TGR: You also have some holdings in vanadium. What’s the supply-and-demand story there?
PR: Vanadium has two main potential demand factors. The first, and most immediate, is in steel. Since the Chinese earthquakes, for example, the need for vanadium for building earthquake-proof structures has become very important there. As an alloy, it’s also used in automobile and aircraft production, to reduce the weight of vehicles and planes. Longer term, vanadium will play a role in storage batteries. That could create a quantum leap in demand.
The total world supply market is about 127,000 tons (127 Kt). Demand exceeds that slightly, at 136 Kt. Supply is concentrated in China, South Africa and Russia, with China being the biggest producer. Largo Resources Ltd. (LGO:TSX.V) is about to commission a new vanadium production facility in Brazil, which will be a welcome addition to global supply.
Vanadium pricing has been weak for some time. With restricted supply and a structural long-term upshift in demand, we expect vanadium pricing to improve over the next couple of years. Largo offers a cheap entry into vanadium.
TGR: When will Largo’s Maracas project be in production?
PR: It’s ramping up right now, and I expect it to be running at full production by the end of June. This company should be generating around $100M in annual cash flow by 2016, which makes Largo extremely cheap right now.
TNG Price at posting:
17.0¢ Sentiment: Buy Disclosure: Held
