Shareholders and friends,
We’re excited to provide an update on recent activity in the vanadium market – it seems vanadium is finally picking up steam with help from China’s increasing use of vanadium in steel .
Metal Pages published an article from Beijing yesterday entitled, “INSIGHT - China’s new rules on use of high strength rebar set to boost vanadium demand” stating:
“The Chinese government is enforcing new rules aimed at promoting use of grade 3 reinforced steel bar (rebar), which is a high strength rebar containing vanadium...The move is expected to boost demand for vanadium…” (Metal Pages: Insight., Jan 9, 2013)
China’s mandated use of grade 3 rebar in all construction and engineering projects has long generated excitement for the vanadium market, however, until recently, this had not been fully implemented or enforced.
It is anticipated that implementation of this regulation could nearly double China’s consumption rate of Vanadium (Metal Pages: Feb 15, 2012).
This would be an incredibly significant development for the vanadium market as a whole. In 2010, China, the largest single consumer, accounted for 31% of vanadium consumption*, of an approximately 60,000 tonne global market. Largo estimates that this has increased since 2010 and that with this further increase, China’s demand for rebar, could potentially require an additional 30,000 tonnes of vanadium per annum.**
Increasing demand seems to be driving prices. In recent weeks, Vanadium pricing has dramatically increased. Prices have risen over 10% since the beginning of 2013 (Metal Pages Pricing: Jan 9, 2013).
Metal Pages published another article yesterday entitled: “European ferro-vanadium prices surge to 30-month high,” which states:
“Material [ferro-vanadium] is now changing hands in a range between $31.50-32.50/kg, though there are separate reports of material going for as high as $33.50/kg and as low as $30-31/kg.
Vanadium pentoxide has also jumped from $5.80-6/lb to $6-6.80/lb, leading trade sources to question whether material has already reached the $7/lb mark.” (Metal Pages: European., Jan 9, 2013)
Likewise, Metal Bulletin published an article yesterday, entitled, “FeV prices likely to continue rising through Q1” which attributed vanadium price increases to increasing demand from china and limited availability. The article also states:
“[FeV] Prices in China are already breaking through $33 and even $34 per kg, sources have said, and this is likely to have a knock-on effect on prices in Europe.” (Metal Bulletin. Jan 9, 2013)
With prices at these levels, Largo’s Maracas Vanadium project continues to present extremely attractive economics (see press release issued September 13, 2012). Management encourages shareholders and friends to stay tuned for our upcoming Preliminary Economic Assessment which is due to be released by the end of Q1, 2013 (as announced September 26, 2012) and will explore the economics of an expanded production scenario.
Hope this will be a great year for vanadium and Largo! We will keep you up to date as the situation progresses.
Yours truly,
LGO Management
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*Roskill. Vanadium: Global Industry Markets and Outlook. (2010)
**Contains forward looking information - see below disclaimer regarding forward looking statements
Sources:
Metal Bulletin: Hack, Claire. FeV prices likely to continue rising through Q1. Jan 9, 2013: http://bit.ly/VLBOh9
Metal Pages: Evans, John. European ferro-vanadium prices surge to 30-month high: Jan 9, 2013: http://bit.ly/ZnZ8Sx
Metal Pages: INSIGHT - China’s new rules on use of high strength rebar set to boost vanadium demand: Jan 9, 2013: bit.ly/VPS3cT
Metal Pages: Global Markets 2012: China's latest five year plan to boost vanadium consumption. Feb 15, 2012. http://bit.ly/VaNEzx
Disclaimer Regarding Forward Looking Statements
The estimate relating to China's consumption of Vanadium information is “forward-looking information”, within the meaning of the Canadian securities laws. This forward-looking information is based on the opinions and estimates of management as of the date hereof, and it is are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by the forward-looking information. There can be no assurance that the estimate provided will prove to be accurate, as actual results and future events could differ materially from those anticipated. Accordingly, readers should not place undue reliance on the forward-looking information. The Company does not undertake to update its estimate relating to China's consumption of Vanadium, except in accordance with applicable securities laws.
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