Resource World Magazine

a u g u s t / s e p t e m b e r 2 0 1 6 www.resourceworld.com 47 Toronto-based Largo Resources Ltd. [LGO- TSX; LGORF-OTC] is moving quickly to establish itself as a rarity among TSX- listed mining stocks. Its strategic aim is to become a pure play on vanadium, a metal that has traditionally been tied to the fortunes of the steel industry, but is now being used in batteries and other high tech applications. In keeping with that goal, the company recently announced that its 100%-owned, flagship Vanadio de Maracas Menchen Mine in Bahia, Brazil produced a record 801 tonnes of vanadium during June. That marked a 3% increase from May, which also set a new production record. The announcement is a key step for Largo as it moves to secure premium pricing for its vanadium production by selling to buyers in the aerospace and oil refining sectors. Vanadium is primarily used as an alloy to strengthen steel and reduce its weight. But in an interview with Resource World, Largo President and CEO, Mark Smith, said the company is hoping to achieve a quality level in the production process that will allow its vanadium to be used in more advanced applications that will also include vanadium redox batteries. These vanadium-driven batteries are alternatives to lithium-ion batteries and are used primarily in the longer-term, grid- scale storage of clean energy from solar and wind sources. If the company is successful, Largo could represent a rare investment opportunity because it is the only primary producer of the vanadium in the Americas. The other major producers are located in China, Russia and South Africa where the metal is mined as a by-product of iron ore slag. "As a basic resource company, we have the recipe for success here because we have arguably the best vanadium resource in the world,'' said Smith during a telephone interview from Denver, Colorado. In addition to his role as CEO of Largo, Smith is also Chairman and CEO of Niocorp Developments Ltd. [NB-TSX]. Niocorp's key asset is a niobium, scan- dium, titanium project in Nebraska. He previously served as CEO of US rare earths giant Molycorp, and was involved in tak- ing the company public on the New York Stock Exchange in 2010. Having joined Largo in March, 2015, he is overseeing the development of the Maracas Menchen Mine, site of a high- grade vanadium deposit with proven and probable reserves standing at 18.4 million tonnes, averaging 1.17% V 2 O 5 (vanadium pentoxide), a grade that Largo says is double the industry average. The project is estimated to contain an additional 54 mil- lion tonnes of material in the measured, indicated and inferred category. With such rich material at its disposal, Largo hopes to operate a cost efficient mine that can withstand the impact of fluctuat- ing prices, which dipped to a 12-year low of US $2.40 a pound in December 2015, due to slowing demand from the Chinese steel industry. More recently, prices have rebounded to trade in the US $3.30 to US $3.50 range after jumping to around US $4 in early June 2016. Swiss metals mining-trading giant Glencore PLC [GLEN-London] is currently buying all of Largo's production under a six-year take or pay agreement. Largo is working to achieve name plate capacity (9,600 tonnes) after lower than expected guidance and higher than forecast costs prompted Dundee Capital Markets analyst Joe Gallucci to drop his rating on the stock in December, 2015 to hold from buy. At that time the stock was trading at 24 cents, down from $3.20 in early 2014. After sliding to 13 cents in February, the stock is now trading at 64 cents on July 28, 2016. "Taking vanadium out of an ore matrix and converting it into the V 2 O 5 that we do is an extremely complicated process,'' Smith said. "It is truly chemical engineer- ing and chemical processing." Still, he believes the stars are aligning for his company. "The supply/demand side is fairly straight forward in that demand is doing just fine. I think it is safe to say that it is going to be the same or a little bit higher this year than last year," Smith said. This optimistic view is based on the supply side of the equation. "Prices got so low for this commodity last year that it caused various operations around the world to go into bankruptcy, and or stop altogether," Smith said. "A lot of these stoppages are permanent reductions at operations that went through bankruptcy and are actually in the liqui- dation process." By the end of this year, Smith estimates that upwards of 20,000 tonnes of production will be gone from the supply side of a sector that normally pro- duces about 95,000 to 98,000 tonnes per year. Meanwhile, with US $16 million cash at the end March 2016, Largo may consider tapping the market for funding in the near future. "We will take advantage of opportunities as they arise,'' said Smith. "We really want to demonstrate to the world that we have an economically viable operation." Largo recently signed a non-binding memorandum of understanding with Vionx Energy Corp., which develops, produces and sells vanadium redox flow batteries (VRBs) for utility grid applica- tions. It is hoped discussions may lead to Largo supplying vanadium electrolyte to Vionx to further the research and develop- ment of advanced VRBs utilizing VNX grid energy storage systems. n miNiNg Largo Resources to target vanadium battery market by Peter Kennedy

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