Mark Smith, Chief Executive Officer of Largo, stated: "Largo's ability to consecutively increase its production at the mine is a testament to the very skilled operations team at Maracás and has enabled the Company to exceed its midpoint guidance of 9,650 tonnes of V2O5 for the year. We are also very proud to report yet another quarterly production record from the Maracás Menchen Mine in addition to a new record of full year production for 2018."
He continued: "During the year ahead, Largo will continue its focus on profitability and looks forward to reaping the benefits of the increased production rate as a result of the Company's ongoing expansion project. The expansion project to increase nameplate production capacity to approximately 1,000 tonnes of V2O5 per month is progressing on time and the Company expects to reach the new nameplate capacity rate in Q3 2019."
2019 Production and Cost Guidance – Continued Profitability Underscored by Low-Cost Production
Largo Resources experienced a solid year of production growth at the Maracás Menchen Mine setting multiple production records during the year. Building on the operational successes throughout 2018, management expects to continue this momentum in 2019 as it increases its nameplate production rate by way of its expansion plan. The Company anticipates the expansion ramp up to be completed in Q3 2019 and expects to reach the increased nameplate production rate of 1,000 tonnes of V2O5 per month in the same quarter.
Additionally, the Company plans to replace the kiln refractory in Q1 2019 which will result in approximately 17 days of down time affecting production rates and cash operating costs4 for the quarter. As a result of the kiln refractory maintenance, the Company now anticipates lower production during the month of March and higher cash operating costs5 in Q1 2019. The Company's V2O5 total production for 2019 will range between 10,000 and 11,000 tonnes which is inclusive of high-purity vanadium flake and high-purity vanadium powder production.
The Company has also provided an annual average cash operating cost6 guidance for the year excluding royalties as it believes this guidance more fully represents the total costs associated with producing vanadium. Current cash operating costs include royalties which vary based on the price of V2O5 and in Largo's view does not completely reflect the operational performance undertaken at the mine. In 2019, the Company expects an annual average cash operating cost excluding royalties of US$3.45 – 3.65/lb V2O5.
A summary of 2019 production, cost and capital expenditure guidance are included in the table below:
2019 Production and Cost Guidance
Annual V2O5 Production Guidance
10,000 – 11,000 tonnes
Average Annual Cash Operating Cost7 Guidance Per
Pound Excluding Royalties
US$3.45 – 3.65
Sustaining Capital Expenditure8
US$10 – 14 million
Expansion Capital Expenditure9
US$10 – 14 million
Vanadium Outlook Update
On the back of the Company's solid production growth in 2018, vanadium prices soared approximately 156% but have recently receded to the range of US15.50-16.00/lb10. This reported price range for vanadium is presently up 38% when compared to the same period last year and Largo continues to believe as a result of the structural supply deficit, an elevated pricing environment should remain for the metal in the short-term.