Largo Reports Robust Projected Economics From Feasibility Study for ...

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Projected Cash Flows and Economic Results

Based on an estimated initial capital investment of US$270.6million and the milling of 13,079,000 tonnes of ore at a dilutedgrade of 1.34 % vanadium pentoxide, the Maracas project isprojected to have a discounted payback of 1.9 years and generatecash flows of US$1,329.0 million over an estimated production lifeof 23 years on an after-tax basis that assumes the availablefederal corporate tax incentives are granted. This results in anafter-tax IRR of 41.7% and an after-tax NPV of US$450.7 at adiscount rate of 10% per year. This scenario results in theproduction of approximately 4,431 tonnes per year (tpa) of vanadiumcontained in 80% ferrovanadium alloy ("ferrovanadium")over the first eight years of mine life after which productiongradually decreases to stabilize at 1,748 tpa from year 14 to year22 with year 23 being a partial year of production.

Projected revenues are based on the sale of ferrovanadium as thesole product.

Price forecasts for vanadium pentoxide have been provided by CPMGroup of New York, USA. Their forecast indicates the long-termprice of ferrovanadium will stabilise at approximately $45.86 perkg, which is equivalent to V2O5 price of $8.00 per lb, after asteady decrease from current levels. The current prices forferrovanadium and vanadium pentoxide are approximately US$66 per kgand US$17 per lb, respectively.

A table summarizing the ferrovanadium prices in 2007 dollars usedin the cashflows from 2010 to 2018 as forecast by CPM Group isprovided below.

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Year 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Ferro-
vanadium
Price
(US$/kg) 73.30 65.04 59.97 58.75 56.22 52.47 51.04 48.17 45.86
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Prices beyond 2018 are forecast to be $45.86 per kg.

Corporate tax incentives are available through a Brazilian federalgovernment agency known as SUDENE. The mission of SUDENE is topromote sustainable development through tax incentives and othermeans in the Brazilian "Nordeste" in which the State ofBahia is located. The tax incentives currently include a reductionin corporate tax of 75%.

The economic results of the Feasibility Study (i) on a pre-taxbasis, (ii) on a regular tax basis with no tax incentives, and(iii) with corporate tax incentives, are summarised in thefollowing table.

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Pre-Tax No Corporate Tax With Corporate Tax
Incentives Incentives
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IRR (%) 43.9 34.9 41.7
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NPV @10% US$489.0 million US$335.9 million US$450.7 million
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Undis-
counted
cumulative
cashflow US$1,422.2 million US$1,049.4 million US$1,329.0 million
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The Feasibility Study was based on work carried out by PeimengLing, P. Eng. Of Aker Solutions and other consulting firmsincluding NCL Brasil of Nova Lima, Bahia, Brazil (NCL); ECM S.A. ofBelo Horizonte, Bahia, Brazil (ECM); VOGBR Recursos Hidricos &Geotecnia of Nova Lima, Bahia, Brazil (VOGBR); Brandt Meio Ambienteof Nova Lima, Bahia, Brazil (Brandt); Integratio of Nova Lima,Bahia, Brazil (Integratio); and SGS Mineral Services of Lakefield,Ontario (SGS) with Aker Solutions taking overall responsibility forcompiling the study. The primary scope of work responsibilities ofthese consultants was as follows:

- Aker Solutions: hydrometallurgical process, overall capital costestimation, economic analysis and compilation of reports

- NCL: mining

- ECM: process beneficiation and site infrastructure

- VOGBR: tailings management facility, site water management andcontrol and geotechnical investigations

- Brandt: environmental issues including environmental submissionsto the Bahia state environmental agency, Instituto de MeioAmbiente, (IMA)

- Integratio: environmental support and community engagement issues

- SGS Mineral Services: metallurgical testwork

Estimated Mineral Resources and Mineral Reserves

The Measured and Indicated Mineral Resource as reported by Micon inthe Micon Resource Report were estimated to be 17.26 million tonnesat a grade of 1.44 % vanadium pentoxide. The estimated resourceswere based on a US$3.50 Whittle pit shell and a V2O5 cut-off of0.66%. The mineral resource also contained platinum at a grade of0.21 g/t and palladium at a grade of 0.09 g/t (see Press Releasedated November 7, 2007).

In the Feasibility Study, NCL estimated the mineral reserves to be13,079,000 tonnes grading 1.34% vanadium pentoxide. Carlos GuzmanMAusIMM, of NCL, a qualified person in terms of NI 43-101 who isindependent of Largo, prepared the estimate.

The following table outlines the mineral reserve estimates, as atAugust 12, 2008. The mineral reserve terms used herein have themeaning ascribed thereto in the CIM Definition Standards.

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Contained V in
Reserve Grade ferrovanadium
Classification Tonnes (V2O5 %) (tonnes)
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Proven 7,341,000 1.28 33,451
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Probable 5,738,000 1.42 29,050
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Total Mineral Reserve 13,079,000 1.34 62,502
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The estimation of mineral reserves was based on a mine designdeveloped using Lerch-Grossman pit optimization techniques. Theinputs to the optimization were generally drawn from the MiconResource Report and the estimated mineral reserves are included inthe mineral resources described above. The optimization parametersare listed below:

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Parameter Value
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Price of V2O5 US$5.00 per lb
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Price of vanadium in ferrovanadium US$23.08 per kg
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Overall recovery from ore to product 63.4%
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Waste mining cost US$1.39 per tonne
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Ore mining cost US$1.42 per tonne
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Processing to V2O5 US$30.66 per tonne
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Processing to ferrovanadium US$0.35 per lb of V2O5
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General and Administrative US$2.12 per tonne
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Pit slope angle 45 degrees
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The pit design was based on a pit shell using a US$12.93 per kgprice assumption. A range of pit shells over a price range ofUS$6.92 to US$34.62 per kg were generated. The US$12.93 per kg pitshell was selected because it contains approximately 65% of thevanadium but just 26% of the waste rock tonnage compared to theUS$23.08 per kg pit shell. This selected scenario defines a projectlife of 23 years at the proposed processing capacity.

Drilling continues on the Maracas property with other explorationtargets being investigated. A priority vanadium target is the NovaAmparo zone contained within the property boundary. The possiblefuture development of this zone as an additional source of millfeed from open pit mining has been included in the application forenvironmental licensing currently in progress through the Bahiastate environmental agency (Instituto de Meio Ambiente). Thepresence of several other vanadium-bearing structures within theproperty, including Nova Amparo (see the Micon Resource Report),provides confidence regarding the longevity and potential, futureexpansion of the project.

Project Description

The deposit outcrops on surface and is amenable to open pit mining.The waste rock scheduled for mining is estimated to be 29,108,000tonnes, resulting in a Life-of-Mine strip ratio of 2.23:1. Open pitmining proceeds at a faster rate than milling in order to supplythe mill with higher-than-average-grade feed for the first 13 yearsof the mine life. The grade is projected to be highest in the firsteight years when the mill feed averages 1.94%. Excluding one yearof pre-stripping, the open pit is forecast to be mined out over 13years. However, milling of the lower grade material is projected tocontinue for a further ten years after completion of the milling ofthe higher grade material. Largo believes there is an opportunityto further optimise the mine plan, through additional phases ofmining to exploit the deeper parts of the resource. The pit wasdesigned based on a vanadium pentoxide price of US$3.40 per lb asthis approach provided economically favourable results for thepurposes of the Feasibility Study. The surface structures adjacentto the pit have been located beyond the anticipated surfaceexpression of deeper pits to allow for subsequent pit deepening ifdetermined to be economically justified in the future.

The process flowsheet has been based on work carried out by SGS andothers. The flowsheet comprises the following steps: comminution,concentration by magnetic separation, roasting, leaching,precipitation and production of ferrovanadium. Mill throughput is581,000 tpa. Overall vanadium recovery is estimated to be 71.6%.The ferrovanadium produced will be sold to Glencore under anoff-take agreement, as previously announced (see Press Releasedated May 14, 2008).

The execution schedule for implementation of the project preparedby Aker Solutions indicates ramp-up of production aftercommissioning occurring in the fourth quarter 2010 withcommencement of site work scheduled for the first quarter of 2009,subject to prior receipt of the environmental licence required tocommence construction. The implementation schedule has beenaccelerated by the identification of long-lead items, the ordersfor which are currently being negotiated.

Costs

Capital costs associated with infrastructure, mining equipment andconstruction of the process plant are estimated to be US$270.6million, including a contingency of US$45.8 million. The estimatehas an intended level of accuracy of +/-15%.

Operating costs before payment of royalties over the first eightyears of production are estimated to be US$15.49 per kg of vanadiumcontained in ferrovanadium. Life-of-mine costs are estimated to beUS$19.26.

Conclusions and Recommendations

The average grade at Maracas is high when compared to other knownvanadium mines of similar geology currently in production. In theFeasibility Study, Aker Solutions concluded that the Maracasvanadium deposit could form the basis on which to build a viableferrovanadium production operation.

Largo President and CEO Mark Brennan commented: "we aredelighted with the results of the Feasibility Study by AkerSolutions. I believe it sets apart Maracas as a robust vanadiumdeposit with the metrics from the Feasibility Study singling outthe project as having the potential to become one of the world'slowest cost primary producers of vanadium. Key milestones that willbe pursued in the weeks ahead include formal commencement of basicand detailed engineering, placement of orders for long-lead items,continued build-up of Largo's team to be based in Maracas,completion of key elements of the licensing process and thefinalization of the project financing. The potential for expansionof the project is also very exciting."

Conference call:

Largo Resources will hold a conference call for investors focusingon the financial results of the Feasibility Study at 11:00AM (ET)on Wednesday, August 13th.

The conference call information is as follows:

Local # 416-695-7848
North America# 1-800-952-6845
International# +1-416-695-7848

This press release was reviewed by Tim Mann, P.Eng., Largo's VP ofEngineering and a Qualified Person as per National Instrument43-101 who has the ability and authority to verify the authenticityand validity of information provided herein.

Aker Solutions which is responsible for delivery of the FeasibilityStudy has reviewed this Press Release.

About Largo

Largo Resources is a Canadian natural resource development andexploration company with two advanced stage projects: the MaracasVanadium-PGM deposit in Brazil and the Northern DancerTungsten-Molybdenum deposit in the Yukon. Largo also has a large(60,000 hectare) land position and prospective gold explorationproperties in Ecuador. The company is listed on the TSX VentureExchange under the symbol LGO.

For more information please refer to Largo's website:www.largoresources.com.

Disclaimer

This press release contains forward-looking statements underCanadian securities legislation. Forward-looking statementsinclude, but are not limited to, statements with respect to theLargo's development potential and timetable of the Maracas project;the Largo's ability to raise additional funds necessary to completethe project; the future price of ferrovanadium and vanadiumpentoxide; the estimation of mineral reserves and mineralresources; conclusions of economic evaluation; the realization ofmineral reserve estimates; the timing and amount of estimatedfuture production; costs of production; capital and operatingexpenditures; success of exploration activities; mining orprocessing issues; currency exchange rates; government regulationof mining operations; and environmental risks. Generally,forward-looking statements can be identified by the use offorward-looking terminology such as "plans","expects" or "does not expect", "isexpected", "budget", "scheduled","estimates", "forecasts", "intends","anticipates" or "does not anticipate", or"believes", or variations of such words and phrases orstatements that certain actions, events or results "may","could", "would", "might" or"will be taken", "occur" or "beachieved".

Forward-looking statements are based on the opinions and estimatesof management as of the date such statements are made. Estimatesregarding the anticipated timing, amount and cost of mining at theMaracas project are based on assumptions underlying mineral reserveand mineral resource estimates and the realization of suchestimates; detailed research and analysis completed by independentconsultants; research and estimates regarding the timing ofdelivery for long-lead items; knowledge regarding the factorsinvolved in building a mine in Brazil and other factors that willbe described in the technical report summarizing the FeasibilityStudy that will be filed under the profile of the Company on SEDAR.Capital and operating cost estimates are based on extensiveresearch of the Largo and independent consultants, recent estimatesof construction and mining costs and other factors that are set outin the Feasibility Study. Production estimates are based on mineplans and production schedules, which have been developed by theLargo's personnel and independent consultants. Forward-lookingstatements are subject to known and unknown risks, uncertaintiesand other factors that may cause the actual results, level ofactivity, performance or achievements of the Largo to be materiallydifferent from those expressed or implied by such forward-lookingstatements, including but not limited to risks related to:unexpected events and delays during construction, expansion andstart-up; variations in ore grade and recovery rates; receipt andrevocation of government approvals; timing and availability ofexternal financing on acceptable terms; actual results of currentexploration activities; changes in project parameters as planscontinue to be refined; future prices of ferrovanadium; failure ofplant, equipment or processes to operate as anticipated; accidents,labour disputes and other risks of the mining industry. Althoughmanagement of the Largo has attempted to identify important factorsthat could cause actual results to differ materially from thosecontained in forward-looking statements, there may be other factorsthat cause results not to be as anticipated, estimated or intended.There can be no assurance that such statements will prove to beaccurate, as actual results and future events could differmaterially from those anticipated in such statements. Accordingly,readers should not place undue reliance on forward-lookingstatements. The Largo does not undertake to update anyforward-looking statements, except in accordance with applicablesecurities laws.

THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THEADEQUACY OR ACCURACY OF THIS RELEASE.

Contacts:
Largo Resources Ltd.
Mark Brennan
President & CEO
(416) 861-5886
Email: mbrennan@largoresources.com
Largo Resources Ltd.
Tony LaMantia
VP, Corporate Development
(416) 861-5882
Email: tlamantia@largoresources.com
Website: www.largoresources.com

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