largo corporate presentation - march 2011
TRANSCRIPT
TSX.V:LGO
www.largoresources.com
Creating a World Leading Strategic Mineral Company
March 2011
A Member of the Forbes & Manhattan Group of Companies
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”, 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 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.. 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.
Experienced Management Team
3
Mark Brennan, President & CEO Founding member of Desert Sun Mining with over 20 years financing experience in North America & Europe. Founder and principal of Linear Capital, Brasoil Corporation, James Bay Resources, Morumbi Oil & Gas and former President, CEO and Chairman of Admiral Bay Resources.
Tim Mann, P. Eng., Chief Operating OfficerMining Engineer with extensive international operations and management experience in mine engineering, development and mine 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, BrazilFormer Jacobina Mine Manager, Brazil. Mining Engineer with over 30 years experience including Anglo Gold and
Desert Sun Mining.
Les Ford, Technical Director of Brazilian OperationsWith over 40 years of experience 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.
Rodrigo Costa, Operations DirectorMost recently Metallurgy Manager with a major mining company in Brazil. His previous experience includes commissioning and constructing mines as well as acting as General Manager with one of Brazil's largest private mining companies.
Kevin Brewer, P. Geo., General Manager – Northern Dancer ProjectGeologist with over 20 years of mining and exploration experience combined with extensive knowledge of regulatory and environmental assessment processes.
Deborah Battiston, C.G.A., Chief Financial OfficerOver 20 years of accounting and financial management experience.
444
Tim Mann, P. Eng.Chief Operating Officer
Mark BrennanPresident & CEO
Robert Campbell, P. Geo.VP Exploration
Yukon
Kevin BrewerGeneral Manager, Yukon
Mauro SilvaElectrical Engineer
Mauricio ColettiMining Engineer
Rodrigo CostaDirector of Operations
Israel NonatoSenior Exploration Geologist
Kurt MenchenGeneral Manager,
Carlos LorenzoEnvironmental Geologist
Les FordTechnical Director
Eldes BittencourtGeologist
Brazil
4
Toronto
Main Office Location
Management Breakdown
Mike HendersonGeologist
Strong Board of Directors
5
Stan Bharti, P.Eng., ChairmanOver 25 years experience in operations, public markets and finance. Has raised over $500 million in the last
decade. Former founder and Chairman of Desert Sun Mining.
Mark Brennan, President/CEO and DirectorFounding member of Desert Sun Mining with over 20 years financing experience in North America & Europe.
Founder and principal of Linear Capital, Brasoil Corporation, James Bay Resources, and Morumbi Oil & Gas.
Bill Pearson, Ph.D., P.Geo., Director & Technical AdvisorOver 33 years experience in the mining & exploration industry; former VP Exploration at Desert Sun Mining.
Mike Hoffman, P.Eng., DirectorProfessional mining engineer with over 25 years experience; former VP at Yamana Gold and Desert Sun Mining
William Clarke, DirectorFormer Ambassador to Brazil and Sweden. Former Advisor to Desert Sun Mining.
Dr. Allen Alper*Accomplished senior executive, 30 year career at Osram Sylvania. Formerly VP and General Manager Osram
Chemical/Metallurgical Division (15 years). Expert in manufacturing and marketing of Tungsten, Molybdenum
and other strategic metals. Holder of 33 patents in high temperature metals.
* Advisory Board member
Company Overview
Positioned to be a leading player in the primary production of
vanadium:
Top two undeveloped vanadium deposits in the world
Potential lowest cost producer of primary vanadium
Vanadium prices rebounding
Potential to be a leading non Chinese producer of tungsten
Largest undeveloped tungsten-moly deposit in the world
Short term low cost production opportunity: Currais Novos
Strong long term relationships with industry leaders
6
Why Invest in Vanadium?
Strategic Metal with the highest strength to weight ratio
World production totals only 70,000 tons per year and demand
continues to grow
Main Commercial use: steel industry Small amount doubles the strength of steel alloy and increases corrosion and
abrasion resistance
Airplanes, automobiles, construction
The future of Vanadium is Vanadium will play an integral role in the green revolution
Lithium Redox Batteries & Clean Energy Technologies
Vanadium increases effectiveness of energy storage – energy can be
stored longer and re-charged faster
Electric cars, solar panels, wind turbines etc.
New applications = increasing demand
7
Vanadium Uses: Steel Drives Demand
Steel industry: 90% ferro-vanadium end use
Carbon Steel 36% High strength low alloys 22% Stainless/tool 9% Full Alloy 20%
Ferro-vanadium (FeV) used in high performance steels for:
Construction (building frames, bridges, etc.) Ship construction Structural applications
Airplanes Automobiles and parts Railways Tools
8
Vanadium Uses: Growth in Green Technologies
Diagram of a Vanadium Flow Battery 9
Vanadium Redox Storage Batteries
Wind Turbines Solar Panels Backup Electrical Systems Hybrid/Electric Cars
Vanadium and Green Batteries
Source: USGS, Byron Capital Markets
► Vanadium phosphate cathode material can support 20% more energy storage than cobalt oxide, 26% more than iron phosphate and 56% more than manganese oxide, solving the issue of quick discharge in electric cars
► Highest voltages measured, generating a more powerful batteryV
an
ad
ium
Ad
va
nta
ge
s
Voltage with Different Cathodes (v)
10
4.8
4.1 4.03.7 3.6
3.3
Li3V2(PO4)3 LiVPO4F LiMn2O4 LiCoO2 Li2FePO4F LiFePO4
Lithium Vanadium Electric Car
The potential demand for electric cars can substantially increase demand for lithium-ion batteries with cathodes compounded by vanadium
Photo Courtesy of Tesla Motors
Vanadium Projects
11
Located in mining-friendly and politically stable Brazil
Established infrastructure: roads, electricity, shipping routes, water sources and ports
Local communities provide access to labor and basic supplies
Top Two Undeveloped Vanadium Deposits in the World
Potential to be one of the Lowest Cost Producers
Location Highlights
Maracás Vanadium Project, Brazil
12
Mineral reserve: 13.1 million tonnes grading 1.34% Vanadium Pentoxide
Mineral Resource: 23.2 million tonnes grading 1.27% Vanadium Pentoxide (measured + Indicated)
Deposit Characteristics
Rio Jacaré intrusion
21 concessions totalling 27,172 ha (40 km x 2.5 km) Vanadium is contained in Magnetite with a higher iron content
than others High iron content results in highly magnetic magnetite making
beneficiation very efficient giving high vanadium recoveries. Produces a concentrate with much higher V2O5, higher Fe, and
lower SiO2 than any other deposit
Highest Grade Vanadium Deposit in the World
Maracás Resource and Property Maps
13
Gulcari “A” deposit detail
Maracás concessions and strike length =
tremendous exploration upside
NI 43-101 Resource was defined solely on Gulcari “A” deposit
14
Cross Section – Gulcari “A” Deposit
Maracás Processing Overview
1.94% V2O5 mill feed projected during first 8 years production (mineral reserve) Results for Definitive Feasibility Study announced August 2008
Yearly production 5,000 tonnes Ferrovanadium Open pit with low strip ratio of 2.23:1 Mill throughput of 1,600 tpd
Recovery of 71.6% Proven mining technology and processes 23 year production plan Commissioning 18 months from financing
Upcoming Milestones
→ Project financing underway – announced March 11, 2011
→ Verge of awarding FEED contract
→ Process flow diagrams already drafted – to be reviewed and accepted by EPC
→ Process instrumentation drawings complete – to be reviewed and accepted by EPC
→ Granting of Installation License
→ Equipment purchase & construction
→ Production Q1, 2013
15
Results of 2008 Definitive Feasibility Study
Maracás : Current Operating Parameters
16
(5,000 Tonne Per Annum Scenario)
Current ferrovanadium price: US$28.00+ per Kg
Average cash operating costs of
FeV:
US$12.89 per Kg
Average pre-tax operating cash
flow:US$ 80.0 MM per year
Initial CAPEXUS$ 212.0 MM
Payback 4.3 Years
Largo – Comparative Landscape
17
*
Maracas South African Australian
Concentrate V2O5 % 3.40 2.00 1.27
SiO2 % in concentrate 1.00 2.00 2.10
V2O5:SiO2 ratio 3.4 1.0 0.6
Fe % 60.0 54.0 53.5
Concentrate Quality*
Maracas South African Australian
Ore V2O5 % 1.34 0.47 0.47
Waste Ratio 2.23 2.00 2.00
Concentrate % SiO2 1.00 2.10 2.30
Concentrate % V2O5 3.42 2.00 1.27
Ore Quality*
*Average grade comparisons compiled by Les Ford, presentation March 8, 2011
Campo AlegreVanadium Property, Brazil
100% owned iron, titanium and
vanadium deposit
650 kilometres west-northwest of
Salvador with excellent access &
infrastructure
Property consists of 7 concessions
covering 9,274.66 ha
24 km by 5.5km
18
Potentially the World’s Second Highest Grade Vanadium Deposit
Non NI 43-101 compliant resource: 133 million tonnes grading 50% Fe, 21% TiO2 , 0.75% V2O5
Campo Alegre: Potential to Expand
Iron, titanium and vanadium mineralization
hosted in extensive laterally continuous
massive magnetite layers in the Campo
Alegre de Lourdes Intrusion
11 known showings and occurrences traced
along strike for 9 kilometres
Mag-survey indicates fold structure
Deposits remain open along strike and at
depth
19
Deposit details
Exploration plans for 2011
Preliminary metallurgical testing underway
Drilling to commence in Q2
Bring into a compliant resource
Strategic Metal with highest melting point of all metals
Market dominated by China Chinese produce 90% of global supply
Tight export restrictions
Chinese supply dwindling
Main Commercial use: steel industry Automotive, drilling, electronics, construction materials & pipelines
20
Why Invest in Tungsten?
Tungsten Projects
21
Currais Novos (Brazil)Near term tungsten production – Production scheduled for July, 2011 Located on major highway and shipping route
close to ports Prolific tungsten mining district
Northern Dancer (Yukon)Largest undeveloped tungsten-moly deposit in the worldWell situated 10 km off Alaskan Highway First-world advantages
Northern Dancer: Highlights
March 2009 NI 43-101 resource estimate:
223.4 MT grading 0.102% WO3 and 0.029%Mo
(Measured & Indicated)
22
Higher-grade Tungsten and Molybdenum zone:
60.3 MT of 0.14% WO3 and 0.045% Mo (M&I) and 5.4 MT of 0.13% WO3 and 0.047% Mo (Inferred) 201.2 MT grading 0.09% WO3 and 0.024% Mo
(Inferred)
PEA Complete
11,500 metre infill drilling program completed
Discussions with off-take partners and JV partner
One of largest undeveloped Tungsten-
Molybdenum deposits in the world
Northern Dancer: PEA Highlights
Positive NPV of US$ 918 million (at an 8% discount rate)
Low cash cost producer: US$116 per MTU (Metric Tonne Unit) (current
trading price of US$365 MTU)
Cumulative cash flow US$ 4.8 billion
Average annual production of 833,000 MTU tungsten and 5,959,000 lb
molybdenum over initial 23 years
Potentially one of the world’s largest tungsten producers
Preliminary Feasibility Study to begin immediately
Pre-Production Capital Costs : $645 million 23
*Note: includes contingency of 25%
Northern Dancer PEA
24
Tonnage milled for 1st 23 years is 252 Mt at 0.10% WO3 and 0.32 Mo
Tungsten(US$ per mtu)
Molybdenum (US$ per lb)
IRR (%) NPV @ 8%(US$ millions)
$275 $17.50 20 918
$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
Northern Dancer: Process Flow
Crushing at 30,800 tpd
Sorting using Dual Energy X-Ray Transmission (DE-XRT) (35%
mass reject)
Milling at 20,000 tpd
WO3 and Mo concentrate production by flotation methods
WO3 concentrate converted to APT
Mo concentrate shipped off-site for roasting
Overall WO3 recovery is 75%
Overall Mo recovery is 72%
APT conversion recovery is 95%
Pit stripping ratio: W:O = 0.1525
Northern Dancer: OPEX
Average Operating Cost Per Tonne Mined (Ore and Waste)
26
Mining (ore and waste) C$2.20 per tonne mined
Ore re-handling C$0.76 per tonne mined
Concentrator operations C$4.71 per tonne mined
Sorting reject re-handle C$0.88 per tonne mined
Tailings management C$0.20 per tonne mined
APT production C$1.88 per tonne mined
G&A C$1.01 per tonne mined
Total C$10.11 per tonne mined
Northern Dancer: Opportunities to Add Value
Conducting additional testwork with the objective of refining the Dual
Energy X-Ray Transmission (DE-XRT) technique to improve sorting
recoveries
Conducting additional flotation testwork to produce a concentrate for
the production of APT, and to endeavour to improve overall flotation
recoveries
Detailed analysis of the production, costs and marketing of WO3
and/or APT to maximise revenues over the long-term
Reduce infrastructure costs particularly in respect of power supply.
27
Northern Dancer: Identification of Higher Grade Zones
28
Currais Novos:
Good Location & Access
Good Location & Access in
Northeastern Brazil
165 km west-southwest of Natal in south central Rio Grande do Norte State, Brazil
The nearest community is Currais Novos(37,300 pop) which lies 12 kilometres north of the project area
Access to the project is on the Campina Grande-Natal Highway
Excellent site well suited for mine infrastructure, number of past producers in the immediate area
LOI signed to acquire 4 additional properties
29
Currais Novos: Summary Highlights
Near term production
Reprocessing and recovery of tungsten from two tailings piles
deposited during the processing of ore from the Barra Verde and
Boca de Laje tungsten mines
Previous owners estimate a historical (1980’s) resource of 4.1 million
tonnes (non NI 43-101 compliant resource)
Due diligence and updated independent resource model
completed
Plant construction underway
Production to begin July 2011
30
Targeting 1.5 million lbs of WO3 per year
Capital Structure
31
Stock symbol: LGO – TSX.V
Share price (March 11, 2011): $0.41
Shares issued (Basic): 309 million
Management & Institutions: 80%
52-week High/Low: $0.58 / $0.14
Market cap (Basic): C$ 125MM
Investor Contact
32
Darcie Ladd
Business Development Manager
416-861-5938
Mark Brennan
President & CEO
www.LargoResources.com
Largo Resources
33
APPENDIX
Vanadium fundamentals Maracas feasibility parameters
Maracas PGM potential Tungsten fundamentals
Overview – Vanadium and Steel
34
Vanadium is mainly used in the form of ferrovanadium (88%) Titanium alloys are the main non-ferrous use. (9%)
Source: CPM group, Vanadium Industry Outlook
Vanadium is used as an additive in steels and alloys because of its properties as an active grain refiner and deoxidant. Vanadium imparts strength, toughness and wear resistance due to its strong affinity to carbon. When added to steels and carbons, vanadium is able to retard grain growth and acts as an effective hardening agent.
Global Vanadium Usage
Steel
Titanium Alloys
Chemicals
Vanadium Demands
Vanadium End - Uses Carbon Steel 37%
High Strength Low Alloys 22% Stainless/tool 9%
35
0
0.5
1
1.5
2
2.5
3
3.5
4
Vanadium End Uses
Carbon
HSLA
STS/Tool
Full Alloy
Ti Alloy
Chemicals
Full Alloy 20% Titanium Alloy 9% Chemicals 3%
Sources of Vanadium
2007 2015*Primary 20% 24%
By-Product 24% 14%
Co-Product 56% 62%
36
Primary: Produced from vanadium-rich ore. Mines rely on vanadium for the majority of their revenue.
By-Products: Oil residues and recycling of spent catalyst. By Product producers have higher operating costs than most primary and co-product producers.
By-Product small Chinese producers currently occupy the “swing producer” in the vanadium industry. *
*Source: CRU, Vanadium Outlook
Co-Products: Production of vanadium with steel is driven by the economics of the steel industry. Co-products cannot be increased without increasing the steel production.
Global Production
37
2007
World Production
China 46%
Russia 17%
South Africa 36%
2015P**
World Production
Maracás* 5%
Australia 7%
U.S 7%
China 45%
Russia 11%
South Africa 23%
**CRU, Vanadium Market Outlook
Vanadium Price Outlook: Strong
$-
$9.00
$18.00
$27.00
$36.00
$45.00
$54.00
$63.00
$72.00
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
Market Balance (LHS) Ferro-V Price
Base Case: World Vanadium Supply and Demand
Annual, Projected through 2018p
Projected
Metric Tonnes $/Kg. V.
Actual
38Source: CRU
Maracás PGM Exploration Blue Sky
PGM’s: high Pt:Pd ratio similar to Bushveld
& Great Dyke
208,000 ounces PGMs
High Pt:Pd ratio (4:1)
Higher concentration PGMs interstitial to
sulphides
Phase II 5,000 metre drill program Q2 2008
High-priority targets: 700M anomaly NE of
Gulcari “A”; 900M anomaly south of Novo
Amparo
39
Tungsten End-Use
4%15%
20%61%
Tungsten Applications in the US
Other
Steel Alloys
Mill Products
Hard Metals
40
Hard metals and steel alloy: 81 percent of end-use
*Source: (USGS)
End Use in the United States heavy machinery and specialty alloys jet turbine engines and light-bulb filaments sporting goods (golf clubs, tennis racquets). electronics
pipelines mining & construction materials.
China tungsten demand
The US is entirely dependant on imports and US Strategic stockpile.
Companies outside China with tungsten exposure are few and far between.
2007, US tungsten imports 11,500 tonnes from mainly: China, Canada, Bolivia
and Portugal.
US account for 13% of total tungsten consumption. Source: (USGS)
41
US domestic tungsten source
China demand growth
Global Industry Analyst, Inc : China’s own use of tungsten was growing at 8 percent
per year.
China is the world’s largest tungsten consumer.
Chinese industries demand tungsten and authorities are keen to ensure
uninterrupted supply.