Vanadium prices remain unsustainably low and TSX-listed Largo Resources expects sentiment and prices to improve as evidenced by the recent price increase for ferro-vanadium in Europe.
This was stated by Paulo Misk, President and CEO for Largo, during the release of the company’s third quarter (Q3) 2019 operational and financial results.
Largo is a Toronto-based strategic mineral company focused on the production of vanadium flake, high purity vanadium flake and high purity vanadium powder at the Maracás Menchen mine located in Bahia State, Brazil.
He added that 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 vanadium pentoxide (V2O5) slag production earlier in 2019 from vanadium-titano magnetite (VTM) 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.”
Meanwhile, the quarter’s financial results highlighted 2 952 tonnes of V2O5 produced at a cash operating cost excluding royalties of US$2.81 per pound of V2O5.
Misk said that operations at the Maracás Menchen mine performed well in the third quarter 2019 following increased production from the expansion project.
Cash operating costs excluding royaltie2 were US$2.81 per pound V2O5 in Q3 2019 representing a decrease of 8% over Q3 2018.
Although the company achieved lower operating and unit costs during the quarter, he explained that profitability continued to be impacted as a result of lower vanadium prices combined with the Largo’s re-measurement of trade receivables and payables as a result of its current off-take agreement. Consequently, the company recorded a net loss of $8.6 million in Q3 2019.
“The Board realizes that the share price does not currently reflect the business value of the company and is considering instituting a share repurchase programme by way of a normal course issuer bid.”
Further, Largo reported that the Board has approved the construction of a ferrovanadium conversion plant at the Maracás Menchen mine.
“Ferrovanadium is essential in the production of steel products, which make up approximately 91% of global vanadium consumption. The construction of the company’s own ferrovanadium conversion plant creates downstream advantages as it eliminates the need to convert Largo’s V2O5 using third party convertors,” Misk explained.
He said that the company has started the basic engineering studies associated with the construction of the plant.
“Largo is advancing basic engineering studies to further evaluate the economics associated with upgrading the Maracás Menchen mine’s non-magnetic tailings using concentrate flotation to produce titanium dioxide concentrate.”
The company’s non-magnetic tailings are composed of ilmenite, which also contain titanium dioxide. It began a plant study in October to prove flotation performance and anticipates results of the ongoing study in the forth quarter of 2019.