Mark Brennan, President, CEO & Director, Largo Resources Ltd. at the Hard Assets Resource Investment Conference in NYC
Largo Resources Looks to be a World Leader in Vanadium Production
Largo Resources Ltd., a Canadian exploration and development company, owns the top two undeveloped vanadium deposits in the world with their Maracas and Campo Alegre de Lourdes projects, both in Brazil. The Maracas Vanadium-PGM deposit in Bahia, Brazil is also the highest grade vanadium project in the world. And Largo doesn’t just hold records for vanadium. They also own the largest undeveloped tungsten deposit in the world with the Northern Dancer Tungsten-Molybdenum property in the Yukon Territory, Canada.
Largo made the right decision in 2006 to switch to high demand strategic minerals. According to Mark Brennan, President, CEO & Director, Largo Resources Ltd., “We looked at gold and precious metals, but we couldn’t find any value at the time where we weren’t chasing the commodity price.” Brennan joined Largo in 2005 and started with a gold project in Ecuador. According to Brennan, it was a project with about 700,000 ounces of gold with average grade of about 2.4 grams per tonne. Brennan explains, “It was in a difficult area geographically and did not have enough ore to prove the resource so we decided to move on.”
This is when Brennan started to look at the Maracas project, which Largo ultimately acquired in November 2006. “At the time we acquired the project it had a 10 million tonne inferred resource. In a period of 18 months we took it from an inferred resource to a measured resource of about 23 million tonnes of vanadium pentoxide and completed a bankable feasibility study.” expounds Brennan.
Distinguishing Characteristics for Maracas
When asked what makes Largo unique, Brennan points to two distinguishing characteristics: “One, we have a very high grade deposit. Our average grade for the reserve that we have is 1.34%. Every other mine in production today runs at about 0.47%.”The second distinguishing characteristic that Brennan adds is, “We also have a very low silica content. We only have 1% silica compared to the lowest cost producer today, who has about 2.1% silica.”
Brennan points out, “those two characteristics are very important with respect to the cost to recovery. We anticipate being the lowest cost producer, probably by $5 per kilo. Our information today suggests that the cheapest producer runs at about $18.50 per kilo and we will probably come in at about $13 per kilo.”
Campo Alegre de Lourdes Property Large Fe-Ti-V Deposits
The Campo Alegre de Lourdes property “hosts a large potentially world class iron, titanium and vanadium deposit. The 9,275-hectare property is located 875 kilometres north-northeast of Brasilia, the capital of Brazil, and 650 kilometres northwest of Salvador, the capital of Bahia State.”
What is Vanadium?
Used in construction, automobile, aircraft and rail industry, Vanadium added as an alloy in steel production can double its strength and make it more corrosion and abrasion resistant. Brennan mentions that Vanadium has the greatest strength to weight ratio of any engineering material. The steel industry has been advancing the quality of its product by using high strength, low alloy steels that use vanadium. The market for vanadium is growing about 8% per annum in the steel market. Brennan adds that there’s a lot of interest now in the battery market.
“After the investment in Maracas ,we decided that we would look at other strategic metals such as tungsten and molybdenum. In the summer of 2006 we acquired the Northern Dancer project,” Brennan explains.
By acquiring and building a tungsten processing plant at Currais Novos in Brazil, Largo is targeting near term production by the end of July. Initial reprocessing and recovery of tungsten and molybdenum from two tailings piles deposited during the processing of ore from the Barra Verde and Boca de Laje tungsten-molybdenum mines.
Backed by a Strong Team
Further to Largo’s strengths, Brennan says, “for a very young company, we have an extremely talented and experienced team.”
“With our board we have all facets of governance covered. We have Mike Hoffman, a very strong engineer; we have Bill Clarke, who is very corporate governance orientated and is also former Ambassador to Brazil, which has helped out a lot. We have Stan Bharti who is the chairman of the company. He’s raised a lot of money and is an engineer.”
Brennan also welcomes 3 recent additions to the board. “As a consequence of raising $115 million we’ve added new board members who were part of the investor group. We’ve brought on some very strong partners on the funding side. One of whom is Dirk Donath from Eton Park, a very large hedge fund out of the US. The second board member we brought on is Santiago Pardo who comes from Ashmore Investment, which again is a very large hedge fund based out of London. And we also brought in ARC Investment Management, another well known mining investment hedge fund out of New York.”
Regarding Largo’s management team, Brennan again points to a strong group. “We have close to 10 engineers on board, 5-6 geologists and all of them are very senior. As a management group, the team has either built, developed or refurbished probably over 30 mines and processing facilities to date.”
Listing just a few of the management team, Brennan mentions, Tim Mann, Chief Operating Officer, who Brennan says, “Is a senior mining engineer with extensive international operations and management experience in mine engineering, development and mine operations with SNC Lavalin, Placer Dome and Goldcorp. ”Brennan also mentions Andy Campbell, Vice President, Exploration, who is a second generation geologist. Campbell has over 30 years experience in mining and exploration, including LAC Minerals and Noranda. Also Kurt Menchen, General Manager, Brazil, is another mining engineer with over 30 years experience. Brennan finishes with Les Ford, who is a new addition to their team. “Les has essentially built every vanadium facility in the western world
outside of the US. There are probably no people of his caliber in the world today,” proclaims Brennan. Continuing on discussing the strength of Largo’s team, Brennan says, “We have tremendous loyalty. Every member of our team is also a significant shareholder of Largo.”
Why did financial partners invest in Largo?
Brennan explains that their financial partners have decided to invest in Largo “because they see tremendous cash on cash return. At Maracas, we’ll be looking to invest with $212 million of which 60% of that will be debt. We’re essentially looking at generating about $100 million of cash flow a year, so the payback is just over 2 years for their investment.
“It’s a project that’s had tremendous due diligence, scrutiny and engineering design and work. From that regard I think they see an asset that will provide tremendous returns.” Brennan also says that Largo’s predictions for the project are for it to produce for 20 years, probably longer.
Brennan further says of Largo’s financial partners’ motives, “I think they are also encouraged by the other assets that we have. Not only with Largo do you get Maracas, but also they’re looking at Northern Dancer, a very interesting tungsten deposit; they’re looking at the Campo Alegre asset, which could be a significant iron ore deposit; and they’re looking at the immediate production coming from Currais Novos, which will generate $1 million a month to the company. They see their investment being highly leveraged with marginal risk.”
“We currently have a market capitalization of just under $200 million,” remarks Brennan. “We’ve recently raised $115 million. On a diluted basis, we’re running about $300 million of market cap. We’re now funded to production and don’t expect that we’ll be raising any new money in the near term.”
4 Reasons to Invest in Largo
When asked, what are 4 reasons why investors should invest in Largo, Brennan jokingly responds “cash flow, cash flow, cash flow, cash flow.” He follows up with what he sees as the real reasons why Largo is a good place to invest:
- We have the richest vanadium deposit in the world, and this deposit will come into production in the first quarter of 2013. Our expectation is that it will generate at least $100 million of cash flow.
- Largo’s other assets, such as Northern Dancer. In our expectation, Northern Dancer can generate between $150 and $200 million a year. It looks very attractive with a very strong IRR and a net present value.
- We have a very strong management team, technically and financially, that are very good at finding good opportunities to expand. Our target for Largo is to be a $2.5 billion company in terms of market capitalization in the next 5 years.
- We’re undervalued. Based on Maracas alone we have a market cap of $300 million on an asset that can generate $100 million. So we have a lot of upside just from Maracas not including the other assets.
Note: Dr. Alper is an Advisory Board Member of Largo Resources and owns shares of Largo’s stock.
For more information:
http://www.largoresources.com
Largo Resources Ltd
65 Queen Street West, Suite 820, P.O. Box 71
Toronto, Ontario
Canada M5H 2M5
Tel: 416-861-5938
Fax: 416-861-8165
info@largoresources.com