RIO DE JANEIRO, May 21 (Reuters) - Canada's Largo Resources Ltd opened Latin America's first vanadium mine on Wednesday and aims to produce 7.5 percent of global supply of the steel-making ingredient within a year.
With China producing more higher-grade steel similar to standards in Europe and the United States, demand for vanadium has risen. Vanadium is added to steel in small quantities to make it stronger and more resistant to rust. Two pounds of vanadium added to a tonne of steel can double the steel's strength.
Largo Resources hopes to take advantage of this trend in steelmaking to expand operations in Brazil's northeastern state of Bahia and capture as much as 40 percent of the vanadium market over the next decade.
"It's the richest, highest-grade vanadium deposit in the world, and our hope is that it will be the lowest-cost producer in the world too," Chief Executive Mark Brennan said in an interview.
The company has a six-year agreement to sell 100 percent of output to trading giant Glencore Xstrata.
The project has been seven years in the making and struggled through the 2008 financial crisis when Largo Resources' lost more than 90 percent of its value over a couple of months.
Brennan said Brazil's state-owned development bank BNDES stepped in to help finance the mine at a time when his company would have had difficulty borrowing money from banks in Europe or the United States.
"It's been a long, long haul... we're very excited to bring it to fruition and production," Brennan said.
Largo Resources expects production to reach a rate of 9,600 tonnes a year of vanadium pentoxide within the next 12 months. A second phase of expansion aims to raise output to 14,400 tonnes a year within the next three years.
Largo Resources shares fell 5.2 percent in morning trading in Vancouver but are up 20 percent over the last three days. (Reporting by Stephen Eisenhammer; Editing by Grant McCool)