Vanadium producer Largo Resources — changing of the guard
When NioCorp Developments Ltd. (“Niocorp”, TSXV: NB | OTCQX: NIOBF) picked up Mark Smith, fresh from Molycorp, as its CEO, it was not difficult to fall back on analogies that likened NioCorp’s “catch” to bagging one of the biggest fish in the specialty metals space, indeed Mark Smith qualifies as the Great White Whale. The addition of Smith to the NioCorp team certainly did the trick as the one time REE explorer had repositioned itself as a Niobium player and Smith had previously been deeply inserted in the very rarified (pardon the pun) Niobium space when Molycorp back in its Chevron/Unocal manifestation had a strategic stage in the Brazilain giant, CBMM, that mines over 80% of the world’s Niobium supply. In that capacity he had sat on the board of CBMM and knew the inner working of the Niobium space. Over the last year Niocorp has got increased traction with institutional shareholders and the effects can be seen in the price chart below. This was crowned in the last week with a jump to the TSX Main Board from the TSXV. Frankly it is almost inevitable that the company will end up with a US listing, considering that the US is where the company’s Elk Creek deposit in located.
So the latest developments at Largo look like the Brazilian Vanadium miner is hoping that it too can harvest some of the Mark Smith magic to propel its stock price higher and raise its profile in the US markets. Smith also brings significant history in dealing in Brazil.
As most people know Mark Smith served as the President of MolyCorp Minerals, LLC and was its Chief Executive Officer from October 2008 to 2012. He had previously held numerous engineering, environmental and legal positions within Unocal and later Chevron. He was responsible for Chevron’s three coal mines, one molybdenum mine, a petroleum coke calcining operation and the Mountain Pass REE mine. He also managed the real estate, remediation, mining and carbon divisions of Unocal Corporation from May 1984 to August 2005. In total he worked for Unocal for over 22 years. He was also a Director for Avanti Mining Inc. since November 9, 2009.
He had been a Non-Executive Director at Talison Lithium Limited which was part of the Resource Capital stable of interests (as was Molycorp), until Talison was taken over by Chinese interests in 2013. As mentioned earlier he served as a Director of Companhia Brasileira de Metalurgia e Mineracao (CBMM), part of the Moreira Salles Group.
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While the story of Molycorp has not exactly been joyous of late, Mark Smith’s reputation is as a builder of mines, not a faker as is so common in Canadian juniors. Niocorp has certainly been moving along a trajectory to realization with a loan guarantee from Germany in the pipeline (underpinned by the offtake agreement with Thyssen-Krupp), a recent financing of over $2mn and an expanded resource statement highlighting the Titanium and Scandium potential at Elk Creek.
I would also remind that investors that Largo also owns a Tungsten project (Currais Novos) in Brazil that began production and then swiftly shut down due to the multi-year drought that has afflicted Brazil. Recent reports of rains may put this asset back in contention again.
So what does the latest move mean? One can let the imagination run riot with the fact that Smith shall run both Largo and Niocorp at the same time. Does this presage an eventual merger? Then again bringing Smith on board in Brazil might very well be linked to Largo’s next expansion move. Might it try and pick up the Catalão Niobium facility in the state of Goias, which is owned by Anglo American Brazil. It has the smallest reserves of the three Niobium “majors”. There has been speculation that the mine may run out of ore if the deposit size cannot be increased, but we do not believe this. Anglo-American mines the majority of its niobium ore from the Boa Vista open pit. It processes it in Catalão and Ouvidor and exports ferroniobium to the main steel plants in Europe, North America and Asia.
In recent times the company has invested US$325 million to expand the Boa Vista operation. The Boa Vista Fresh Rock project will increase production capacity by almost 50% to 6,500 tonnes per year and potentially moves the complex up to be the second largest producer of niobium worldwide. Certainly combining this with Largo would make a very sexy beast in the steel alloy metals market.
Such an entity would be attractive to the US market and so we may see Largo making a push to become even more US-centric in its shareholder base.
If there is one thing that one can be sure of when Mark Smith walks in the door, there will be never a dull moment..
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>