TORONTO (miningweekly.com) – Having started to feed vanadium concentrate into the heated kiln at its Maracas vanadium project in Bahia, Brazil, Canadian miner Largo Resources is bullish on supplying a significant chunk of the growing global demand for the steelmaking ingredient.

The TSX-V-listed company expeced to capture 7.5% of the global vanadium market within a year and believed that there was ample upside to swell output through a series of expansions in the coming years, as demand and market conditions warranted.

“Of every commodity, there is one best deposit and for vanadium it is Maracas. It is the richest, highest-grade vanadium deposit in the world,” president and CEO Mark Brennan said in an interview with Mining Weekly Online.

With the global market bolstered by strong demand from Chinese smelters producing higher-quality steel, similar to European or US standards, and materials advances in the aerospace industry, the global market is expected to grow at about 5% a year.

Vanadium is added to steel in small quantities to make it significantly stronger and more resistant to rust.

The Toronto-based project developer last month formally inaugurated the $240-million project, receiving its preliminary operating licence for production, which was issued after completing plant commissioning. A final operating licence is expected within 180 days.

Brennan said despite the company dealing with some initial teething problems at the front-end of the plant, no critical issues had been found as the plant ramped up. He expected the mine to declare commercial production when the plant had achieved a throughput rate of between 50% and 60% of the nameplate capacity by September or October, with full production expected from the first quarter of 2015.

Largo expects output to reach a rate of 9 600 t/y of vanadium pentoxide within the next 12 months, at cash costs of between $5.50/kg and $6/kg. A second phase of expansion will see output rise to 14 400 t/y within the next three years, potentially giving the company the ability to supply up to 10% of the global demand.

Brennan said the second phase expansion and any subsequent potential plant expansions, would deliver exceptional returns on investment, boosted by Maracas’ high grades and low costs.

However, for now, Largo is focused on achieving the most rapid payback on its investment, having also cut back on growth expenses, such as exploration, until the company becomes cash-flow positive.

The Maracas deposit has total compliant proven and probable reserves of 13.1-million tonnes, grading 1.34% vanadium pentoxide, 24.6-million tonnes, grading 1.11% in the measured and indicated categories, and 30.4-million tonnes, grading 0.83% in the inferred category.

The mineral reserve, as originally defined in the 2008 feasibility study, is located at the project's primary deposit, Gulcari A, which extends 400 m along strike to a vertical depth of over 350 m, with an average width of about 40 m.

The company has a six-year agreement to sell all of Maracas’ output to global trading firm Glencore. Brennan said the take-or-pay contract was fixed to the Metal Bulletin price fix for vanadium, providing the firm with pricing upside as demand grows.

Brennan explained that the project took seven years to develop to where it was today, almost failing during the 2008 financial crisis. However, Brazil's State-owned development bank BNDES stepped in to help finance the mine during the most difficult market conditions in recent years.

Largo’s TSX-V-listed stock had gained 28.57% in value over the last six months, and on Thursday changed hands at C$0.265 apiece.