With the red-hot steel market in Asia showing no signs of cooling, demand for rare and strategic metals like vanadium is likely to remain strong, according to Largo Resources (LGO-V).
Vanadium is used in steel-making and Largo Resources says an addition of a small amount of vanadium to a steel alloy can double its strength and make it more resistant to corrosion and abrasion.
So it was with great excitement that the company announced today that the Gulcari A deposit at its Maracas Vanadium-PGM deposit in Brazil has “robust economics” based on a new NI 43-101 compliant preliminary assessment.
The preliminary assessment is a revision of an earlier assessment completed in June and based on an updated block model that included more vanadium tonnage and the inclusion of platinum group metals, the company said.
Largo reported that based on an estimated initial capital investment of US$126.2 million and the milling of 14.63 million tonnes of open pit material at a diluted grade of 1.29% vanadium pentoxide, the project will have a discounted payback of 3 years.
The preliminary assessment also found that the project will generate cash-flow of US$683 million over an estimated production life of 26 years.
Based on the two most-used measures for evaluating an investment the net present value and the internal rate of return — the deposit also looks robust, the company said.
The preliminary assessment anticipated a pre-tax IRR of 40.7% and a pre-tax NPV of US$212 at a discount rate of 10% a year.
Over the first 10 years of the mine’s life, about 5,000 tonnes a year of 80% ferrovanadium alloy or ferrovanadium will be produced. After that time, production will fall to about 2,000 tonnes per annum.
Current prices for ferrovanadium and vanadium pentoxide are about US$36 per kilogram and US$7.50 per pound, respectively, the company said.
Largo cited price forecasts for vanadium pentoxide by CRU of London. The base case view of the forecast, Largo stated in a press release, is that the long-term price of vanadium pentoxide will stabilize at about US$5 per lb.
A measured and indicated resource at US$5 per lb. vanadium pentoxide consistent with a cut-off grade of 0.46 grams per tonne, was estimated to be 22.5 million tonnes grading 1.27% vanadium pentoxide and 0.28 grams per tonne combined platinum and palladium. That included a high-grade zone of 8.4 million tonnes grading 2% vanadium pentoxide and 0.40 grams per tonne platinum and palladium.
The open pit design was based on a pit shell reflecting a vanadium pentoxide price of US$5 per lb. The open pit design will have a strip ratio of 3.33:1.
Largo said its projected revenues will be comprised of the sale of ferrovanadium alloy as the primary product and by-product revenue from the sale of leached concentrate pellets as feedstock for iron and steel production.
News of the study sent Largo shares on the TSX Venture Exchange up 2 to close at 50 apiece on a trading volume of 156,600.
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