Largo Resources Reports Record Production and Lowest Annual Cash Costs at the Maracás Menchen Mine with 2019 Financial Results

2020-03-20

CSE - Canadian National Stock Exchange · Gold · Copper · Arsenic · Canada

Canada NewsWire

TORONTO, March 20, 2020

All financial figures are in Canadian dollars unless otherwise stated.

Q4 2019 Highlights

Production of 3,011 (6.6 million lbs1) tonnes of V2O5in Q4 2019, a 16% increase over Q4 2018 Record monthly V2O5production of 1,162 tonnes in December 2019 Cash operating costs excluding royalties2of US$2.48($3.28)per lb V2O5, a decrease of 29% over Q4 2018 Revenues of $34.1 millionin Q4 2019 (net of the re-measurement of trade receivables / payables of $13.5 millionon vanadium sales from a contract with a customer of $47.6 million)

Full Year 2019 Highlights

Record FY 2019 production, achieving midpoint production guidance: 10,577 tonnes (23.3 million lbs1) of V2O5produced in 2019, an increase of 8% over FY 2018 Cash operating costs excluding royalties2of US$2.95($3.92)per lb V2O5, 12% lower than 2019 cost guidance; 13% lower than 2018 Revenues of $140.0 millionin FY 2019 (net of the re-measurement of trade receivables / payables of $137.3 millionon vanadium sales from a contract with a customer of $277.3 million) Net loss of $36.2 millionand a loss per share of $0.07 Cash balance of $166.1 millionexiting 2019 New safety record in 2019: 238 days (1.5 million man-hours worked) without a Lost Time Injury

Other Significant Updates

Strategic sales and marketing transition proven successful: 90% committed on guided annual sales for 2020 New 2020 total cash cost8guidance of US$3.45– 3.65/lb V2O5 2020 total cash cost8, cash operating costs excluding royalties2, sales and production guidance maintained on a "business as usual" basis Board approval for the construction of a vanadium trioxide ("V2O3") processing plant in Maracás, Brazil Ilmenite flotation pilot plant proven successful; TiO2 chemical pilot plant tests and study expected to commence in April 2020

TORONTO, March 20, 2020/CNW/ - Largo Resources Ltd. ("Largo" or the "Company") (TSX: LGO) (OTCQX: LGORF) announces its 2019 financial results highlighted by record annual production of 10,577 tonnes of vanadium pentoxide ("V2O5") and the lowest annual cash operating costs excluding royalties2achieved to date of US$2.95per pound of V2O5. The Company recorded a net loss of $36.2 millionin 2019 largely due to lower vanadium prices and the re-measurement of trade receivables / payables as part of its offtake agreement which expires on April 30, 2020.

Paulo Misk, President and Chief Executive Officer for Largo, stated_: "Profitability was impacted in Q4 2019 and in 2019 as a consequence of lower vanadium prices and largely due to a total re-measurement of trade receivables / payables during the year of $137.3 millionas part of the Company's off-take agreement. Following the expiration of the off-take agreement next month, the Company remains focused on maximizing value through its sales and marketing business, which includes a focus on high purity vanadium sales with price premiums. I am very pleased to report that the Company is approximately 90% committed on its annual guided sales for 2020."_

He continued:_"On the operational front, the Company performed extremely well in 2019 achieving cash operating costs excluding royalties2of US$2.95per pound of V2O5in addition to setting a new V2O5production record of 10,577 tonnes. I am very proud of the entire Largo team who have consistently demonstrated their ability to achieve new production records while maintaining cost discipline. In addition to the ferrovanadium conversion plant approval, the Board of Directors has also approved the construction of a V2O3processing plant at the Maracás Menchen Mine. Once completed, the Company expects to increase its premium yielding high purity sales in the vanadium-titanium-aluminum alloying market which is required for aerospace manufacturing, chemical industry and vanadium electrolyte used for vanadium redox flow batteries."_

He concluded: "The Company is continuing to monitor the rapidly developing impacts of the COVID-19 ("coronavirus") pandemic and will take all possible actions to help minimize the impact on the Company and its people. Our thoughts are with all of those affected by this virus. To date, there has been no impact on our production or on our shipment of product out of Maracás. At this time, there has been no significant disruption to the Company's supply chain for its operations and the level of critical consumables continues to be at normal levels. Additionally, not a single employee or contractor has tested positive for the virus and given its relative isolation, we believe that the risk to our operating team in Maracás remains relatively low. Largo continues to monitor and will, if and when required, implement business continuity measures to mitigate and minimize any potential impacts of the global pandemic on our operations, supply chain, and commercial and financial activities. The Company continues to follow best practices as provided by the World Health Organization and will provide additional updates as they are needed."

A summary of the operational and financial performance for the fourth quarter Q4 and full year 2019 is provided below:

| Financial | | | | | | | | | | | | | | | | | | | | | Three months ended | Year ended | | | | | | | | | | December 31, | | December 31, | | December 31, | | December 31, | | | | 2019 | | 2018 | | 2019 | | 2018 | | Revenues | $ | 34,118 | $ | 177,543 | $ | 140,012 | $ | 521,415 | | Direct mine and mill costs | | (20,025) | | (21,332) | | (84,252) | | (82,037) | | Operating costs | | (29,980) | | (37,637) | | (123,841) | | (135,746) | | Net income (loss) before tax | | (2,544) | | 131,091 | | (31,259) | | 322,654 | | Income tax (expense) recovery | | (1,190) | | (11,694) | | (1,144) | | (27,467) | | Deferred income tax (expense) recovery | | (1,219) | | (11,436) | | (3,809) | | 20,769 | | Net income (loss) | | (4,953) | | 107,961 | | (36,212) | | 315,956 | | Basic earnings (loss) per share | | (0.01) | | 0.21 | | (0.07) | | 0.61 | | Diluted earnings (loss) per share | | (0.01) | | 0.16 | | (0.07) | | 0.49 | | | | | | | | | | | | Cash provided (used) before non-cash | | | | | | | | | | working capital items | $ | 16,507 | $ | 134,357 | $ | 28,630 | $ | 403,157 | | Net cash provided by operating activities | | 10,445 | | 144,165 | | 139,282 | | 352,074 | | Net cash (used in) financing activities | | 12,206 | | (64,811) | | (115,226) | | (177,786) | | Net cash (used in) investing activities | | (7,472) | | (6,198) | | (50,386) | | (18,989) | | Net change in cash | | 11,262 | | 78,127 | | (40,111) | | 151,463 | | | | | | | | | | As at | | | | | | | | December 31, | | December 31, | | | | | | | | 2019 | | 2018 | | Cash | | | | | $ | 166,077 | | 206,188 | | Working capital3 | | | | | | 102,013 | | 135,258 | | Trade payables | | | | | | 87,782 | | - |

| Operational | | | | | | | | | | | | | | | | | | | 2019 | 2018 | | | | | | | | Q4 | Q3 | Q2 | Q1 | Full Year | Q4 | Full Year | | | | | | | | | | | Total Ore Mined (tonnes) | 329,792 | 267,257 | 308,858 | 250,109 | 1,156,016 | 256,436 | 822,795 | | Ore Grade Mined - Effective Grade (%)6 | 1.36 | 1.52 | 1.21 | 1.29 | 1.34 | 1.33 | 1.30 | | | | | | | | | | | Effective Grade of Ore Milled (%)6 | 1.57 | 1.44 | 1.49 | 1.51 | 1.50 | 1.53 | 1.68 | | Concentrate Produced (tonnes) | 100,879 | 92,629 | 102,320 | 86,673 | 382,501 | 92,190 | 343,126 | | Grade of Concentrate (%) | 3.28 | 3.26 | 3.30 | 3.32 | 3.29 | 3.27 | 3.41 | | Contained V2O5(tonnes) | 3,310 | 3,016 | 3,380 | 2,874 | 12,580 | 3,016 | 11,718 | | | | | | | | | | | Crushing Recovery (%) | 96.6 | 96.5 | 98.0 | 97.0 | 97.0 | 97.4 | 97.2 | | Milling Recovery (%) | 96.0 | 97.0 | 97.9 | 96.8 | 96.9 | 97.9 | 96.9 | | Kiln Recovery (%) | 89.7 | 88.8 | 88.8 | 89.2 | 89.1 | 84.3 | 86.6 | | Leaching Recovery (%) | 96.7 | 97.2 | 95.7 | 97.7 | 96.8 | 96.5 | 97.2 | | Chemical Plant Recovery (%) | 96.1 | 96.7 | 97.1 | 97.7 | 96.8 | 97.2 | 97.0 | | Global Recovery (%)7 | 77.3 | 78.1 | 79.1 | 80.0 | 78.5 | 75.3 | 77.0 | | | | | | | | | | | V2O5produced (tonnes) | 3,011 | 2,952 | 2,515 | 2,099 | 10,577 | 2,595 | 9,830 | | V2O5produced (equivalent pounds1) | 6,638,111 | 6,508,038 | 5,544,619 | 4,627,497 | 23,318,266 | 5,720,989 | 21,671,415 |

Fourth Quarter and Full Year 2019 Financial Results

The Company recorded a net loss of $36.2 millionin 2019 compared to net income of $316.0 millionin 2018. This movement was primarily due to a decrease in revenues during the year and was partially offset by a decrease in operating costs of $11.9 million, a decrease in finance costs of $21.4 millionand an increase in interest income of $5.7 million. In Q4 2019, the Company recorded a net loss of $5.0 millioncompared to net income of $108.0 millionin Q4 2018.

The Company's total sales of V2O5in 2019 were 10,160 tonnes which includes 1,640 tonnes of high purity V2O5. Total high purity sales in 2019 increased 14% over the 1,440 tonnes sold in 2018. Total sales of V2O5in Q4 2019 were 2,860 tonnes which includes 480 tonnes of high purity V2O5.

Following the $137.3 millionreduction in revenues as a result of the re-measurement of trade receivables / payables under the Glencore contract, the Company recognized revenues of $140.0 millionin 2019 compared with revenues of $521.4 millionin 2018. Revenues per pound sold4in 2019 were $6.25(US$4.70)compared with $24.33(US$18.68)per pound in 2018. For Q4 2019, the Company recognized revenues of $34.1 millioncompared with revenues of $177.5 millionin Q4 2018. Revenues per pound sold4in Q4 2019 were $5.41(US$4.09)compared with $31.96(US$24.19)per pound in Q4 2018.

Vanadium sales from a contract with a customer was $277.3 millionin 2019, compared with $455.4 millionin 2018. Vanadium sales per pound sold4 in 2019 was $12.38(US$9.32)compared to $21.25(US$16.32)per pound in 2018. This decrease is primarily attributable to a decrease in the V2O5price, with the average price per lb of V2O5of approximately US$9.36for 2019, compared with approximately US$18.30for 2018. Vanadium sales from a contract with a customer was $47.6 millionin Q4 2019, compared with $167.6 millionin Q4 2018. Vanadium sales per pound sold4 in Q4 2019 was $7.54(US$5.70)compared to $30.17(US$22.84)per pound in Q4 2018. This decrease is primarily attributable to a decrease in the V2O5price, with the average price per lb of V2O5of approximately US$5.37for Q4 2019, compared with approximately US$24.53for 2018.

31, 2019 | December

31, 2018 | December

31, 2019 | December

31, 2018 | | | | Vanadium sales from a contract with a customer | $ | 47,568 | 167,639 | 277,285 | 455,368 | | Vanadium sales per pound sold4 ($/lb) | $ | 7.54 | 30.17 | 12.38 | 21.25 | | Vanadium sales per pound sold4(US$/lb) | $ | 5.70 | 22.84 | 9.32 | 16.32 | | | | | | | | | Re-measurement of trade receivables / payables | $ | (13,450) | 9,904 | (137,273) | 66,047 | | Revenue adjustment per pound5($/lb) | $ | (2.26) | 3.65 | (6.05) | 3.53 | | Revenue adjustment per pound5(US$/lb) | $ | (1.71) | 2.76 | (4.55) | 2.71 | | | | | | | | | Revenues | $ | 34,118 | 177,543 | 140,012 | 521,415 | | Revenues per pound sold4($/lb) | $ | 5.41 | 31.96 | 6.25 | 24.33 | | Revenues per pound sold4($US/lb) | $ | 4.09 | 24.19 | 4.70 | 18.68 |

As a consequence of the negative revenue adjustment per pound5realized in Q4 2019 and in 2019, the Company's trade payables balance at December 31, 2019was $87.8 millionand the revenue adjustment payable5was $95.7 million(US$73.6 million). Assuming V2O5prices remain the same as at December 31, 2019, the Company's estimated revenue adjustment payable5for V2O5sold to December 31, 2019is $96.2 million(US$74.0 million). At the date of this press release, the Company's estimated revenue adjustment payable for V2O5sold5to February 29, 2019is approximately $94.4 million(US$72.6 million).

The Company has forecast its expected cash balance and the estimated revenue adjustment payable5at April 30, 2020under three different vanadium price scenarios. Each scenario assumes that the vanadium price shown in the table below applies from January 1, 2020to April 30, 2020and constant foreign exchange rates and cash operating costs per pound produced2consistent with the guidance released. The forecast balances, which constitute forward-looking information, are shown in the table below.

The Company is continuing to monitor the rapidly developing impacts of the COVID-19 pandemic and will take all possible actions to help minimize the impact on the Company and its people. Given these uncertainties, the Company is actively working to secure credit facilities to provide it with additional cash resources should the impacts be significant. In March 2020, the Company secured a US$13.0 millioncredit facility in Brazil. All amounts drawn under the facility are due to be repaid as a lump sum at maturity in 359 days.

| | | | | | | | | | | US$5.00/lb | | US$6.00/lb | | US$7.00/lb | | Forecast cash at April 30, 2020 | $ | 165,295 | $ | 165,464 | $ | 165,949 | | Estimated revenue adjustment payable5at April 30, 2020 | | 93,281 | | 84,474 | | 75,826 | | Net | $ | 72,014 | $ | 80,990 | $ | 90,123 |

Operating costs in 2019 were $123.8 millioncompared to $135.7 millionin 2018 and include direct mine and mill costs of $84.3 million($82.0 millionin 2018), depreciation and amortization of $31.7 million($31.0 millionin 2018) and royalties of $7.9 million($22.7 millionin 2018). For Q4 2019, operating costs were $30.0 millioncompared to $37.6 millionin Q4 2018 and include direct mine and mill costs of $20.0 million($21.3 millionin Q4 2018), depreciation and amortization of $8.0 million($7.3 millionin Q4 2018) and royalties of $2.0 million($9.0 millionin Q4 2018). The decrease in direct mine and mill costs in Q4 2019 is primarily attributable to the recovery of operating cost related tax credits totaling R$12.3 million. Additionally, the decrease in royalties in 2019 from 2018 is due to a decrease in V2O5price.

Cash operating costs excluding royalties2in 2019 were $3.92(US$2.95)per pound compared to $4.41(US$3.38)in 2018, representing a decrease of 13%. Cash operating costs excluding royalties2in Q4 2019 were $3.28(US$2.48)per pound compared to $4.60(US$3.48)in Q4 2018 which represents the lowest unit costs achieved since commencement of operations in 2014. The decrease seen in Q4 2019 compared with Q4 2018 is largely due to the Q4 2019 production of 3,011 tonnes of V2O5being 416 tonnes higher than the 2,595 tonnes produced in Q4 2018, as well as an improvement in the global recovery level and the recovery of tax credits.

Interest income in 2019 was $6.6 millionrepresenting an increase of $5.7 millionover 2018. For Q4 2019, interest income was $1.1 millioncompared to $0.6 millionin Q4 2018. This is due to the Company's increased cash position during Q4 2019 and in 2019 which has enabled it to benefit from greater deposit interest rates.

Fourth Quarter and Full Year 2019 Operational Results

Total V2O5production of 3,011 tonnes during Q4 2019 was 16% higher than Q4 2018. Production in December 2019achieved a new monthly record with 1,162 tonnes of V2O5produced, which contributed to the total V2O5production in 2019 of 10,577 tonnes being 747 tonnes higher than in 2018. In October, 946 tonnes of V2O5was produced, with 903 tonnes produced in November. Q4 2019 production was 2% higher than in Q3 2019, primarily due to the successful completion of the expansion in the milling and evaporation areas, which enabled the full plant to achieve its expanded design capacity.

In Q4 2019, 329,792 tonnes of ore were mined with an effective grade6of 1.36% of V2O5. The Company produced 100,879 tonnes of concentrate ore with an effective V2O5grade of 3.28%, compared with 92,190 tonnes produced in Q4 2018 with a grade of 3.27%. The Company uses production drilling prior to blasting to better define the ore and waste material being mined. This dilution control procedure has enabled the Company to avoid mining waste rock inside the ore block, resulting in less ore being mined, but with a higher grade than expected. The effective grade milled reports higher than the effective grade mined as a result of dry magnetic separation which occurs between the two processes. The Company's crushing and milling costs have benefited from the implementation of these procedures as a result of lower throughput of material in these sections of the plant.

The Q4 2019 global recovery7of 77.3% was impacted by the lower global recovery7achieved in October 2019(72.9%) through the commissioning and ramp-up activities in the milling area. The 2019 global recovery7of 78.5% is higher than the 77.0% achieved in 2018, primarily due to the improved performance of the kiln, which increased its recovery from 86.6% in 2018 to 89.1% in 2019.

V2O3Processing Plant Approval

In addition to the previously approved ferrovanadium conversion plant, the Company's Board of Directors has also approved the construction of a V2O3processing plant at the Maracás Menchen Mine, which is expected to increase sales in the high purity aerospace market, chemical industry and vanadium electrolyte used for vanadium redox flow batteries. The Company expects the construction of the V2O3plant to begin in Q1 2021 and subsequent ramp up and commissioning of the plant to conclude in Q3 2021. Total capital expenditures are expected to be in the range of approximately US$10to 11 million.

Ilmenite Flotation Pilot Plant Study Proven Successful – Next Step: TiO2 Chemical Pilot Plant Study

The Company continues to evaluate the economic feasibility of extracting ilmenite concentrate and titanium dioxide (TiO2) from its non-magnetic tailings at the Maracás Menchen Mine. To date, the Company has successfully proven its ability to produce ilmenite concentrate using an ilmenite flotation pilot plant. The Company is expected to commence the next phase of testing in April 2020to further upgrade its ilmenite concentrate into TiO2using an additional chemical pilot plant. The Company will continue to provide updates as these studies progress.

Q1 2020 Operational Update and Q2 2020 Financial Results Outlook

Subsequent to Q4 2019, production in January 2020was 956 tonnes of V2O5, with 915 tonnes of V2O5produced in February 2020. Production in January 2020was impacted by shutdowns of the kiln and cooler to fix the refractory and maintenance to correct an instability in the kiln feed. February 2020production was impacted by a kiln shutdown to fix a hot spot in the refractory. In April 2020the Company is planning an upgrade to the kiln burner and improvements in the cooler with the aim of increasing kiln capacity by 10%. This will require the kiln and cooler to be shut down for approximately 15 days. During this period, the Company will replace approximately 15 to 20 metres of the cooler refractory. The Company estimates that production in April 2020will be approximately 500 tonnes of V2O5.

In addition to the impact on production as a result of kiln upgrades and cooler maintenance in April 2020, the Company expects its Q2 2020 financial results to be impacted by lower sales realized in the quarter as a consequence of inventory working capital due to shipping and ferrovanadium conversion lead times. Assuming an increase or decrease in the V2O5price of US$1.00/lb after April 1, 2020, the Company expects the revenue adjustment payable8to impact future periods (positively or negatively) by approximately US$7.4 million($10,730using a foreign exchange rate of 1.45).

2020 Guidance Update

The Company's 2020 guidance presented in the following table is prepared on a "business as usual" basis. Notwithstanding the Company's production, cost and sales guidance for 2020, Largo is conscious of the rapid expansion of the COVID-19 pandemic and the evolving measures being imposed by governments globally to reduce its spread and the impact that this may have on our guidance. To date, the restrictions imposed by the government in Brazilhave not impacted our operations but the potential future impact of these restrictions and other restrictions globally on our operations, sales efforts and logistics is unknown but could be significant. The Company will continue to monitor the situation and will, if and when necessary, update the market.