The Investment Doctor • Tue, Nov. 25
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- Largo Resources confirms the chromite and platinum occurrence after a grab sampling program.
- The grades are a very nice surprise, but the sampling program might have been a bit biased.
- Largo Resources still is a buy because of its Vanadium project. The chromite discovery is a nice bonus.
- Largo Resources has discovered chromite and potentially PGM mineralization close to its vanadium mine in Brazil.
- Other news from the company includes a mixed bag of a favorable progress report, and a capital raise.
- Bullish thesis stands in the light of progress in ramping up vanadium production.
Update: Largo Resources Unexpectedly Announces A C$30M Financing
- Largo Resources announces a $27M capital raise at a 6% premium to the market price.
- This was unexpected, as I thought Largo would be able to reach the cash flow positive stage without further dilution.
- As I didn’t take this dilution into account, the target price will decrease by approximately 10%, keeping all other parameters the same.
- Largo Resources agreed with its lenders to extend the grace period of the loan.
- This will allow the company to have more financial flexibility during the ramp up phase of the Maracas project.
- This solves the only 'problem' I had with Largo Resources, and I now expect a relatively smooth ramp up period.
- Largo Resources has achieved first production identified as a near-term catalyst in our recent article.
- Bullish case strengthened as company moves into ramp-up.
- Nameplate production expected within a year.
The Market Is Only Just Starting To Wake Up To Largo Resources
- A growing supply deficit will drive vanadium prices higher in coming years.
- Commissioning at Largo Resources' world-class Maracas vanadium mine has been completed and production is imminent.
- The market has only just started to appreciate the quality of the asset, and the outstanding execution of Largo bringing the mine into production.
- We estimate 150% upside if past performance can be maintained throughout ramp-up.
Largo Resources Has Hit The Ground Running - Time To Re-Evaluate
- Largo's share price has increased 27% since my last article, as the company continues to make progress at Maracas.
- Commissioning of the facility has been completed, and Largo Resources is on track to reach the commercial production stage in the second half of this year.
- The vanadium price remains strong, which made me revise my expectations upwards. Additionally, as the project is getting de-risked, I thought a lower discount rate is appropriate.
- Almost 90% of the world supply of vanadium comes from three relatively unreliable countries (Russia, China, South Africa), and I strongly believe Largo could obtain an important position.
- Even after the 27% share price increase, the company seems to be undervalued based on the Maracas project. Additionally, you get exposure to the second project (tungsten-molybdenum) for free.
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LGORF vs. ETF Alternatives
Largo Resources Ltd. , LGO:TSXV - Largo Resources is a Canadian based Strategic Mineral Company focused on developing its Vanadium and Tungsten projects in Brazil and Canada<br /><br />Largo's primary focus is to continue to advance its flagship Maracas Vanadium Project with the target to... More
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