Largo reports highlights of its 3rd quarter fiscal 2016 financial results
TORONTO, Nov. 15, 2016 /CNW/ - Largo Resources Ltd. ("Largo" or the "Company") today released highlights of its financial results for the quarter ended September 30, 2016. The Company is releasing highlights of its third quarter, as filed in full on SEDAR at http://www.sedar.com and on the Company's website at http://www.largoresources.com.
Highlights of the Company's financial results1:
| Sep. 30, 2016 | Dec. 31, 2015 | |||
| Cash | 1,683 | 2,869 | ||
| Total Current Assets | 23,545 | 19,718 | ||
| Mine properties, plant and equipment | 321,724 | 296,041 | ||
| Total Assets | 345,269 | 315,759 | ||
| Total Current Liabilities | 76,266 | 100,313 | ||
| Total Liabilities | 306,832 | 282,817 | ||
| Q3 2016 | Q3 2015 | YTD 2016 | YTD 2015 | |
| Revenues | 20,758 | - | 49,751 | - |
| Direct mine and mill costs2 | (20,499) | - | (55,525) | - |
| Net loss | (24,705) | (50,005) | (43,976) | (93,995) |
| Basic loss per share | (0.06) | (0.25) | (0.12) | (0.61) |
| Net cash provided by (used in): | ||||
| Operating activities | 32 | (2,701) | (20,461) | (5,660) |
| Financing activities | 2,131 | (8,213) | 31,240 | 46,362 |
| Investing activities | (4,103) | (13,003) | (12,119) | (33,848) |
Cash operating costs3 since the commencement of commercial production on October 1, 2015:
| Production Tonnes | Production Pounds Equivalent | CDN$ Cost per pound | US$ Cost per pound | |
| Q4 2015 | 1,654 | 3,646,441 | $5.97 | $4.47 |
| Q1 2016 | 1,169 | 2,577,201 | $6.52 | $4.75 |
| Q2 2016 | 2,311 | 5,094,877 | $4.19 | $3.25 |
| Q3 2016 | 2,182 | 4,810,481 | $4.67 | $3.59 |
Mark Smith, President and Chief Executive Officer for Largo, stated: "We are delighted with the Company's operational improvements, as evidenced by strong production results and improvements in cash operating costs since the beginning of the fiscal year. We are especially gratified by the fact that the Company was able to record positive cash from operating activities during Q3 2016."
He continued: "We believe the Company is poised to capture additional economic benefit from recent increases in vanadium prices. The price of vanadium pentoxide was quoted at approximately US$ 2.36 per pound during December 2015 and currently trades in a range of US$ 4.65 to US$ 4.85 per pound, which is already significantly higher than prices quoted during Q3 2016. We anticipate that the recent improvements in vanadium pricing will continue during 2017."
| 1 | Financial numbers are reported in thousands of Canadian dollars, except for per share and per pound amounts or as otherwise noted. References to "Q3" and "YTD" refer to the three-month and nine-month periods ended September 30, respectively, and as reported in the Company's unaudited condensed interim consolidated financial statements for Q3 and YTD, 2016 and 2015. |
| 2 | Refer to Note 17 in the Company's unaudited condensed interim consolidated financial statements for Q3 and YTD, 2016 and 2015. |
| 3 | Refer to the "Non-GAAP Measures" section of the Company's Management's Discussion and Analysis for Q3 2016 ("MD&A") and the production guidance section of this press release for a discussion of Non-GAAP Measures and the calculation of cash costs. |
Highlights of Q3 2016
- On July 4, 2016, the Company's common shares commenced trading on the Toronto Stock Exchange ("TSX") and will continue trading under the symbol LGO.
- On July 18, 2016, the Company announced that it had entered into a non-binding memorandum of understanding ("MOU") with Vionx Energy Corporation ("Vionx"), a company which develops, produces and sells vanadium redox flow batteries ("VRBs") for utility grid applications. The MOU is conditional upon a number of items as set out in the Company's press release dated July 18, 2016.
- The Company's Maracás Menchen Mine achieved a new monthly production record of 806 tonnes of vanadium pentoxide (V2O5) in September 2016. Production in July 2016 was 630 tonnes, with 746 tonnes produced in August 2016.
- On September 7 and September 12, 2016, the Company announced the closing of the first and second tranches of a non-brokered offering of units. The Company received gross proceeds of $4,452 from the sale of 9,894 units of the Company. Each unit was sold at a price of $0.45 and consisted of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant will be exercisable into one common share at a price of $0.45 per share for a period of three years from closing of each tranche.
Significant events and transactions subsequent to Q3 2016
- On October 4, 2016, the Company announced the closing of the third and final tranche of a non-brokered offering of units. The Company received gross proceeds of $548 from the sale of 1,217 units of the Company. The terms of the units are the same as for the first and second tranches. Pursuant to an agreement with the Company, the gross proceeds of $193 received from the Arias Resource Capital Management LP ("ARC Funds") in the third tranche are to be used to fund a possible listing on a U.S. stock exchange. Accordingly, these proceeds will be accounted for as restricted cash. For details of ARC Funds' total participation in the non-brokered offering please refer to the Company's MD&A.
Maracás Menchen Mine
- During Q3 2016, production output was 5.6% lower than in the second quarter of 2016, primarily due to the low production in July. Production in July was impacted by power interruptions and equipment repairs. Production improved in August with 746 tonnes of V2O5, a level that was marginally lower than expected due to instrumentation issues with the deammoniator in the beginning of the month, as well as scheduled maintenance at the plant. September saw a new production record of 806 tonnes of V2O5. Nameplate annual production capacity for the Maracás Menchen Mine is 9,634 tonnes of V2O5 or approximately 26.4 tonnes per day.
- The cost per pound was higher in Q3 2016 compared to Q2 2016, primarily due to an increase in mining costs. In Q3 2016, 1,377,694 tonnes of waste were mined, compared to 904,999 tonnes in Q2 2016 and 656,451 tonnes in Q1 2016. The increased volume of waste mined contributed to a higher cost per pound, as well as an increase in capitalized stripping costs. In addition, the power issues experienced in July contributed to an increase in power costs.
- For the fourth quarter 2016 the Company is focused on achieving monthly production levels above 800 tonnes, increasing recoveries, reducing variable costs and identifying opportunities to reduce fixed costs. Production in October 2016 was 715 tonnes of V2O5, which was lower than expected due to a longer than anticipated scheduled shut-down of the kiln and cooler for refractory repair. The repair required in the cooler refractory was greater than anticipated, and the Company took advantage of the shut-down to extend the repair area to prevent further issues in the coming months.
- During Q3 2016, improvements in milling control and leaching performance resulted in improved recoveries. For 2017, the Company aims to implement projects in the leaching and kiln sections to further increase recovery levels. In addition, the Company aims to improve the level of consumption of sodium carbonate and ammonium sulphate, two of the Company's key consumables, by improving control of the dosage system.
- During Q3 2016, 241,180 tonnes of ore with an average grade of 1.54% containing 3,721 tonnes of V2O5 were mined. 291,964 tonnes averaging 1.30% V2O5 were crushed, from which 205,055 tonnes with an average grade of 1.71% V2O5 were milled. The mill produced 92,625 tonnes of concentrate grading 3.42% V2O5 containing 3,167 tonnes of V2O5. The chemical plant produced 2,182 tonnes of V2O5 flake from this concentrate.
- During Q3 2015, 238,617 tonnes of ore with an average grade of 1.38% containing 3,283 tonnes of V2O5 were mined. 244,855 tonnes averaging 1.41% V2O5 were crushed, from which 202,993 tonnes with an average grade of 1.71% V2O5 were milled. The mill produced 82,595 tonnes of concentrate grading 3.18% V2O5 containing 2,627 tonnes of V2O5. The chemical plant produced 1,711 tonnes of V2O5 flake from this concentrate.
Reiterating production guidance for 2016:
| Annual Production High-End | Annual Production Low-End | Average Annual Production | Estimated Annual Average US$/CDN$ Cash Operating Costs Per Tonne 1,2,3 | Estimated Annual Average US$/CDN$ Cash Operating Costs Per Pound 1,2,3 | |
| 2016 2,6 | 8,543 tonnes 4,5 ~ 18.8 million lbs | 7,543 tonnes 4,5 ~ 16.6 million lbs | 8,043 tonnes 4,5 ~ 17.7 million lbs | US$8,541 CDN$11,166 | US$3.87 CDN$5.07 |
| 1. | The cash operating costs reported are on a non-GAAP basis. Cash operating costs include all cash expenditures, the main categories being mining costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, commissions on sales, royalties and sales, general and administrative costs ("SG&A"). Cash operating costs excludes depreciation and amortization charges, interest or any other debt servicing costs. Refer to the "Non-GAAP Measures" section of the Company's MD&A. See also 3. below. The estimated average annual R$/US$ and CDN$/US$ exchange rates used for 2016 are approximately 3.46 and 1.31 respectively. |
| 2. | Excludes corporate SG&A or CAPEX (Capital Expenditures). |
| 3. | The reader is cautioned that the cash operating costs presented are intended to serve as a guide to the magnitude of the Company's monthly operating expenditures on a cash basis and excludes financing costs associated with the operations and non-cash accounting charges (including but not limited to depreciation and amortization expense, accretion, share-based payments, or foreign exchange and derivative gains or losses). The measure may therefore not be comparable to other companies or the results of similar operations and does not meet any definition of GAAP. Refer to the "Non-GAAP Measures" section of the Company's MD&A. |
| 4. | Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs. |
| 5. | Total CAPEX for fiscal 2016 is anticipated to amount to $13.9 million. The Company periodically reviews its CAPEX needs and will update the market when its estimates change by a material amount. |
| 6. | Calculated from "CDN$ Cost per pound" using average CDN$/US$ foreign exchange rates of 1.34, 1.37, 1.29 and 1.30 for the 4th Quarter 2015, 1st Quarter 2016, 2nd Quarter 2016 and 3rd Quarter 2016, respectively. |
About Largo
Largo Resources Ltd. is a growing strategic mineral company focused on the production of vanadium pentoxide at its Vanadio de Maracás Menchen Mine. Vanadium is primarily used as an alloy to strengthen steel and reduce its weight. Vanadium enhanced steels are used in a vast and growing range of products that are used and encountered every day; including, rebar, automobiles, transport infrastructure etc. With consumption increasing at a compound annual growth rate of over 8% for the past several years (Roskill, 2015), vanadium is a bourgeoning commodity which lacks opportunities for investment in the wider market place. As trends in the steel industry now demand increasingly stronger and lighter products for advanced applications, the use of vanadium is expected to continue this growth over the medium and long term. Largo also has interests in a portfolio of other projects, including: a 100% interest in the Currais Novos Tungsten Tailings Project in Brazil; a 100% interest in the Campo Alegre de Lourdes Iron-Vanadium Project in Brazil; and a 100% interest in the Northern Dancer Tungsten-Molybdenum property in the Yukon Territory, Canada. For more information, please visit www.largoresources.com.
Cautionary Notes:
This press release contains forward-looking information under Canadian securities legislation. Forward-looking information includes, without limitation, statements with respect to completion of a listing on a U.S. stock exchange. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". All information contained in this news release, other than statements of current and historical fact, is forward looking information. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Largo to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on SEDAR from time to time. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo's annual and interim MD&As.
Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Largo Resources Ltd.
Contact
Largo Investor Relations, info@largoresources.com