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Largo Corporate Presentation, October 2012

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Largo Corporate Presentation, October 2012

Largo Corporate Presentation, October 2012

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Largo Corporate Presentation, October 2012 Largo Corporate Presentation, October 2012 Presentation Transcript

  • An Emerging Market Leaderfor VANADIUM and TUNGSTEN Production CORPORATE PRESENTATION October 2012 www.largoresources.com
  • Forward Looking StatementsThe 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 mineralresources; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; metal prices and demand formaterials; capital expenditures; success of exploration and development activities; permitting time lines and permitting, mining or processing issues; governmentregulation of mining operations; environmental risks; and title disputes or claims. Generally, forward-looking statements and forward-looking information can be identifiedby 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 ofmanagement 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 actualresults, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements orforward-looking information, including, but not limited to, unexpected events during operations; variations in ore grade; risks inherent in the mining industry; delay orfailure to receive board approvals; timing and availability of external financing on acceptable terms; risks relating to international operations; actual results of explorationactivities; conclusions of economic valuations; changes in project parameters as plans continue to be refined; and fluctuating metal prices and currency exchangerates. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained inforward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can beno 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 anyforward-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 resourcesbe 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 ResourcesThe information presented uses the terms “measured,” “indicated” and “inferred” mineral resources. United States investors are advised that while such terms arerecognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize these terms. “Inferred mineralresources” 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 aninferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibilityor 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 convertedinto 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 legallymineable. 2
  • Investment Highlights Exposure to growing supply constrained commodities Specializing in production and development of vanadium and tungsten projects World-class Maracas Vanadium Project Lowest cost production Fully funded, permitted and in Construction Commissioning targeted for Q4, 2013 Substantial cashflow generation in 2014 Significant expansion potential at two near-term assets Maracas & Currais Novos High quality Management, Board and supportive core investor-base 3 View slide
  • Strategic Development Timeline 4 View slide
  • Corporate Structure Stock symbol: LGO – TSX-V Share price (Oct 10, 2012): $0.22 Shares issued (Basic): 824 million Market Cap C$197 million 52-week High/Low: $0.36 / $0.22 Management & Institutions: 75% Currais Novos Warrants & Options (Basic): 222 million Shareholder site visit – August 2012Shareholders & Project Partners Institutional Shareholders Project Partners Arias Resource Capital-16.8% Glencore International 100% 6 yr take-or-pay off-take agreement for Maracas Mackenzie Investments-15.9% vanadium project Eton Park Capital Management-13.3% Major Tungsten End User 100% Off-take agreement for Currais Novos tungsten project Ashmore Investment Management-13.3% 5
  • Experienced Management Team Mark Brennan, President & CEO Founding member of Desert Sun Mining with over 20 years financing experience in North America and Europe. Founder and Principal of Linear Capital, Brasoil Corporation, Castle Resources, James Bay Resources, Morumbi Oil & Gas and former President, CEO and Chairman of Admiral Bay Resources. Tim Mann, P.Eng., Chief Operating Officer Mining Engineer with extensive international operations and management experience in mine engineering, development and operations with SNC Lavalin, Placer Dome and Goldcorp. Andy Campbell, M.Sc., P.Geo., Vice President Exploration Over 33 years experience in mining and exploration, including LAC Minerals and Noranda. Kurt Menchen, General Manager, Brazil Former Jacobina Mine Manager, Brazil. Mining Engineer with over 30 years experience including Anglo Gold and Desert Sun Mining. Les Ford, Technical Director of Brazilian Operations With over 40 years of experience in constructing, developing and producing vanadium projects, Mr. Ford is arguably one of the world’s foremost experts in vanadium. Previously Assistant General Manager of Highveld Steel and a member of the Highveld Executive Committee, and Managing Director of Rand Mines Vansa. Douglas Herbst, Maracas Project Manager Donald Clark, Construction Advisor and Specialits Mr. Clark formerly headed up Yamanas construction management team in Brazil. Mr. Clark has over 30 years of experience managing the design, construction and operations of major mineral processing plants in Brazil and abroad and will provide guidance with respect to the construction management process for Maracás. John Laurie, C.G.A., Chief Financial Officer Over 20 years of accounting and financial management experience. 6
  • Strong Board of Directors Mark Brennan, President/CEO and Director Founding member of Desert Sun Mining with over 20 years financing experience in North America and Europe. Founder and Principal of Linear Capital, Brasoil Corporation, James Bay Resources, and Morumbi Oil & Gas and former President, CEO and Chairman of Admiral Bay Resources. Dirk Donath, Director Senior Managing Director and Partner at Eton Park Capital Management, responsible for Eton Park’s private equity and direct investment activities in emerging markets. Eton Park is a global, multi-disciplinary investment fund with a capital base of over US$14 billion. Dan Ioschpe, Director Mr. Ioschpe is currently Chief Executive Officer of Lopche-Maxion, an international company operating in the automotive and railroad sectors.. Alberto Arias, Director Founder and President of Arias Resource Capital Management. He worked for Goldman Sachs & Co and was ranked for five consecutive years as the #1 Equity Research Analyst for the metals and mining industry in Latin America. Prior to Goldman Sachs, he worked at UBS as Executive Director and Analyst covering the Latin American mining sector. David Brace, Director Mr. Brace is currently Chief Executive Officer and a director of Karmin Exploration and a director of Viking Gold Exploration Inc. Mr. Brace previously served as President of Lambton Capital Inc., a private investment firm focused on evaluating mining investments. He has also served as the Chief Executive Officer and as a director of Globe Star Mining as well as Executive Vice-President of Business Development with Aur Resources Inc. until August, 2007. Wayne Egan, Director Mr. Egan is a partner at the law firm of WeirFoulds LLP and acts for several public companies on the TSX and TSX Venture Exchange. Dr. Alan Alper, Director Dr. Alper is an accomplished senior executive, with 30 years of experience at Osram Sylvania, Inc., formerly GTE Sylvania. 7
  • Vanadium 8
  • Vanadium Uses:Steel Drives Demand *Roskill Information Services Ltd ** Byron Capital Markets. 9
  • Long Term Vanadium Pricing * Source: Metal Bulletin 10
  • Tungsten 11
  • Tungsten Uses:Supply Constraints Drive Pricing Strategic metal with highest melting point of all metals * 12
  • Long Term Tungsten Pricing High & Low Tungsten Pricing 600 500 400 Low Price 300 High Price 200 100 0 10/8/2008 0:00 10/8/2009 0:00 10/8/2010 0:00 10/8/2011 0:00 10/8/2012 0:00 * Source: Metal Bulletin 13
  • Maracás Vanadium Project 14
  • Maracas “Base Case”Operating Parameters* Mineral Reserve: 13.1 million tonnes @ 1.34% V2O5 Average Annual Production (years 1-5) 9,200 tonnes of vanadium pentoxide (V2O5) Average Annual Production (years 6-15) 6,136 tonnes of ferrovanadium (FeV) Vanadium Pentoxide Price: $6.46 per lb, or $14.24 per Kg (3 year average) Average Vanadium Pentoxide Operating $3.12 per lb Costs IRR and NPV IRR of 22.4% and NPV of US$274 million (8% discount rate) Initial Capital Costs: $230,347 ($USD millions) USD/BR$ Exchange Rate: 2.00 Glencore International Off-take Take or Pay contract for 100% of vanadium products Agreement: for first 6 years * As outlined in “Technical Report for the Largo Maracás Vanadium Project Plant, Brazil” announced September 13th 2012 15
  • Maracas Grade and Quality Highest Grade/Quality Vanadium Deposit in the World Deposit CharacteristicsVanadium is contained in magnetite with a higher iron content than others =Better recoveries, less power required, less chemicals =concentrate with much higher V2O5, higherFe, and lower SiO2 (contaminant) than any other deposit = Ore V2O5% Concentrate SiO2% Concentrate V2O5% LOWEST COST PRODUCTION *Average grade comparisons compiled by Les Ford, presentation March 8, 2011 16
  • Maracas Mining Process Simple, Cost-Effective Open Pit Mining Process • Nominal strip ratio 1.95:1 • Deposit outcrops at surface • Less than 1 meter pre- stripping • High grade material from surface and continues to depth * As outlined in “Technical Report for the Largo Maracás Vanadium Project Plant, Brazil” announced September 13th 2012 17
  • Development on Track Construction underway and on schedule Procurement orders 65% complete with orders placed for all long-lead items: • Kiln • Sodium sulphate crystalliser • V2O5 reactor Earthworks (clearing and filling of earth for plant plateaus) commenced in June Water supply pipeline construction in progress and on track Installation of 138 kV powerline underway Accommodations for Largo staff in Maracás are complete, construction of contractor lodgings will be ongoing through 2012 Maracas Site visit – August 2012 Civil construction at plant site underway 18
  • Maracas Process Flow Proven Low-Cost Process with Efficient Ramp Up • Designed using “best-practices” from current low-cost producers • “Off the Shelf Technology” – no new processes or technology • Lower power costs; electricity and heavy fuel oil • Lower usage of sodium carbonte and ammonium sulphate • Efficient ramp-up schedule • First product sold after 7 days from full commissioning • 75% production reached by month 6 19
  • Maracas Projected Cashflow* $90.00 $80.00 $70.00 $60.00 Significant CashflowUS$ Millions Generated from Year 1 $50.00 Annual Cashflow (pre-tax) $40.00 Annual Cashflow (post-tax) $30.00 $20.00 $10.00 $0.00 2014 2015 2016 * As outlined in “Technical Report for the Largo Maracás Vanadium Project Plant, Brazil” announced September 13th 2012 20
  • Technical Report Sensitivity Analysis Project Internal Rate of Return 30% 25% I 20% R Sensitivity to Vanadium Pricing R 15% 10% ( % 5% • Current vanadium pricing ) 0% perceived to be industry “floor” 85% $5.49 90% 95% $6.46 105% 110% $7.36 100% 115% • Output cut offs at $5.00 per lb Sale Price (Vanadium Pentoxide) of V2O5 • US$ based commodity Project Net Present Value (NPV) • Main sources of supply prone N 350,000 P 300,000 to instablity (South Africa, V 250,000 Russia, China) 200,000 150,000 ( U 100,000 S 50,000 D 0 ) $5.49 $6.46 $7.36 Sale Price (Vanadium Pentoxide) * As outlined in “Technical Report for the Largo Maracás Vanadium Project Plant, Brazil” announced September 13th 2012 21
  • Technical Report Sensitivity Analysis Project Net Present Value (NPV) 350,000 300,000 NPV (USD) 250,000 200,000 Sensitivity to Operating Costs 150,000 100,000 • Lowest cost producer with 50,000 0 potential to reduce operating $2.65 90% 95% $3.12 105% 110% $3.59 85% 100% 115% costs further Operating Cost • Adoption of “owner-crushing” projected to reduce opex 30% Project Internal Rate of Return • Increase in production output 25% further decreases opex 20% • PEA to be completed by Q2, IRR (%) 15% 10% 2014 will explore these scenarios 5% • Anticipated reduction in op-costs 0% $2.65 90% 85% 95% $3.12 105% 110% $3.59 100% 115% Operating Cost * As outlined in “Technical Report for the Largo Maracás Vanadium Project Plant, Brazil” announced September 13th 2012 22
  • 23
  • Concessions and Mineralization Gulcari “A” Deposit Detail Maracás concessions and strike length 24
  • Potential to Expand Gulcari “A” deposit is location of entire Mineral Reserve 13,000 Meter Drill Program Completed in 2012 • Five new satellite depositsLocation of Gulcari “A” delineated with total Inferredand proposed open pit (400 m x 450 m) 8km resources of 27.8 MT containing 232,100 tonnes @ 0.83% V2O5 • Increased M&I resources at Gulcari “A” by 1.4 MT • Total M&I 24.6 MT containing 272,900 tonnes @ 1.11% V2O5 • Increased Inferred resources at Gulcari “A” by 2.6 MT containing 19, 800 tonnes @ 0.76% V2O5 25
  • Increase Capacity Increasing capacity by 50% anticipated to require nominal capital expenditures relative to projected cashflows All critical equipment ordered for “base case” with expanded capacity to minimize future capital expenditures Simple ramp-up process to increase production once plant is commissioned Agreement with Glencore in place for all vanadium material produced – includes potential for increased production PEA underway exploring expansion scenario anticipated for Q2, 2014 Also will explore potential to produce both FeV and vanadium pentoxide 26
  • Maracas Cash Flow Projections projection Maracas: Catalysts for Growth  Year 1 = Current production parameters  Year 2 = Sale of tailings material (pig-iron)  Years 4+ = 50% increase in production capacity •Projections assumes FeV pricing of $28.00 per Kg 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 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 forward-looking 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. 27
  • Implementation Summary Highlights Commercial Production Commenced December 2011 90 tonnes of concentrate shipped Initially commissioned without mill due to importation delay at port Mill commissioned in February Plant optimization proceeded to adjust milling circuit 3 additional screens were added in order to increase yields Screens presently being commissioned Undergoing minor modifications to plant Full production anticipated by November, 2012 4 shipments per month (72 tonnes of Currais Novos concentrate) Site Visit – August 2012 28
  • Identify and AcquireAdditional Resources 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 29
  • Currais Novos Cash FlowProjections Currais Novos: Catalysts for Growth projection  Year 2 = Current production parameters  Year 4+ = following 3 year exploration ramp-up on recently acquired additional underground properties* Projections assumes exploration success on aditional properties ramp up 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 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 forward-looking 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. 30
  • Campo Alegre Project Non NI 43-101 Compliant Resource: 133 Million Tonnes Grading 50% Fe, 21% TiO2, 0.75% V2O5* 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) Originally purchased for potential inventory of vanadium and as stop-gap for acquisition by potential competitors Preliminary metallurgical testwork completed in 2011 suggested potential for a large-scale titanium dioxide (TiO2) project Further metallurgical testing underway in 2012 * Historical resource provided by CBPM (Bahia State Mining Development Agency) 31
  • Campo Alegre: Potential to Expand 14 km x 2.5 km trend Multiple mag-targets Mag-survey indicates fold structure Historical drill program only tested to 60 m Potential expansion at depth 32
  • Northern Dancer ProjectNorthern Dancer Resource Estimate 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 33
  • Northern Dancer: PEA Highlights Highlights* 49 year mine life Positive NPV of US$918 million at $275 MTU APT and an 8% discount rate Current trading price of US$360 MTU Low cash cost producer: US$116 per MTU Cumulative cash flow US$4.8 billion Average annual production of 833,000 MTU tungsten (18.3 million pounds) Average annual production of 5,959,000 pounds molybdenum over initial 23 years Pre-production capital costs: $645 million Tungsten Molybdenum NPV @ 8% IRR (%) (US$ per MTU) (US$ per lb) (US$ millions) $275 $17.50 20.0 918 $300 $17.50 22.2 1,110 $325 $17.50 24.4 1,302 $350 $17.50 26.5 1,494 $365 $17.50 27.8 1,769 * The PEA is preliminary in nature, and includes inferred resources that are too speculative geologically to have economic considerations applied to them. 34 There is no certainty that the PEA will be realized.
  • Northern Dancer: Highlights IRR and NPV’s at Higher Tungsten Price Points* Tungsten Molybdenum NPV @ 8% IRR (%) (US$ per MTU) (US$ per lb) (US$ millions) $400 $17.50 31.0 2,074 $450 $17.50 35.0 2,500 ** * Derived from PEA sensitivity analysis * ** Roskill: Tungsten Market Outlook, 2012 35
  • Strategic Development Timeline 36
  • Investor Connect Darcie Ladd Business Development Manager dladd@largoresources.com 416-861-9406 Mark Brennan President and CEO mbrennan@largoresources.com 416-861-9797 Largo Resources www.LARGORESOURCES.com @LargoResources1 55 University Ave. Suite 1101 Toronto, ON – M5J 2H7 Largo Resources 37
  • Appendix Maracas Commissioning and Ramp Up Site Development Maracas Project Infrastructure Maracas Photo Gallery Vanadium – Growth in Green Tech Management Regional Breakdown 38
  • Commissioning and Ramp Up1) 1) Run water through all “wet” machinery to make sure they are performing to design 2) • Modify/adjust3) 2) Kiln warm up period – 7 days prior to feed being introduced 3) Begin running material through the plant following process-flow sequence 4) First salable product will be available after 7 days from introduction 5) 5) Ramp up – continually increasing 4) production until full capacity is reached • 75% Capacity at 6 months 39
  • Site Development 40
  • Maracas Project Infrastructure Major road leaving Maracás Major road to Porto Alegre turn-off (30 Km) Access to Porto Alegre Typical dirt road (20 Km) 41
  • Photo GalleryClearing and filling of earth for plateau platforms for plant site Earth removal for laying of concrete foundations for piperacks Pit area fully cleared Preparing to pour foundations for raw water tanks 42
  • Vanadium Uses:Growth in Green Technologies Vanadium Advantages Storage Applications Vanadium has shown to increase the Wind turbines effectiveness of energy storage in traditional Solar panels batteries Backup electrical systems Mass amounts of energy can be stored longer and batteries can be re-charged faster Hybrid/electric cars Low-cost, low-volatility, high-performance batteries Vanadium Redox Storage Batteries Vanadium redox storage batteries are the potential solution to green energy’s storage issues. Source: USGS, Byron Capital Markets 43
  • Vanadium Uses:Growth in Green Technologies Voltage with Different Cathodes (v) Vanadium phosphate cathode material can support 20% more energy storage than 4.8 Advantages cobalt oxide, 26% more than iron phosphate 4.1 4.0 Vanadium 3.7 3.6 and 56% more than manganese oxide, 3.3 solving the issue of quick discharge in electric cars Highest voltages measured, generating a more powerful battery Li3V2(PO4)3 LiVPO4F LiMn2O4 LiCoO2 Li2FePO4F LiFePO4 Lithium Vanadium Electric Car Photo Courtesy of Tesla Motors The potential demand for electric cars can substantially increase the demand for lithium-ion batteries with cathodes compounded by vanadium. Source: USGS, Byron Capital Markets 44
  • Management Breakdown Tim Mann, P.Eng. Mark Brennan John Laurie Chief Operating Officer President & CEO Chief Financial Officer Kurt Menchen Darcie Ladd Robert Campbell, P.Geo. General Manager, Brazil Manager Business Development VP Exploration Kevin Brewer Paulo Vianna Luciano Chaves General Manager, Yukon Chief of Administration, Brazil Chief of Finance, Brazil Douglas Herbst Les Ford Israel Nonato Project Manager Technical Director of Operations Senior Exploration Geologist Mauricio Coletti Donald Clarke Eldes Bittencourt Mining Engineer Mining Engineer Geologist Mauro Silva Carlos Lorenzo Mike Henderson Electrical Engineer Environmental Geologist Geologist Toronto Main Office Location Brazil Yukon