Largo Raises 2020 Vanadium Production Guidance On Strong Q4 Output Growth

Largo Resources has raised its 2020 vanadium pentoxide (V2O5) production guidance at its Maracas Menchen mine in Brazil, it said in its fourth-quarter and full-year 2019 production report on Tuesday January 14.

The Toronto-based vanadium producer is expecting total V2O5 production for 2020 in the range of 11,750-12,250 tonnes, inclusive of high purity vanadium flake and high purity vanadium powder production.

Largo’s fourth quarter output increased by 16% year on year to 3,011 tonnes, taking its full-year output to 10,577 tonnes of vanadium pentoxide, up 8% from 2018, it said.

Production in the fourth quarter of 2019 represents the third consecutive quarter-on-quarter production growth in 2019 and is the strongest quarter of production since commencement of operations in 2014, it added.
Largo attributed the higher production to the ramp-up and completion of its expansion project at the Maracás Menchen mine.

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.

The company anticipates total sales in 2020 to be in the range of 9,500-10,000 tonnes, with approximately 2,000-2,500 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, Largo added.

Fastmarkets assessed the vanadium pentoxide 98% V2O5 min, in-whs Rotterdam price at $4.80-6.10 per lb on Friday January 10, up from the previous week’s assessment of $4.80-5.85 per lb due to a pick-up in spot activity and tightening prompt availability in Europe.

V2O5 prices in Europe plummeted by more than 60% last year after hitting all-time highs in the second half of 2018. Prices had soared because of an anticipated increase in demand from the implementation of new rebar manufacturing standards in China, which came into effect on November 1, 2018.

The policy requires Chinese steel mills to eliminate the original 335 megapascals (MPa)-tensile strength rebar and start producing 600MPa-tensile strength rebar, which has better earthquake resistance. In doing so, the policy encourages domestic Chinese mills to utilize greater volumes of alloys to meet the revised strength requirements.

But prices began to drop sharply late in 2018 when market participants realized enforcement of the revised rebar policy was not as stringent as had been expected and because steel mills had increased their use of ferro-niobium to reduce their consumption of more costly vanadium.