Largo receives $56M term sheet for iron ore calcine stockpiled at Brazil mine

[Ben Graham]

Largo (TSX, NASDAQ: LGO) has received a binding term sheet for the potential sale of iron ore calcine, a byproduct of its vanadium mining operations in Brazil.

The term sheet provides for a multi-year contract to sell 4.5 million tonnes of iron ore calcine for cash proceeds of $56 million, the Toronto-based company said Monday. The material, as Largo highlights, has been stockpiled over the past 11 years at its Maracás Menchen mine in Maracás, Bahia.

“This binding term sheet reflects external demand for materials generated as byproducts from our operations and highlights the strategic value of Largo’s byproduct inventory as a way to enhance further the cost-competitiveness of our vanadium business,” Alberto Arias and Daniel Tellechea, co-CEOs of Largo, said.

The company regards this as an opportunity to unlock value from its significant inventory of mineral byproducts such as iron ore and titanium while maintaining focus on its core vanadium business. The term sheet remains subject to final documentation, amendments to certain commercial terms and customary conditions, it said.

Shares of Largo jumped as much as 7.1% to C$1.55 on the TSX following the announcement, taking its market capitalization to C$126.6 million ($92 million).

Largo is amongst the world’s leading primary producers of vanadium, a critical mineral used in the steel, aerospace, defense, chemical, and energy storage sectors. Production at its Maracás Menchen mine, one of the world’s highest-grade vanadium resources, first began in 2014 and is expected to last over 30 years.