When it comes to mining, vanadium probably isn’t the first product that jumps to mind. But, for Largo Resources Ltd. (TSX: LGO)(OTC: LGORF), business is all about vanadium pentoxide, or V2O5, the most important compound in vanadium.
Although it has other applications, vanadium is primarily used as an alloy to strengthen steel. It’s properties, which include high temperature tolerances, increase the strength of steel by 30% while lowering the weight, making it ideal for countless applications.
Toronto-based Largo is the only pure-play producer of vanadium from its Vanadio de Maracás Menchen Mine in Brazil. The company touts the resources at its mine as the highest-grade vanadium deposit in the world. General grades of deposits average about 0.47% - 0.50% V2O5, compared to Largo’s deposit which more than double that with an average grade of approximately 1.15% V2O5.
Last July, Largo entered into a non-binding memorandum of understanding with Vionx Energy Corp., a producer and seller of Vanadium Redox Flow Batteries (VRFBs) for utility grid applications. VRFBs are a type of rechargeable flow battery used for energy storage, typically large-scale energy storage. Nothing has been said about the MOU since, but the pact is still prominent in Largo’s August 2017 investor presentation.
On Thursday, the company announced a major milestone with the shipment of its 1,000th lot of vanadium, representing about 44 million pounds of V2O5. According to Largo CEO and president Mark Smith, V205 was fetching a five-year high between $9.00 and $10.00 per pound last week. That was up about 64% from the average price during Largo’s second quarter. When coupled with low cost production Largo has, the stage is set for a strong finish to 2017.
During the second quarter, Largo produced 2,181 tonnes of V2O5 at a cash cost of $3.56 per pound. The company sold 82 tonnes of high purity V205, helping boost revenue to $35.8 million from $18.9 million in Q2 2016. Largo still logged a net loss of $13.9 million, or 3 cents per share, for the quarter.
Investors are cheering the milestone shipment in Tuesday trading, sending shares up 18.3% to 71 cents around 12:30 EDT. That’s the highest price since last May, when shares touched 72 cents
