockpile, January 2014 TSXV: LGO 37
  • 38. Recent Construction Milestone Installation of kiln shells – December 2013 Above: Final kiln shell being installed, December 2013 TSXV: LGO 38
  • 39. Recent Construction Milestone Commissioning of milling and beneficiation system – February 2013 Above: main ball mill being commissioned TSXV: LGO 39
  • 40. Corporate Structure Stock symbol: LGO – TSX-V Share price (Feb 27, 2013): $0.28 Shares issued (Basic): 982 million Market Cap C$275 million 52-week High/Low: $0.305 / $0.155 Management & Institutions: 75% Warrants & Options (Basic): 253 million Cash: $38.5 million Debt: $159 million Project Finance Deal of the Year Awards - March 2013 Shareholders & Project Partners Institutional Shareholders Arias Resource Capital - 25.9% Project Partners Glencore International Mackenzie Investments - 14.3% 100% 6 yr take-or-pay off-take for Maracas Eton Park Capital Management - 11.1% Business Development Bank of Brazil Ashmore Investment Management - 11.4% Bank Itau, Votorantim, Bradesco TSXV: LGO *Cash based on last reported financial statement – September 30, 2013 40
  • 41. Secondary Projects Currais Novos Campo Alegre Northern Dancer Region: Brazil Region: Brazil Region: Yukon, Canada Metal: Tungsten Metal: V, Ti, Fe Metal: Tungsten Stage: Care & Maintenance Stage: Exploration Stage: PEA Complete Blue sky potential to add value TSXV: LGO 41
  • 42. Investment Summary   Project commissioning 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  Under-Valued Near-Term Producer Project funded, permitted and in construction Pipeline of projects in place for growth Substantially de-risked flagship project with near term cash flow TSXV: LGO 42 Project as atFebruary 20, 2013 November 19, 2013 Project as at December 26, 2013
  • 43. Darcie Ladd Business Development Manager dladd@largoresources.com 416-861-9406 LARGORESOURCES.COM Mark Brennan President and CEO mbrennan@largoresources.com 416-861-9797 Largo Resources LargoResources1 largoresources Largo Resources TSXV: LGO 43
  • 44. Appendix  Board of Directors  Maracas Mining Process  Tungsten  Currais Novos  Northern Dancer  Campo Alegre de Lourdes TSXV: LGO 44
  • 45. Appendix: Strong Board 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 Aur Resources Wayne Egan Director Partner at Weir Foulds LLP Dr. Alan Alper Director Tungsten expert. Formerly with Osram Sylvania TSXV: LGO 45
  • 46. Appendix: Maracas 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 Simple, Cost-Effective Open Pit Mining Process • Deposit outcrops at surface • Less than 1 meter pre-stripping • High grade material from surface continues to depth TSXV: LGO *As outlined in 2013 Preliminary Economic Assessment **Includes all royalties less credit Iron Ore byproduct 46
  • 47. Appendix: Tungsten Tungsten [W74] Tungsten is unique in its extreme qualities and difficult to replace Very Hard • Only diamonds are harder • 100X harder than steel Very Heat Resistant • Highest melting point • Lowest expansion Very Dense TSXV: LGO Cemented Carbide Usage • Greater than lead or uranium Source: Roskill, 2011 Source: Minor Metals Trade Association 47
  • 48. Appendix: Tungsten Demand Supply 95,000 Tonnes (2015) Projected to increase Tungsten Scored 4th Most at Risk out of 52 Elements 67,000 Tonnes (2011) Production Consumption 17% TSXV: LGO Source: British Geological Survey’s Risk List, 2011 Source: US Gelological Survey Growing at 7% per year Source: Roskill, 2011/Europacific Canada, April 12, 2012 48
  • 49. 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 Operational History:   Plant optimization continued through 2012  TSXV: LGO Production Commenced December 2011 Production temporarily suspended due to severe regional drought in 2013 49
  • 50. Appendix: Campo Alegre Project Mineral Resources (non-NI 43-101)  133 Million Tonnes Grading 50% Fe, 21% TiO2, 0.75% V2O5* Development Milestones  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 TSXV: LGO * Historical resource provided by CBPM (Bahia State Mining Development Agency) 50
  • 51. Appendix: Northern Dancer Project Mineral Resources  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 51
  • 52. Appendix: Northern Dancer PEA Highlights  Low Cash cost producer: US $116 per MTU  49 year mine life Strategic asset for long term supply of tungsten  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$370 MTU Tungsten (US$ per MTU) $275 $17.50 20.0 918 $17.50 22.2 1,110 $325 $17.50 24.4 1,302 $350 $17.50 26.5 1,494 $365 TSXV: LGO IRR (%) $300 Attractive economics at current tungsten prices Moly (US$ per lb) NPV @ 8% (US$ millions) $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. 52