lgo corporate presentation june 2013
TRANSCRIPT
www.largoresources.com
Near Term VANADIUM Producer
June, 2013
CORPORATE PRESENTATION
Metals and Mining Deal of the Year
Forward Looking StatementsForward 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,”, “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 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.
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Production in sight.
As at May 21, 2013
Maracas Vanadium ProjectMaracas Vanadium Project
Vanadium Project in Brazil Highest grade/quality; lowest cost project Funded and in construction Production to begin in Q4, 2013 Glencore Off-take: 100% Take-or-Pay Contract
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Set to capitalize on rising demand for high-strength steel
Metals and Mining Deal of the Year
Vanadium – a Strategic MetalVanadium – a Strategic Metal
Most used alloy to strengthen steel Found with iron Highly magnetic Proven process for separation
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Makes steel stronger, tougher and lighter
Source: vanitec.org/Roskill, 2013
Vanadium – Few Substitutes Vanadium – Few Substitutes
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Strongest strength to weight ratio of any alloy
Source: vanitec.org
Demand is growingDemand is growing
Demand Drivers:
Higher quality steel standards in BRICsGrowth of V use in steel productionGrowth in applications for V
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Very tight Supply/Demand balance
CAGR through 2017
Source: Roskill, 2013
Growth ExampleGrowth Example
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0.08% 0.07% 0.05% 0.023%
2010
Minimum
0.05%
2013+
Source: Les Ford Vanadium and Steel presentation, PDAC 2010
%V in Rebar
Supply is ConcentratedSupply is Concentrated
China 39,000 tonnes South Africa 19,600 tonnes Russia 7,800 tonnes
Total Demand: 76,000 tonnesTotal Supply: 71,000 tonnes
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Brazil production provides stability of supply
Source: Roskill, 2013
Maracas – Ideal LocationMaracas – Ideal Location
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Located in a safe, mining friendly jurisdiction
Government and local support Arid climate, ideal topography Management with regional experience
Metals and Mining Deal of the Year
Maracas - MineralizationMaracas - Mineralization
Magnetite deposit Mineralization at surface Highest grade and quality ore Contains Platinum Group Metals
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Long strike zone
Concessions and MineralizationConcessions and Mineralization
Gulcari “A ” Deposit Detail
Maracás concessions and
strike length
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Maracas – Resource EstimatesMaracas – Resource Estimates
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Mineral ResourcesMineral Reserve: 13.1 million tonnes @ 1.34% V2O5
Mineral Resource: 24.6 million tonnes @ 1.11% V2O5 (M&I)
30.4 million tonnes @ 0.83% V2O5 (Inferred)
Largo’s grade is 2x higher than industry average
Maracas Project EconomicsMaracas Project Economics
14*including iron ore byproduct credit**Average years 1-15
Net Present Value $554 million
After tax Internal Rate of Return 26.3%
Discount rate 8%
Average Production 11,400 tonnes V2O5 equiv
Mine life 29 Years
Initial CAPEX 235 million
OPEX $2.10*
V2O5 price – 3 year avg $6.37
Average annual cashflow $89 million**
Includes all taxes, royalties, and sustaining capex
Low Cost EnvironmentLow Cost Environment
Open pit mining At surface deposit Highly magnetic ore Few contaminants Water leaching process
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OPEX costs*
Ore provides better recoveries and reduces input costs
*including iron ore byproduct credit
Vanadium Historical PricingVanadium Historical Pricing
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Largo cost
Consistent pricing floor at $5.00
Cost AdvantageCost Advantage
Vanadium is contained in magnetite with a higher iron content than others
Better recoveries, requires less power and less chemicals
Concentrate with much higher V2O5, higher Fe, and lower SiO2 (contaminant) than any
other deposit
LOWEST COST PRODUCTION
*Average grade comparisons compiled by Les Ford, presentation March 8, 2011
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Highest Grade/Quality Vanadium Deposit in the World
= = =
Ore V2O5% Concentrate SiO2%
Concentrate V2O5%
Process Flow SheetProcess Flow Sheet
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Proven, industry tested process
Production Ramp-UpProduction Ramp-Up
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Production Profile
Year ProductionTonnes V2O5 Equiv.
Operating Cash Flow
2014 5,511 $30 million
2015 9,689 $80 million
2016 12,952 $108 million
2017 13,757 $120 million
2018 14,599 $125 million
Near to steady cash flow
Strong PartnersStrong Partners
Glencore International Plc.
Largest trader of VanadiumTake-or-pay agreement100% of all material produced
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Off-take agreement
De-risked product sale
Strong ManagementStrong Management
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Mark Brennan President & CEO 20+ years experience in capital markets
Tim Mann Chief Operating Officer 30+ years mining engineering experience designing, building, operating, managing mines
Les Ford Technical Director Vanadium expert. 40+ years experience building/designing vanadium plants
Kurt Menchen Country Manager & Maracas Project Manager
30+ years mining engineering experience operating mines in Brazil
Douglas Herbst Maracas Construction Manager
30+ years mining engineering experience building mines
Don Clark Construction Advisor Specialist with 30+ years managing, designing and construction of mines
Andy Campbell VP Exploration 30+ years of mining exploration experience
John Laurie Chief Financial Officer 20+ years experience in financial management
Maracas Construction ScheduleMaracas Construction Schedule
2012 2013
Engineering
Procurement Services
Civil Works
Crushing System Erection
Milling System Erection
Kiln System Erection
Sulphate Salt Recovery System Erection
Deammoniator/ Furnace Erection
Utilities System Erection
Equipment Fabrication
Eletrical Line Contract
Water Pipeline Erection
COMPLETE
COMPLETE
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Com
mis
sion
ing
Targ
et
Ran
ge
Q1 Q2 Q3 Q4Q4Q3Q2
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Site DevelopmentSite Development
Gulcari “A” Deposit and Open Pit
Concrete Plant Main Access RoadAdmin
Facilities
Processing Plant
Crushing and Milling
Maracas Deposit OutcropMaracas Deposit Outcrop
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25 meters of ore at surface
150 meters
Magnetite
Gabbro (waste)
◦Dips at 65
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Site DevelopmentSite Development
Concrete Plant Main Access RoadAdmin
Facilities
Processing Plant
Crushing and Milling
Project as at May 21, 2013
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Site DevelopmentSite Development
Implementation at Primary Crushing Area
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Site DevelopmentSite Development
Pedestal for Kiln and Cooler
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Site DevelopmentSite Development
Civil Works in Main Plant Area
Foundation for Main Ball Mill with Installation of Baseplates in Progress
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Site DevelopmentSite Development
Civil Works in Main Plant Area
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Site DevelopmentSite Development
Transformer in completed switchyard
Corporate StructureCorporate Structure
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Stock symbol: LGO – TSX-V
Share price (June 13, 2013):
$0.19
Shares issued (Basic): 897 million
Market Cap C$170 million
52-week High/Low: $0.275 / $0.155
Management & Institutions:
75%
Warrants & Options (Basic):
250 million
Institutional Shareholders
Arias Resource Capital-19.9%
Mackenzie Investments-15.9%
Eton Park Capital Management-12.5%
Ashmore Investment Management-12.5%
Shareholders & Project Partners
Project Finance Deal of the Year Awards - March 2013
Project Partners
Glencore International 100% 6 yr take-or-pay off-take for Maracas
Business Development Bank of Brazil Bank Itau, Votorantim, Bradesco
Secondary ProjectsSecondary Projects
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Project Jurisdiction Metal Stage
Currais Novos Brazil Tungsten Development – care and maintenance due to drought
Northern Dancer Yukon, Canada Tungsten PEA Complete
Campo Alegre de Lourdes
Brazil Iron, Titanium, Vanadium
Exploration
Blue sky potential to add value
Investment Summary:Investment Summary:
Project funded, permitted and in construction
Advancing towards production in Q4
High grade, low cost production project
Experienced management
Capitalizing on market demand and supply instability
Pipeline of projects in place for growth
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Substantially de-risked flagship project with near term cash flow
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Largo Resources
@LargoResources1
Largo Resources
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www.LARGORESOURCES.com
55 University Ave. Suite 1101
Toronto, ON – M5J 2H7
Darcie LaddBusiness Development Manager
416-861-9406
Mark BrennanPresident and CEO
416-861-9797
AppendixAppendix
Board of Directors
TSX – TSXV Market
Maracas Cashflow Projections
Maracas Mining Process
Tungsten
Currais Novos
Northern Dancer
Campo Alegre de Lourdes
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Appendix: Strong BoardAppendix: Strong Board
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Mark Brennan Director Largo Resources President & CEO
Dirk Donath Director Managing director Eton Park Capital Management
Alberto Arias Director Founder & President Arias Resource Capital
Dan Ioschpe Director CEO of Lopche-Maxion
David Brace Director CEO of Karmin Exploration. Formerly with Aur Resources
Wayne Egan Director Partner at Weir Foulds LLP
Dr. Alan Alper Director Tungsten expert. Formerly with Osram Sylvania
TSXV - TSX Mining MarketTSXV - TSX Mining Market
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YTD loss Market Vectors Junior Gold Index (GDXJ)
TSXV loss over past 12 months
YTD loss in Global Base Metals Index (ITXBM)
Decline in market cap of top 100 mining companies on the TSXV in 2012
YTD loss Global Mining Index(TXGM)
Mining IPOs in Q1, 2013
As at, May 27, 2013Source: http://www.pwc.com/en_CA/ca/junior-mining-headquarters/publications/pwc-junior-rmine-2012-11-en.pdfSource: http://finance.yahoo.com/news/tough-times-continue-junior-mining-162000422.html
YTD loss Global Gold Index (XGD)
Maracas Projected Cash flow*Maracas Projected Cash flow*
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Significant Cash Flow
*See press release dated Jan 18, 2013
Implementing Expansion & FeV plant
Appendix: Maracas Mining Process*Appendix: Maracas Mining Process*
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• Deposit outcrops at surface
• Less than 1 meter pre-stripping
• High grade material from surface continues to depth
Simple, Cost-Effective Open Pit Mining
Process
Unit Mining Cost
Total OPEX
Revenue
Tonne of ore $14.29 $61.50 $129.97
Per lb V2O5
/equiv.**$0.82 $2.10 $6.09
*See press release dated Jan 18, 2013**Includes all royalties less credit Iron Ore byproduct
Appendix: TungstenAppendix: Tungsten
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Tungsten [W74]
Tungsten is unique in its extreme qualities and difficult to replace
Source: Roskill, 2011Source: Minor Metals Trade Association
Cemented Carbide Usage
Tungsten is….
Appendix: Tungsten Appendix: Tungsten
41Source: British Geological Survey’s Risk List, 2011 Source: US Gelological Survey
Supply Demand
Source: Roskill, 2011/Europacific Canada, April 12, 2012
Production
17%
Tungsten Scored 4th Most at Risk out of
52 Elements
67,000 Tonnes(2011)
95,000 Tonnes(2015)
Growingat 7%
per year
Consumption
Supply
Appendix: Currais NovosAppendix: Currais Novos
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
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Appendix: Currais Novos Summary HighlightsAppendix: Currais Novos Summary Highlights
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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 commissioned in Q3
Modifications to plant are ongoing
Production temporarily suspended due to severe regional drought
Currais NovosSite Visit – August 2012
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Appendix: Northern Dancer ProjectAppendix: Northern Dancer Project
Northern Dancer Resource Estimate223.4 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
Appendix: Northern DancerPEA HighlightsAppendix: Northern DancerPEA Highlights
Tungsten (US$ per MTU)
Moly(US$ per lb)
IRR (%) NPV @ 8%(US$ millions)
$27
5 $17.50 20.0 918
$30
0 $17.50 22.2 1,110
$32
5 $17.50 24.4 1,302
$35
0 $17.50 26.5 1,494
$36
5$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. There is no certainty that the PEA will be realized.
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Low cash cost producer: US$116 per MTU
49 year mine life
Pre-production capital costs: $645 million
Cumulative cash flow US$4.8 billion
Average annual production of 833,000 MTU tungsten (18.3 million pounds) and 5,959,000 pounds molybdenum over initial 23 years
Current trading price of US$300 MTU
Attractive economics at current tungsten prices
Strategic asset for long term supply of tungsten
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Appendix: Campo Alegre ProjectAppendix: Campo Alegre Project
Non NI 43-101 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)
•Preliminary metallurgical testwork completed in 2011 suggested potential for titanium dioxide (TiO2) project
•Further metallurgical testing underway in 2012
* Historical resource provided by CBPM (Bahia State Mining Development Agency)