First-blush numbers good for Largo

A preliminary economic study on the Maracas vanadium project in western Bahia state, Brazil, shows favourable economics at low vanadium prices, and operator Largo Resources (LGO-V, LGORF-O) will now be assessing the property’s potential to produce platinum group metals.

Consulting firm Micon International estimated an inferred resource of 15 million tonnes grading 1.35% V2O5 (vanadium pentoxide) on the deposit, of which 11.8 million tonnes at an average diluted grade of 1.44% V2O5 were inside a preliminary open-pit boundary. The pit had a stripping ratio of 2.1. Micon cut the resource off at a depth of 150 metres.

In its study, Micon considered a milling rate of 581,000 tonnes per year, with mining moving about twice as fast to provide higher-grade material early in the mine life. The pit would be mined out in 11 years, but the mill would continue for another 11 years on lower-grade stockpiled material. The project would produce about 5,000 tonnes of ferrovanadium alloy annually in the first half of its life, falling to 2,000 tonnes a year after mining ceased.

The process plant would have crushing and grinding circuits followed by magnetic separation to produce a magnetite mineral concentrate for roasting. Vanadium would be leached from the roasted concentrate and re-precipitated, then alloyed with iron. Testing by earlier operators showed recoveries around 63%.

Largo plans to investigate recovery of platinum group elements from the concentrate, and to assess markets for pelletized concentrate, which would be largely iron oxide. Titanium recovery is also potentially economic at Maracas.

Micon estimated that the mine and mill would have a capital cost of US$100 million, and added a US$20-million contingency. Using estimated production costs, and assuming a long-term price of US$16.16 per kg for ferrovanadium, the project would generate US$283 million in cash over the mine life, which works out to a net present value of US$59 million when discounted at 10% per year. Its internal rate of return at that vanadium price is 18.8%. The model includes assumed revenue from concen- trate pellets, but omits the yet-unassessed platinum-group and titanium resources.

The price estimate for ferrovanadium correlates to a V2O5 price of US$3.50 per lb. (US$7.70 per kg), well below current prices in the US$7 to US$8 range. At US$7-per-lb. prices for oxide, translating to US$32.31 per kg for alloy, the project has a 56% internal rate of return and a US$390-million net present value.

At last report, Largo had done about 5,600 metres of drilling and planned to do about 4,400 metres more. Geologically, the deposit is in disseminated and massive magnetite bodies that form part of the Jacare River intrusion, a mafic to ultramafic dyke about 70 km long and 1.2 km wide. Pyroxenite phases in the intrusion carry the magnetite bodies, which are on average 25 metres wide.

Recent drilling on the property returned grades mainly above the resource grade over true widths of 30 to 54 metres. Total platinum group element grades were around 0.5 gram per tonne; in previous drilling there has typically been more than twice as much platinum as palladium.

Reanalysis of cores drilled by the property’s previous Brazilian operators Caemi — now part of Companhia Vale do Rio Doce (RIO-N) — and Odebrecht showed platinum grades of 0.3 to 1.7 grams per tonne and palladium grades of 0.03 to 0.6 gram per tonne.

A large number of samples are out for analysis, but visual evidence from the drill cores is that the deposit could extend farther along strike and that it may be thicker at depth.