Key Points:
* Strong Q4 2019 operational finish: Production of 3,011 tonnes of V2O5 in Q4 2019, a 16% increase over Q4 2018
* Record FY 2019 production, achieving midpoint production guidance: 10,577 tonnes (23.3 million lbs) of V2O5 produced in 2019, an increase of 8% over FY 2018
* Record monthly V2O5 production of 1,162 tonnes in December 2019
* Maracás Menchen Mine expansion project completed in December 2019
* New safety record: 238 days (1.5 million man-hours worked) without a Lost Time Injury
* 2020 Guidance: Annual V2O5 production of 11,750 – 12,250 tonnes; Average annual cash operating cost excluding royalties of US$3.30 – 3.50 /lb V2O5; Annual sales of 9,500 – 10,000 tonnes; Sustaining capital expenditures of US$9 – 11 million; Ferrovanadium conversion plant capital expenditures of US$5 – 7 million
Largo Resources Ltd. (“Largo” or the “Company”) (TSX: LGO) (OTCQX: LGORF) is pleased to report fourth quarter and full year 2019 production results from its Maracás Menchen Mine highlighted by a new annual production record, with 10,577 tonnes of vanadium pentoxide (“V2O5”) produced. In 2019, the Company performed well operationally, achieving its annual midpoint production guidance of 10,500 tonnes of V2O5. Management is confident that it will be able to execute on its 2020 production and cost guidance building upon the Company’s operational successes achieved in FY 2019.
Total production from the Maracás Menchen Mine in FY 2019 was 10,577 tonnes of V2O5 , representing an increase of 8% over FY 2018. The Company also produced 3,011 tonnes of V2O5 in Q4 2019, which is an increase of 16% over Q4 2018. Production in Q4 2019 represents the third consecutive quarter-over-quarter of production growth in 2019 and is the strongest quarter of production since commencement of operations in 2014. Increased production in Q3 2019 and Q4 2019 is largely due to the ramp-up and completion of the Company’s expansion project which concluded in December following the commissioning of the pre-evaporator and leaching, de-silication and precipitation tanks.
In Q4 2019, 329,792 tonnes of ore with an effective V2O5 grade of 1.36% were mined and the crushing unit was fed with 311,148 tonnes with an effective V2O5 grade of 1.20%. The Company also produced 100,879 tonnes of concentrate ore with an average V2O5 grade of 3.28% in Q4 2019 compared to 92,190 tonnes produced in Q4 2018 with a grade of 3.27%.
Global V2O5 recovery rates averaged 78.5% in FY 2019 which is an improvement over the 77.0% averaged in FY 2018. In Q4 2019, global recoveries averaged 77.3% which compares favourably to 75.3% averaged in Q4 2018. Global recoveries declined quarter-over-quarter in 2019 primarily due to some process variability during the expansion ramp-up phase.
Paulo Misk, President and Chief Executive Officer of Largo, stated: “I am very pleased with the Company’s outstanding operational performance in 2019 further underscoring the dedication demonstrated by the whole Largo team. The Company experienced another solid year of production in 2019 following the successful completion of its expansion project which contributed to a new monthly V2O5 production record of 1,162 tonnes in December. Additionally, as a result of effective cost management, the Company expects its 2019 annual average cash operating cost excluding royalties2 to be lower than its updated 2019 cash cost guidance range of US$3.30 to $3.40 per pound V2O5.”
He continued: “The Company also achieved a new safety record in 2019 operating 238 days (1.5 million man-hours worked) without a Lost Time Injury (LTI) surpassing its previous LTI safety record of 203 days (1.3 million man-hours worked). Safety remains a top priority at Largo and the Company plans to update the market with all of its responsible mining initiatives following the release of its 2019 environmental, social and governance report which is expected in Q1 2020. We look forward to another solid year in 2020 as we continue our focus on achieving operational targets in addition to advancing our sales and trading business. I remain extremely confident in our team as we continue this momentum in the year ahead.”
2020 Production, Cost and Sales Guidance
Building on the success of our increased name plate capacity in FY 2019, the Company expects total V2O5 production for 2020 will be in the range of 11,750 and 12,250 tonnes which is inclusive of high purity vanadium flake and high purity vanadium powder production. Additionally, the Company expects annual average cash operating cost excluding royalties will be in the range of US$3.30 – 3.50/lb V2O5 in 2020 and anticipates sustaining capital expenditures will be in the range of US$9.0 and $11.0 million.
Largo’s Board of Directors has approved the construction of a ferrovanadium conversion plant at the Maracás Menchen Mine subject to available liquidity. The Company expects the total capital expenditures for the conversion plant to be in the range of US$8.0 to $10.0 million, with US$5.0 to $7.0 million being incurred in 2020. In addition, the Company plans to perform cooler refractory maintenance in April 2020 and anticipates lower production during this month and higher cash operating costs in Q2 2020. The Company will also utilize this downtime to perform feed rate improvements on the kiln which is expected to increase the nameplate production capacity to 1,100 tonnes of V2O5 per month from 1,000. In addition to the Company’s sustaining capital expenditures for 2020, the expected cost of the kiln feed rate improvement is approximately US$1.3 million.
Largo’s current offtake agreement with Glencore International AG expires on April 30, 2020 and the Company will be responsible for its own sales and distribution directly to end-users from May 2020 onwards. Consequently, the Company anticipates total sales in 2020 will be in the range of 9,500 to 10,000 tonnes, with approximately 2,000 to 2,500 tonnes of its total V2O5 production in 2020 forming part of inventory working capital due to shipping and delivery lead times. The Company’s expected total sales in 2020 will consist of V2O5, high purity V2O5, and ferrovanadium.
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