When Vanadium Investing News (VIN) checked in with Largo Resources (TSXV:LGO) near the start of last month, the company was just getting the kiln ready at its flagship Maracas project in Brazil. Today, Largo announced that it has achieved first production at the project, marking what President and CEO Mark Brennan is calling the "most significant milestone in the Largo's history." The Toronto-based development company has vanadium, tungsten and molybdenum projects in both Canada and Brazil. However, Largo is mainly focused on ramping up vanadium production at Maracas at present. According to the company's press release, the first vanadium pentoxide material was produced at Maracas on August 2. Test work has indicated that the material is up to snuff in terms of Largo's six-year offtake agreement with Glencore (LSE:GLEN). The world's largest vanadium trader has agreed to buy 100 percent of the material that Largo produces at Maracas provided that the product meets specifications outlined in the agreement. Now that production has started, Largo expects to keep building momentum at Maracas. Production volumes are anticipated to increase steadily, with the company aiming to hit 9,600 tonnes — the project's Phase 1 nameplate capacity — before its first year of operations is finished. Competitive advantage All in all, it's good news for Largo. Brennan commented on today's announcement, stating, "[a]chieving production at Maracas is the most significant milestone in Largo's history and we expect this marks the beginning of a period of substantial growth for the company. With our high quality deposit and anticipated substantive cost advantage, Largo is expected to become a market leader for vanadium in the near-term." To be sure, Largo has a competitive advantage in terms of vanadium production. As VIN previously noted, Brennan has been cited as saying that Maracas is second to none in terms of timing, with the project being "one of the first vanadium mines that will be going into production in a long time." Furthermore, current operations are mainly based in China, South Africa and Russia, but Chinese producers are feeling pressure due to environmental regulations, Brennan has told The Wall Street Journal.
It's thus easy to see why Glencore wanted to get its hands on the entirety of Maracas' initial production, and investors will no doubt take comfort in knowing that a buyer has already been secured for all production from the mine. Overall, Largo anticipates it could supply 9.5 percent of the world's vanadium needs by 2016, according to the Journal.Brennan also said, "[a]s we ramp up production at Maracas and begin generating strong cash-flow, I believe that Largo presents a unique opportunity as the only pure play vanadium producer for investors to gain exposure to the vanadium market." All about management Also of interest for investors is the skilled management and technical team behind Largo and Maracas, and the success that bringing the project to production represents. Brennan stated in today's release, "I would also like to highlight how rare it is for a mining development company to successfully finance, build and bring a project to production, as Largo has now done, and I hope that our shareholders and market participants will join us in recognizing and congratulating Largo's technical team in achieving this momentous accomplishment." Of course, it is always important to look at management practices when investing in the resource sector, and it is definitely worth noting when a team is able to reach tangible success with a project. Certainly, Largo saw a positive response from investors today — at close of day, the company's shares were up 5.97 percent, trading at $0.355. Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned. Related reading: Largo Resources Closing in on Vanadium Production at Maracas Largo Resources Reaches First Production at Maracas Vanadium Project, Brazil from Vanadium Investing News