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Why Largo Resources Ltd (OTCMKTS:LGORF) May be Carving Out a Key Low

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One stock that continues to hit our radar as a potential pullback opportunity is Largo Resources Ltd (OTCMKTS:LGORF). To help further flesh out that story, the company just announced the renewal of its Superintendência do Desenvolvimento do Nordeste tax incentive which extends the Company’s current tax rate of 15.25% to December 2028.

According to the release, “The Company’s current SUDENE tax incentive reduces its effective tax rate from 34.0% to 15.25% and was granted in January 2015 for a period of ten years on annual production of 9,636 tonnes of vanadium pentoxide (“V2O5”). Under the renewed incentive, the Company’s current tax rate has been extended to December 2028 including the calendar year of 2019 and applies to the production of up to 13,260 tonnes of V2O5 per year. In accordance with the SUDENE tax incentive, the Company can apply for additional extensions within 12 months of the expiry date following continued investment in the regional areas of north east Brazil.”

Largo Resources Ltd (OTCMKTS: LGORF) bills itself as a natural resource development and exploration company, engages in the acquisition, exploration, and development of mining and exploration properties located in Brazil and Canada. The company primarily explores for vanadium, iron, tungsten, molybdenum, chromite, palladium, and platinum group metals. Its flagship project is the Maracás Menchen Mine that consists of 18 concessions covering an area of 17,690.45 hectares located in Bahia State, Brazil.

The company was formerly known as Consolidated Kaitone Holdings Ltd. and changed its name to Largo Resources Ltd. in June 2004. Largo Resources Ltd. was incorporated in 1988 and is headquartered in Toronto, Canada.

Moreover, Largo Resources Ltd. is a mid-tier mining development company primarily focused on the production of vanadium at its Maracas Menchen Mine in Brazil.

According to company materials, “Largo is a Toronto-based strategic mineral company focused on the production of vanadium flake, high purity vanadium flake and high purity vanadium powder at the Maracás Menchen Mine located in Bahia State, Brazil. The Company’s common shares are principally listed on the Toronto Stock Exchange.“

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As noted above, LGORF just announced the renewal of its Superintendência do Desenvolvimento do Nordeste tax incentive which extends the Company’s current tax rate of 15.25% to December 2028.

The chart shows 18% tacked on to share pricing for the listing in the past month. Moreover, the listing has witnessed a pop in interest, as transaction volume levels have recently pushed 46% beyond its prior sustained average level.

Paulo Misk, President and Chief Executive Officer of Largo stated: “Largo remains very committed to the economic development in the local and regional areas of north east Brazil. We continue to make material investments which result in significant direct and indirect employment generation in these areas. We are very proud of our contributions to date and will continue to operate in a manner that supports local culture and identity, while strengthening socio-economic development for years to come.”

Currently trading at a market capitalization of $436M, LGORF has a significant war chest ($154.8M) of cash on the books, which must be weighed relative to about $96.1M in total current liabilities. LGORF is pulling in trailing 12-month revenues of $283.4M. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -78.5%. We will update the story again soon as further details emerge. Sign-up for continuing coverage on shares of $LGORF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $LGORF, either long or short, and we have not been compensated for this article.

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