Largo Board Approves The Construction Of A Fev Conversion Plant

The board of Toronto-headquartered Largo Resources has approved the construction of a ferrovanadium conversion plant at the Maracás Menchen mine, in Brazil.

The construction of the company’s own ferrovanadium conversion plant creates downstream advantages as it eliminates the need to convert Largo’s vanadium pentoxide (V2O5) using third party convertors, explains CEO Paulo Misk.

He said on Wednesday that basic engineering studies associated with the construction of the plant had begun and that more details would be provided at a later stage.

During the third quarter, Largo produced 2 952 t of V2O5 at a lower cash operating cost of $2.81/lb.

Misk noted, however, that despite the 8% drop in operating costs, profitability continued to be impacted by the lower vanadium prices, with the miner recording a net loss of C$8.6-million. In the prior-year period, Largo posted a profit of C$91.73-million.

Revenue plunged to C$32.12-million, from C$149.46-million a year earlier.

“The company believes that vanadium prices are unsustainably low and expects sentiment and prices to improve as evidenced by the recent price increase for ferrovanadium in Europe. Despite greater vanadium consumption in China over the last two years, the current price environment is largely attributable to high iron-ore prices and a dramatic increase in Chinese V2O5 slag production earlier in 2019 from vanadium-titano magnetite deposits. The increase in Chinese vanadium supply, combined with greater than anticipated niobium substitution, put vanadium prices under pressure throughout 2019.

“Going forward, we expect vanadium market sentiment to improve following current shutdowns from high-cost stone coal producers, a decline in V2O5 slag production and a reverse in niobium substitution on the back of lower vanadium prices,” said Misk.

Largo closed at C$1.20 a share on Wednesday, having touched a 52-week low of C$1.18 a share earlier in the day. A year ago, Largo traded at about C$4.50 a share.

The board noted that the share price did not reflect the business value and said that it was considering a share repurchase programme.