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ARGO RESOURCES LIMITE

VIEWS: 10 PAGES: 29

									                                 LARGO RESOURCES LTD




Management’s Discussion and Analysis
For the year ended December 31, 2010

The following Management’s Discussion and Analysis (“MD&A”) relates to the financial condition and
results of operations of Largo Resources Limited (“we”, “our”, “us”, “Largo”, or the “Company”) as at
and for the year ended December 31, 2010 and should be read in conjunction with the audited
consolidated financial statements and related notes for the year ended December 31, 2010 and the
audited consolidated financial statements and related notes for the year ended December 31, 2009.
The financial statements and related notes of the Company have been prepared in accordance with
Canadian generally accepted accounting principles (“GAAP”). Additional information, including our press
releases, has been filed electronically through the System for Electronic Document Analysis and Retrieval
(“SEDAR”) and is available online under our profile at www.sedar.com.

Unless otherwise noted this MD&A reports our activities through April 20, 2011. All figures are in
Canadian dollars unless otherwise indicated.

Andy Campbell M.Sc, P.Geo, Vice President of Exploration and Tim Mann P. Eng., Chief Operating
Officer, are Qualified Persons as defined under National Instrument 43-101 and have reviewed the
technical information in the MD&A. Messiers Andy Campbell and Tim Mann are officers of Largo.



                  Unless otherwise noted all amounts are recorded in Canadian dollars.


Table of Contents


Cautionary Statement Regarding Forward Looking Information……                                      Page      2

The Company …………….………………………………………………                                                              Page      3

Executive Summary …..…………………….………………………………………………                                                  Page      3

Overview and Outlook...………………………………………………………………….                                                 Page      4

Summarized Financial Results.…………………………………………………………                                               Page 14

Risks and Uncertainties……………………………….……………………………………                                                Page 24




                                                   1
                                 LARGO RESOURCES LTD
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The information presented contains “forward-looking statements”, within the meaning of the United
States Private Securities Litigation Reform Act of 1995, and “forward-looking information” under similar
Canadian legislation, concerning the business, operations and financial performance and condition of
the Company. Forward-looking statements and forward-looking information include, but are not limited
to, statements with respect to the estimation of mineral reserves and mineral resources; the realization
of mineral reserve estimates; the timing and amount of estimated future production; costs of production;
metal prices and demand for materials; capital expenditures; success of exploration and development
activities; permitting time lines and permitting, mining or processing issues; governmen t regulation of
mining operations; environmental risks; and title disputes or claims. Generally, forward -looking
statements and forward-looking information can be identified by the use of forward-looking terminology
such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words
and phrases or state that certain actions, events or results “may”, “could”, “would”, “mi ght” or “will be
taken”, “occur” or “be achieved”. Forward-looking statements and forward-looking information are
based on the opinions and estimates of management as of the date such statements are made, and
they are subject to known and unknown risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of the Company to be materially different from
those expressed or implied by such forward-looking statements or forward-looking information,
including, but not limited to, unexpected events during operations; variations in ore grade; risks
inherent in the mining industry; delay or failure to receive board approvals; timing and availability of
external financing on acceptable terms; risks relating to international operations; actual results of
exploration activities; conclusions of economic valuations; changes in project parameters as plans
continue to be refined; and fluctuating metal prices and currency exchange rates. Although
management of the Company has attempted to identify important factors that could cause actual
results to differ materially from those contained in forward-looking statements or forward-looking
information, there may be other factors that cause results not to be as anticipat ed, estimated or
intended. There can be no assurance that such statements will prove to be accurate, as actual results
and future events could differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements and forward-looking
information. The Company does not undertake to update any forward -looking statements or
forward-looking information that are incorporated by reference herein, except in accordance with
applicable securities laws.

Investors are advised that National Instrument 43-101 of the Canadian Securities Administrators
requires that each category of mineral reserves and mineral resources be reported separately. Mineral
resources that are not mineral reserves do not have demonstrated economic viability.

Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated or Inferred Resources
The information presented uses the terms “measured”, “indicated” and “inferred” mineral
resources. United States investors are advised that while such terms are recognized and required by
Canadian regulations, the United States Securities and Exchange Commission does not recognize
these terms. “Inferred mineral resources” have a great amount of uncertainty as to th eir existence, and
as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred
mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of
inferred mineral resources may not form the basis of feasibility or other economic studies. United
States investors are cautioned not to assume that all or any part of measured or indicated mineral
resources will ever be converted into mineral reserves. United States investors are also cautioned not
to assume that all or any part of an inferred mineral resource exists, or is economically or legally
mineable.




                                                    2
                                 LARGO RESOURCES LTD
THE COMPANY

Largo Resources Ltd. is a Canadian natural resource development and exploration company listed on
the TSX Venture Exchange (“TSXV”). The Company has several projects: the Maracás Vanadium
Project, The Campo Alegre de Lourdes Fe-Ti-V Project and the Currais Novos Tungsten Tailings
Project all located in Brazil, and the Northern Dancer Tungsten-Molybdenum deposit in the Yukon.
Largo is a development stage company in accordance with Canadian Institute of Chartered
Accountants ("CICA") Accounting Guideline 11.

EXECUTIVE SUMMARY

During the year ended December 31, 2010, the following occurred at Largo Resources Ltd:

      In September, 2010, The Company raised $4,997,500 by issuing 29,397,055 units of the
       Company at a price of $0.17 per unit, each unit is comprised of one common share of the
       Company and one common share purchase warrant. Each warrant is exercisable for one
       common share of the Company at a price of $0.25 until September 16, 2011.

      In March, 2010, The Company raised $8,000,000 by issuing 36,363,637 special warrants of the
       Company at a price of $0.22 per special warrant, Each special warrant entitled the holder thereof
       to receive one unit of the Company on the exercise or deemed exercise of the special warrant,
       each unit being comprised of one common share of the Company and one-half of one common
       share purchase warrant. Each whole warrant will entitle the holder thereof to purchase one
       common share at a price of $0.35 until March 5, 2011. The special warrants automatically
       exercised on May 3, 2010.

RECENT DEVELOPMENTS

      On April 11, 2011, the Company raised $114,951,596 by issuing 85,714,286 units and
       242,718,844 subscription receipts. Each unit and each subscription receipt was issued at a price
       of $0.35 per unit or subscription receipt. Each unit is comprised of one common share and one-
       third of one common share purchase warrant of the Company, where each warrant entitles the
       holder to acquire one further common share at a price of $0.50 for a period of 48 months from the
       date of issuance. Each subscription receipt is convertible, at no additional cost, into one unit on
       the same terms above upon the satisfaction of certain escrow release conditions or if exercised at
       the discretion of the holder.

      On March 29, 2011, the Company announced that it has made a $6 million payment to Metais
       Nao Ferrosos Da Bahia Ltda. (“M.N.F.B.”) to acquire an additional 10% interest in the Maracas
       Vanadium Project. The completion of this transaction brings the Company’s total interest in the
       project to 90%. The Company signed an agreement with Itau Brazil for a bridge loan in the
       amount of $6 million in order to complete payment to M.N.F.B. The bridge loan facility bears
       interest at 6% per annum and be secured against all of the shares of M.N.F.B. and Vanadio de
       Maracas Ltda.

      On March 14, 2011, the Company announced that it has negotiated a formal extension of the
       term during which it can purchase the remaining 30% interest it does not already own at the
       Northern Dancer Tungsten-Molybdenum deposit in the Yukon Territory until May 15, 2011. The
       Company currently holds a 70% interest in the Northern Dancer project.

      On February 28, 2011, the Company reported the results of a NI 43-101 compliant Preliminary
       Economic Assessment (the “PEA”) on the Northern Dancer Tungsten-Molybdenum Project
       located in the Yukon Territory, Canada. The corresponding technical report was completed by
       AMC Mining Consultants (Canada) Ltd (“AMC”). The results of the PEA conclude that the
       Northern Dancer Project has favorable economic potential for the low cost production of tungsten
       and molybdenum from an open pit operation. The Company intends to further advance the
       Project towards production and will proceed with the completion of a preliminary feasibility study
       immediately.
                                                   3
                                  LARGO RESOURCES LTD

       On December 14, 2010, the Company reported the results of a NI 43-101 compliant Preliminary
        Economic Assessment (the “PEA”) on the Currais Novos Tungsten Project, in Rio Grande de
        Norte, northeastern Brazil. The PEA has been completed by D.E.N.M Ltd. (“DENM”) of
        Burlington, Ontario. The results of the PEA are very positive and construction for the project is
        underway for the recovery of tungsten from mine tailings. Production of Tungsten (WO3
        concentrate) from the Currais Novos Project is expected to commence by June 2011.

       On November 22, 2010, the Company announced that it has increased its land position around
        the Maracás Vanadium Project. The Company increased its landholdings from the original two (2)
        concessions that made up the Maracás vanadium property that totalled 2,000 hectares to 21
        concessions totalling 27,172 hectares. These concessions cover the Rio Jacare Intrusion for over
        40 kilometres of strike length. The Rio Jacare Intrusion hosts the Gulçari “A” vanadium deposit
        which is part of the Maracás Vanadium Project. This makes the Company the largest land holder
        in the area.


OVERVIEW AND OUTLOOK

EXPLORATION PROPERTIES AND ACTIVITIES:

Maracás - Brazil

Background
The Maracás property is located 405 kilometres by road southwest of Salvador and has excellent access
and infrastructure. The nearest community is the town of Maracás situated 50 kilometres to the northeast
of the property with a population of 25,000. The property consists of 2 concessions covering 2,000
hectares which form a rectangle (2.5 km east-west by 8 km north-south). On November 22, 2010, Largo
announced that it has increased its land position around the Maracás Vanadium Project from the original
two (2) concessions to twenty one (21) concessions totalling 27,172 hectares. These concessions cover
the Rio Jacare Intrusion for over 40 kilometres of strike length The Rio Jacare Intrusion hosts the Gulçari
“A” vanadium deposit which is part of the Maracás Vanadium Project. This makes Largo the largest land
holder in the area.

The land is presently used for ranching and is covered by three large farms.

The Maracás vanadium deposits are hosted within a sequence of gabbros and pyroxenites of the 2.64
billion-year-old, Jacaré River layered mafic-ultramafic intrusion. This sheet-like linear intrusion extends
for 70 kilometres along a north-south strike averaging about 1.2 kilometres in width. There are a number
of striking similarities to the Great Dyke in Zimbabwe including age, rock types, platinum and palladium
ratio and style of intrusion as well as host rock that it intrudes. The Platinum Group Metals (“PGMs”)
found thus far at Maracás are associated with disseminated to massive bodies of titano-magnetite in
pyroxenites. This massive, titano-magnetite mineralization at Maracás ranges from 11 to 100 metres in
thickness with an average true width of 40 metres.

On April 10, 2007, the Company entered into a definitive agreement to acquire the rights to earn up to a
90% interest in Companhia de Maracás S.A. (“Companhia Maracás”), a Brazilian company which holds
an approximate 96% interest in Vanadio de Maracás Ltda (“Vanadio”) which holds title to the Maracás
property in Bahia State, Brazil.

The Company had the right to acquire up to a 90% interest in the Companhia Maracás for a purchase
price of US$10,000,000 payable as follows:
             US $1,000,000 on April 30, 2007 (paid);
             US $4,000,000 plus interest calculated at 5.5% on May 1, 2008 in order to acquire 51%
                (paid); and
             US $5,000,000 plus interest calculated at 5.5% on November 1, 2008 in order to acquire
             the remaining 39% (paid).

                                                    4
                                  LARGO RESOURCES LTD

The Company entered into an agreement with Metais Näo Ferrosos Da Bahia Ltda. (“MNFB”) whereby it
agreed to sell 10% of the interest purchased above for US$1,000,000 to MNFB as follows:

               5.5% upon the Company making the payment of US$4,000,000 (completed) noted above;
                and
               4.5% upon the Company making the payment of US$5,000,000 (completed) noted above.

Largo would have deducted from dividends to be paid to MNFB from Companhia Maracas the
US$1,000,000 purchase price.

Subsequent to December 31, 2010, the Company made a US $6,000,000 payment to MNFB to reacquire
their 10% interest in the Maracas property. The completion of this transaction brings the Company’s total
interest in the project to 90%. The Company signed an agreement with Itau Brazil for a bridge loan in the
amount of US $6,000,000 in order to complete payment to MNFB. The bridge loan facility bears interest
at 6% per annum.

At December 31, 2010 the Company held an 80% interest in the Maracas property.

The Company had the option to buy the remaining 10% by paying US$8,000,000 by December 31, 2010.
This payment was not made by December 31, 2010 and the option expired. The Company intends to
reopen negotiations to obtain the remaining 10%.

Exploration Activities

Largo believes that there is good potential to expand the mineral resource at Maracás significantly with
additional drilling along strike and at depth. The existing resource occupies only a small area within an
extensive system. Largo has done additional work including drilling outside the resource on the property
and has identified a number of targets that can be upgraded through drilling to outline additional
resources. Only 10% of the potential eight (8) kilometres of strike length has been tested to date and four
other targets have been identified that need further drilling to upgrade them to a resource category. No
new exploration work is currently planned at this time.


Engineering Activities

Feasibility Study

Introduction
On August 12, 2008, Largo announced the projected economics for the Feasibility Study, which was
based on the mineral resource statement included in the Technical Report entitled “An Updated Mineral
Resource Estimate for the Maracás Vanadium Project, Municipality of Maracas, Bahia State, Brazil”
prepared by Micon International Limited (Micon) dated December 21, 2007. Mr. B. Terrence Hennessey,
P. Geo., who is a qualified person in accordance with the requirements NI 43-101 and independent of the
Company, authored this report (the “Micon Resource Report”).

Metallurgical testwork for the Feasibility Study was completed by SGS Lakefield. Largo assembled the
following team to complete the Feasibility Study.

 Area of Responsibility                             Consultant
 Compilation of Feasibility Study and National      Aker Solutions
 Instrument 43-101 Report compliant report
 Mineral resource                                   Micon International of Toronto
 Mining                                             NCL Brasil of Belo Horizonte, Brazil
 Process – beneficiation                            ECM S. A. of Belo Horizonte, Brazil
 Process – hydrometallurgical                       Aker Solutions
 Process – ferrovanadium                            Mintec of the Republic of South Africa
 Infrastructure                                     Aker Solutions and ECM S. A. of Belo
                                                    5
                                 LARGO RESOURCES LTD
                                                    Horizonte, Brazil
 Geotechnical, earthworks and tailings dam          VOGBR Recursos Hidricos & Geotechnia of
                                                    Belo Horizonte, Brazil
 Environmental                                      Brandt Meio Ambiente of Belo Horizonte,
                                                    Brazil
 Process and infrastructure capital        costs,   Aker Solutions
 operating costs and economic analysis

Various other ferrovanadium process experts were also engaged, most of whom are based out of the
Republic of South Africa.

A Technical Report entitled “Technical Report of the Feasibility Study for the Maracás Vanadium Project,
Brazil” prepared by Aker Solutions was published in September 2008. Mr. B. Terrence Hennessey, P.
Geo., Mr Carlos Guzman, MAusIMM and Ms. Peimeng Ling, P. Eng, all qualified persons in accordance
with the requirements of NI 43-101 and independent of the Company, authored this report.

An Amended Technical Report entitled “Technical Report of the Feasibility Study for the Maracás
Vanadium Project, Brazil” prepared by Aker Solutions was published in May 2009. Mr. B. Terrence
Hennessey, P. Geo., Mr Carlos Guzman, MAusIMM, Ms. Peimeng Ling, P. Eng., Mr. Alex Duggan, P.
Eng., Mr. Fred Edwards, P. Eng., Mr. H. Adrian C Meintjes, Pr. Eng., and Maria de Loudres Fortes
Alvares da Silva, M.Sc., all qualified persons in accordance with the requirements of NI 43-101 and
independent of the Company, authored this report. The projected cash flows and economic results of the
amended report did not differ from the original report.

Projected Cash Flows and Economic Results

Based on an estimated initial capital investment of US$270.6 million and the milling of 13,079,000 tonnes
of ore at a diluted grade of 1.34% vanadium pentoxide, the project is projected to have a discounted
payback of 1.9 years and generate cashflows of US$1,329.0 million over an estimated production life of
23 years on an after-tax basis that assumes the available federal corporate tax incentives are granted.
This results in an after-tax IRR of 41.7% and an after-tax NPV of US$450.7 million at a discount rate of
10% per year. This scenario results in the production of approximately 4,431 tonnes per year (tpa) of
vanadium contained in 80% ferrovanadium alloy (“ferrovanadium”) over the first eight years of mine life
after which production gradually decreases to stabilize at 1,748 tpa from year 14 to year 22 with year 23
being a partial year of production.

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

Price forecasts for ferrovanadium have been provided by CPM Group of New York, USA. Their forecast
indicates the long-term price of ferrovanadium will stabilise at approximately $45.86 per kg, which is
equivalent to V2O5 price of $8.00 per lb, after a steady decrease from current levels.

A table summarizing the ferrovanadium prices in 2007 dollars used in the cash flows from 2010 to 2018
as forecast by CPM Group is provided below.

 Year               2010     2011     2012    2013      2014    2015     2016     2017     2018
 Ferrovanadium      73.30    65.04    59.97   58.75     56.22   52.47    51.04    48.17    45.86
 Price (US$/kg)

Prices beyond 2018 are forecast to be $45.86 per kg.

Corporate tax incentives are available through a Brazilian federal government agency known as
SUDENE. The mission of SUDENE is to promote sustainable development through tax incentives and
other means in the Brazilian “Nordeste” in which the State of Bahia is located. The tax incentives
currently include a reduction in corporate tax of 75% over a 10-year period.

The economic results of the Feasibility Study on (i) a pre-tax basis, (ii) a regular tax basis with no tax
incentives, and (iii) with corporate tax incentives, are summarised in the following table.
                                                    6
                                  LARGO RESOURCES LTD
                          Pre-Tax                  No Corporate Tax         With Corporate Tax
                                                   Incentives               Incentives
 IRR (%)                  43.9                     34.9                     41.7
 NPV @10%                 US$489.0 million         US$335.9 million         US$450.7 million
 Undiscounted             US$1,422.2 million       US$1,049.4 million       US$1,329.0 million
 cumulative cashflow

The Feasibility was based on an exchange rate of 1.75 Brazilian Real to the US$.

Estimated Mineral Resources and Mineral Reserves

The Measured and Indicated Mineral Resource was estimated by Micon as reported in the Micon
Resource Report to be 17.26 million tonnes at a grade of 1.44 % vanadium pentoxide (5.86 million tonnes
measured and 11.4 million tonnes indicated-see Press Release dated November 7, 2007).

In the Feasibility Study, NCL estimated the proven and probable mineral reserves to be 13,079,000
tonnes grading 1.34% vanadium pentoxide (7,341,000 proven and 5,738,000 probable). Carlos Guzman
of NCL, a qualified person as defined under NI 43-101 and who is independent of Largo, prepared the
estimate.

The following table summarises the mineral reserves.

 Reserve Classification             Tonnes                 Grade (V2O5 %)               Contained V in
                                                                                   ferrovanadium (tonnes)
 Proven                           7,341,000                     1.28                       33,451
 Probable                         5,738,000                     1.42                       29,050
 Total Mineral Reserve            13,079,000                    1.34                       62,501

The estimation of mineral reserves was based on a mine design developed using Lerch-Grossman pit
optimization techniques. The inputs to the optimization were generally drawn from the report entitled “An
Updated Preliminary Assessment of the Maracás Vanadium Project, Municipality of Maracás, Bahia
State, Brazil dated January 23, 2008 prepared by Micon (see Press Release dated December 10, 2007).
The optimization parameters are listed below:

 Parameter                                              Value
 Price of V2O5                                          US$5.00 per lb
 Price of vanadium in ferrovanadium                     US$23.08 per kg
 Overall recovery from ore to product                   63.4%
 Waste mining cost                                      US$1.39 per tonne
 Ore mining cost                                        US$1.42 per tonne
 Processing to V2O5                                     US$30.66 per tonne
 Processing to ferrovanadium                            US$0.35 per lb of V2O5
 General and Administrative                             US$2.12 per tonne
                                                          o
 Pit slope angle                                        45

The pit design was based on a pit shell using a US$12.93 per kg price assumption. A range of pit shells
over a price range of US$6.92 to US$34.62 per kg were generated. The US$12.93 per kg pit shell was
selected because it contains approximately 65% of the vanadium but just 26% of the waste rock tonnage
compared to the US$23.08 per kg pit shell. This selected scenario defines a project life of 23 years at the
proposed processing capacity. The mineral reserve and resource estimates conform to CIM Standards
and NI 43-101. Comparing the proven and probable mineral reserves with the measured and indicated
mineral resources, it is apparent that the proven reserve of 7,341,000 tonnes is greater than the
measured resource of 5,860,000 tonnes, although the probable reserve of 5,738,000 tonnes is less than
the indicated mineral resource of 11,400,000 tonnes.

The anomaly between the measured resource and the proven reserve is explained by the fact that the
mineral resource was based on the resources within a US$3.50 per lb V 2O5 Whittle pit shell using a
0.66% V2O5 cut-off grade, and the mine planning process was based on a higher vanadium price of
                                                    7
                                 LARGO RESOURCES LTD
US$5.00 per lb V2O5, which equates to a cut-off grade of 0.45% V2O5. The use of a lower cut-off grade for
the mine planning process, as compared to that used in the mineral resource estimation, has the effect of
increasing the tonnage available for mining; this was reflected in the mine plan and subsequently in the
mineral reserves. Mine planning was based on a US$5.00 pit shell and cut-off grade of 0.45% because
this selection resulted in an optimum mine production schedule, and the US$5.00 pit shell also provided
an acceptable surface expression of the open pit that was used in the planning of drainage channels
around the pit and other required surface infrastructure.

The measured and indicated resources within a $5.00 per lb V 2O5 pit shell at various cut-offs was
estimated. The tonnage of measured resources at a grade of greater than 0.46% V2O5 is 7,331,006
tonnes, which very closely relates to the proven reserve tonnage of 7,341,000 tonnes.

A priority vanadium-PGM target is the Nova Amparo zone contained within the property boundary. The
possible future development of this zone as an additional source of mill feed from open pit mining has
been included in the application for environmental licensing currently in progress through the Bahia state
environmental agency (Instituto de Meio Ambiente). The presence of several other vanadium-bearing
structures within the property, including Nova Amparo (see the Micon Resource Report), provides
confidence regarding the longevity and potential, future expansion of the project.

Project Description

The deposit outcrops on surface and is expected to be amenable to open pit mining. The waste rock
scheduled for mining was estimated to be 29,108,000 tonnes, resulting in a Life of Mine (“LOM”) strip
ratio of 2.23:1. Open pit mining proceeds at a faster rate than milling in order to supply the mill with
higher-than-average-grade feed for the first 13 years of the mine life. The grade is projected to be
highest in the first 8 years when the mill feed averages 1.94%. Excluding one year of pre-stripping, the
open pit is forecast to be mined out over 13 years. However, milling of the lower grade material is
projected to continue for a further 10 years after completion of the milling of the higher grade material.
Largo believes there is an opportunity to further optimise the mine plan, through additional phases of
mining to exploit the deeper parts of the resource. The pit was designed based on a vanadium pentoxide
price of US$3.40 per lb as this approach provided economically favourable results for the purposes of the
Feasibility Study. The surface structures adjacent to the pit have been located beyond the anticipated
surface expression of deeper pits to allow for subsequent pit deepening if determined to be economically
justified in the future.

The process flowsheet has been based on work carried out by SGS and others. The flowsheet
comprises the following steps: comminution, concentration by magnetic separation, roasting, leaching,
precipitation and production of ferrovanadium. Mill throughput is estimated at 581,000 tpa. Overall
vanadium recovery is estimated to be 71.6%. The ferrovanadium produced will be sold to Glencore
under an off-take agreement, as previously announced (see Press Release dated May 14, 2008).

The execution schedule for implementation of the project prepared by Aker Solutions indicates that the
engineering, procurement and construction management (EPCM) period, including commissioning, will be
26 months.

Costs

Capital costs associated with infrastructure, mining equipment and construction of the process plant are
estimated to be US$270.6 million, including a contingency of US$45.8 million. The estimate has an
intended level of accuracy of +/-15%. The estimate was based on an exchange rate of 1.75 fBrazil Real to
the US Dollar and cost estimates were dated from Q2 2008. .

Operating costs before payment of royalties over the first eight years of production are estimated to be
US$15.49 per kg of vanadium contained in ferrovanadium. Life of Mine costs are estimated to be
US$19.26 per kg of vanadium contained in ferrovanadium.

Largo has also commenced the process of identifying long-lead items for construction including the
procurement of the primary ball mill, rotary kiln, furnace and other equipment. The Brazilian content of

                                                    8
                                  LARGO RESOURCES LTD
this equipment is being maximised to reduce import duties on components that may otherwise be sourced
overseas.

Recent Engineering Activities

Largo continues to work on the environmental licensing process with the Instituto do Meio Ambiente (IMA)
and the Conselho Estadual de Meio Ambiente (CEPRAM) that control the award of environmental
licenses in the State of Bahia. Public hearings arranged by IMA in two locations near the proposed
project site occurred on February 12 and 13, 2009. Subsequently, CEPRAM formally reviewed and
                                    a            ão
addressed the details of the Licenç de Localizaç (LL) prepared by IMA resulting in the LL being issued
on May 14, 2009 (see Press Release, May 14, 2009). Largo is currently working on the documentation
                                      a             ão
required for application of the Licenç de Implantaç (LI), which is in the process of being submitted to
IMA.

Largo is continuing to optimize the Project using their in-house staff located in Brazil supported by
external consultants. In mid-2010, a further program of metallurgical testwork involving piloting was
undertaken to more accurately define some of the operating parameters for the vanadium recovery plant.
The results of this work will allow Largo to further optimize the operating plan for the project with the
objective of maximizing financial returns.

Outlook

Largo’s operating team continues to seek improvements in the projected economics for the Maracas
project by targeting reductions in Capex and operating costs.

The team based in Brazil continues to develop specific aspects of the project as a prelude to more
detailed engineering.

Largo has recently started a ground magnetic survey and geological mapping and sampling program
covering the newly acquired concessions. The objective of the program is to identify other prospective
areas along the 40-kilometre belt that Largo now controls. These will become priority drill targets for a
future drill program to identify additional resources for the mine.

Northern Dancer - Canada

Background

The Northern Dancer property is located 290 km east-southeast of Whitehorse, capital of the Yukon
Territory, Canada. The nearest community is Teslin, population of 300, which is 60 kilometres to the
west. Road access is via the Alaska Highway (a paved highway), to within 13 kilometres of the project
then dirt road to the project site and field camp. The property consists of 23 contiguous mineral claims in
the Yukon and 3 claims in British Columbia totalling 1,500 hectares.

The Northern Dancer deposit is one of the world’s largest known tungsten-molybdenum porphyry
systems. The mineralization is hosted in fractures, veinlets and veins associated with a northeast-
trending sheeted vein structure hosted in calc-silicate (skarn) rocks and spatially related to a felsic
intrusion (quartz-feldspar porphyry). The deposit, which has been tested by drilling for 1.2 kilometres
along strike, 500 metres vertically and 600 metres in width, remains open along strike to both the
northeast and southwest as well as at depth. At Northern Dancer, tungsten and molybdenum
mineralization is concentrated in two zones that partially overlap. In the core of the deposit, there is a
higher grade molybdenum zone where molybdenite occurs within and adjacent to a felsic intrusion.
Surrounding and partially overlapping the molybdenum zone is a more extensive tungsten zone where
scheelite occurs in northeast-trending sheeted quartz vein system.

On April 10, 2006, the Company entered into an agreement to acquire a 100% interest in the Northern
Dancer tungsten-molybdenum project (formerly the Logtung property) which straddles the Yukon-British
Columbia border.

                                                    9
                                 LARGO RESOURCES LTD
The Company has earned a 70% interest in the property as of December 31, 2010. The Company has
the right to earn the remaining 30% by making a cash payment of $5,000,000. During the year ended
December 31, 2010, the Company paid an initial deposit of $200,000 that will be deducted from the final
payment of $5,000,000 which is due on or before May 15, 2011. The optionor can elect to receive the
remaining payment of $4,800,000 in common shares of the Company. The property is subject to a 3%
NSR, 2% of which may be acquired by the Company. Upon completing the conditions to earn the 70%
interest, the Company was assigned 1% of the NSR. Upon completing the conditions to earn the
remaining 30% interest, the Company will be assigned a further 1% of the NSR at no additional cost
beyond the May 15, 2011 payment.

Exploration Activities

In 2008 Largo completed a diamond drilling program at Northern Dancer consisting of 38 holes totalling
11,500 metres of diamond drilling. The focus of this program was to further expand the limits of the
higher-grade tungsten and molybdenum zones outlined during the 2006 and 2007 programs and upgrade
a significant portion of the Inferred and Indicated mineral resource to the Measured and Indicated
categories to support a Pre-feasibility Study.

Largo received all the drill results for the 2008 drill program by the end of November 2008 and reported
drill result highlights throughout the latter part of 2008.

Largo announced on March 12, 2009 that it completed a new block model and updated mineral resource
estimate incorporating the results from its 2006, 2007 and 2008 drill programs and historical drilling
results for the Northern Dancer deposit.

The updated mineral resource for the deposit at a cut-off grade of 0.06% WO3 was estimated as
Measured mineral resources of 30.8 million tonnes grading 0.114% WO3 and 0.030% Mo, Indicated
mineral resources of 192.6 million tonnes grading 0.100% WO3 and 0.029% Mo. The Measured and
Indicated mineral resource estimate contains 500.1 million pounds of WO3 (226.9 k tonnes) and 143.8
million pounds of Mo (65.2 k tonnes). Inferred mineral resources were estimated to be 201.2 million
tonnes grading 0.089% WO3 and 0.024% Mo containing 393.1 million pounds of WO3 (178.3 k tonnes)
and 107.7 million pounds of Mo (48.9 k tonnes).

The grade of WO3 and Molybdenum increased by 14% and 15% respectively in the new Measured
mineral resource estimate compared to the previous Indicated mineral resource estimate (see press
release April 9, 2008). The tonnage of the new Measured and Indicated category increased by 58%
compared to the previous Indicated mineral resource estimate (see press release April 9, 2008). The
contained pounds of WO3 and Molybdenum increased by 56.5% and 76%, respectively.

Most importantly, the 2008 drilling program provided much better definition of the higher-grade zone
which is estimated to contain a Measured and Indicated resource of 60.3 million tonnes grading 0.137%
WO3 and 0.045% Mo (WO3 equiv 0.215%) and Inferred mineral resource of 5.4 million tonnes grading
0.134% WO3 and 0.047% Mo (WO3 equiv 0.214%) at a 0.17% WO3 equivalent cut-off grade. These
estimates represent grade increases of 35% and 70% over the overall deposit grade for both WO3 and
Molybdenum respectively.

Mineral Resources

Mineral Resources are presented in Table 1 below for the overall deposit for each resource category, as
well as for the higher grade tungsten and molybdenum zones, which are included within the overall
resource. The cut-off grade was determined based on comparison to similar deposit types that are being
mined or planned to be mined by open pit methods, but has not been confirmed by appropriate economic
studies.

Table 1: Mineral Resources in the Northern Dancer Deposit, as at March 1, 2009*, based on 0.06 % WO 3
cut off grade.



                                                  10
                                    LARGO RESOURCES LTD
                                                                 WO3          Mo     WO3           Mo
                          Million        %           %
      Category                                                 Tonnes      Tonnes    Million     Million
                          Tonnes        WO3          Mo
                                                                (*000)      (*000)    lbs.        lbs.
    Measured              30.8         0.114        0.030        35.1         9.1     77.3        20.1
     Indicated            192.6        0.100        0.029        191.8       56.1    422.8       123.7
Measured & Indicated      223.4        0.102        0.029        226.8       65.3    500.1       143.9

       Inferred           201.2        0.089        0.024       178.3       48.9      393.1      107.7

Table 2: Mineral Resources in the Northern Dancer Deposit (Higher grade shell**) as at March 1, 2009*,
based on 0.17% WO3 equiv cut-off grade***.


                                                        %          WO3        Mo      WO3         Mo
                       Million       %         %
     Category                                          WO3       Tonnes     Tonnes    Million    Million
                       Tonnes       WO3        Mo
                                                       Equiv      (*000)    (*000)     lbs.       lbs.

   Measured &
    Indicated           60.3        0.137   0.045      0.215       82.8      27.1     182.6       59.6

      Inferred           5.4        0.134   0.047      0.214        7.2       2.5      15.8        5.5


Notes: *The above resource classifications conform to CIM Standards on Mineral Resources and
Reserves referred to in National Instrument 43-101. Although 0.06% WO3 is considered a likely cut-off
grade for this deposit, based on comparisons with other similar deposit types, it has not been confirmed
by the appropriate economic studies. Totals may not add up exactly due to rounding.
**Higher grade shell includes high grade Mo and WO3 zone and is seated within the overall Mineral
Resource.
***The WO3equiv cut-off grade calculated was based on Mo Price at 12 $ /LB; WO 3 price at 9.07 $ /LB;
80 % Mo recovery and 65% WO3 recovery with this formula: WO3equiv= WO3 % + 1.736 * Mo %.

The updated mineral resource estimate was prepared by Largo, and reviewed and validated by Dr.
Warwick S. Board - P.Geo., Senior Consultant with Snowden. Dr. Board is a qualified person as defined
under NI 43-101 and is independent of Largo.

Analytical work for all drill core samples was carried out by Acme Analytical Laboratories Ltd. in
Vancouver, British Columbia, an ISO 9001-2000 certified laboratory. The samples were crushed to 70%
passing 10 mesh, split to 250 g and pulverized to 95% passing 150 mesh. A 5-gram split was analyzed
for Mo and W using a phosphoric acid leach followed by ICP-emission spectrometry. Then a second 5-
gram split was analyzed for 36 elements by ICP-mass spectrometry using a hot (95 degrees centigrade)
aqua regia leach. Routine check assays were performed at SGS Minerals in Lakefield, Ontario on sample
rejects. Largo employs a systematic QA/QC program including standards, duplicates and blanks. Andy
Campbell, P.Geo., Largo's Vice President of Exploration, is the Qualified Person responsible for the
scientific and technical work for the program as defined under National Instrument 43-101.

Largo announced September 27, 2010 that it had begun a 9-hole drill program at Northern Dancer to
further test the higher-grade tungsten and molybdenum zones intersected in the 2006, 2007 and 2008
programs and to test a previously untested exploration target the Marilyn Creek showing. The drilling on
the higher grade zones was done through a series of angled holes drilled across the deposit to test these
higher-grade zones. The Marilyn Creek area lies 500 to 1000 metres north-northwest of the Northern
Dancer deposit. It was discovered during a mapping and sampling program in the summer of 2007. The
drilling is complete and the holes are presently being logged and sampled. Results from the first holes
are anticipated to be received in the near future.




                                                     11
                                  LARGO RESOURCES LTD
Outlook

Largo carried out a further phase of metallurgical testing that was completed in March 2010. The
testwork was carried out on new metallurgical composite samples from diamond drilling core that
represented the first 5-6 years of production, as indicated by preliminary mine planning. The program
was designed to identify the optimal flowsheet that will likely combine gravity and flotation techniques and
also to predict overall recoveries. Largo received encouraging results from it’s testwork and completed a
Preliminary Economic Assessment (PEA) for the project subsequent to year ended. The results of the
PEA conclude that the Northern Dancer Project has favorable economic potential for the low cost
production of tungsten and molybdenum from an open pit operation. The Company intends to further
advance the Project towards production and will proceed with the completion of a preliminary feasibility
study immediately.

Campo Alegre de Lourdes - Brazil

Background

The 9,275-hectare property is located 650 kilometres northwest of Salvador, the capital of Bahia State.
The Fe-Ti-V deposits are hosted within the Campo Alegre de Lourdes mafic-ultramafic intrusion which
consists of a sequence of pyroxenite, gabbro and gabbro-anorthosite intrusive rocks. The widespread
Fe-Ti-V mineralization on the property occurs as wide zones of massive titanomagnetite and ilmenite that
has been traced for eleven kilometres along strike and two kilometres wide and are characterized by 11
deposits aligned roughly north-south as 11 elongated hills.

The property has had a significant amount of work done in the past in particular between the late 1970’s
to early 1980’s by the CBPM. Work has consisted of geochemical soil sampling, geological mapping,
prospecting, preliminary metallurgical testwork, petrographic studies and 60 holes totalling 5,257 metres
of diamond drilling. This work resulted in a reported historical mineral resource, estimated by CBPM to be
133 million tonnes of 50% Fe, 21% TiO2, and 0.75% V2O5 to a vertical depth of less than 60 metres. The
resource was estimated in the 1980’s using a block model and ordinary kriging; this estimate is not NI 43-
101 compliant. Largo has not completed the work necessary to verify the mineral resource and cautions
that the historical resource should not be relied upon.

Upon signing the acquisition agreement, Largo has the option to acquire a 100% interest in the Property,
subject to the terms and conditions set forth therein, which are summarised as follows:

       Initial payment of R$500,000 payable in 5 instalments over 10 months is due as a finder’s fee to
        CBPM. The initial payment has been paid, R$400,000 during 2009 and the final R$100,000 was
        paid during 2010. An additional R$250,000 will be due for each exploration title that is turned into
        a mining concession.

       Once the property is put into production a 3.86% royalty applied to gross sales of Fe, Ti and V will
        be due to CBPM. The royalty will be paid on a monthly basis.

       All exploration work must be accomplished within 24 months and can be renewed for an
        additional 24 months if necessary.

       The production lease period is 20 years and can be renewed for additional 20 year periods up to
        the full depletion of the ore reserves.

The Company is required to invest a minimum of R$ 2,000,000 ($1,198,000) within 24 months and pay
R$250,000 ($150,000) for each mining ordinance granted by the Brazilian National Department of Mineral
Production in relation to the exploration areas. Should the Company want to terminate this agreement, a
penalty of R$2,000,000 ($1,198,000) will be payable to the optionor.




                                                    12
                                   LARGO RESOURCES LTD
Outlook

Largo has moved the core to Largo’s facility near Maracás and has begun to complete systematic
sampling and re-logging of the drill cores to confirm the Fe, TiO 2 and V2O5 values of the deposits.
Results from this will be used to do a new geological model. An exploration program of line cutting,
ground magnetic survey and geological mapping and sampling has been completed and the results are
being reviewed. A major magnetic anomaly and fold structure has been identified from this work. The
magnetic anomaly is 14 kilometres long (north-south) by 2.5 kilometres wide (east-west). Two 50-
kilogram samples from the oxidized and non-oxidized material has been collected for preliminary
metallurgical test work. The next step will be to engage in a drill program to identify a significant iron ore
deposit. A proposed program of 65 holes totalling 10,000 metres has been recommended and is
targeting a 1.5 billion tonne deposit. This will take 9 months to a year to complete and will result in an
independent NI 43-101 compliant resource estimate for Campo Alegre de Lourdes.

Currais Novos – Brazil

Background

The Currais Novos project envisions the reprocessing and recovery of tungsten from two tailings piles
and one low grade mine rejects rock pile deposited during the processing of ore from the 1940’s to the
present at the Barra Verde and Boca de Laje tungsten mines located 180 kilometres west-southwest of
Natal, the capital of Rio Grande de Norte State. The tailings piles and rock rejects are located on a 4
concession, 653-hectare property on which the previous owners estimated an historical (1980’s) resource
of 4.1 million tonnes grading 0.133% WO3. This historical resource is not compliant with NI 43-101 and
should not be relied upon. Largo has completed due diligence and is in the process of conducting on-site
sampling of the tailings piles to verify previous results. This data will form the basis for an independent
mineral resource estimate which has completed during April of 2011.

The properties are held under two separate option agreements that were signed during October and
                                                                                          ão
November 2009. The agreements are with various parties including Emprogeo Ltda., Mineraç Boca de
                        ão
Laje Ltda. and Mineraç Barra Verde Ltda., and provide the Company with rights to acquire the two
tailings piles and the low-grade mine rejects rock pile, all of which are located close by the Barra
Verde and Boca de Laje mines. The Barra Verde mine is still being operated on a small scale by one of
the vendors.

The first option agreement involved the purchase of the tailings pile originating from the formerly
producing Barra Verde mine and the low-grade mine rejects rock pile for US$500,000 ($518,550 paid).

The second option agreement relates to the second tailings pile that originated from the Boca de Laje
mine. The Company is required to pay a total of US$900,000 subject to the Company being satisfied
with the outcome of a due diligence process (completed). The payments will be due as follows:

    -   US$200,000 on August 30, 2010 (paid);
    -   US$300,000 on January 17, 2011 (paid subsequent to year ended); and
    -   US$400,000 on July 17, 2011 .

The payments of US$300,000 and US$400,000 have been accrued as at December 31, 2010 and
included in accounts payable and accrued liabilities.

The Company successfully completed its due diligence process at the Currais Novos tungsten project
and has concluded that the project is of merit. The Company intends to proceed with the project and
property payments.

Outlook

Largo has completed its due diligence and is preparing a mineral resource model. On December 14,
2010, the Company reported the results of a NI 43-101 compliant Preliminary Economic Assessment (the
“PEA”) on Project, which is currently under the Company’s option. The results of the PEA are very
positive and construction for the project is underway for the recovery of tungsten from mine tailings.
                                                     13
                                  LARGO RESOURCES LTD
Production of Tungsten (WO3 concentrate) from the Currais Novos Project is expected to commence by
June 2011.

Subsequent to December 31, 2010, Largo announced that it remains on schedule for the production of
tungsten concentrate in July 2011 from its Currais Novos project.

Highlights of development of the project include:
     The engineering phase is 95% concluded
     The civil works contract has been awarded, and construction of the power substation
        building has commenced
     Long-lead equipment items have been ordered and are beginning to arrive at site
     An order has been placed for a ball mill which is scheduled to arrive at site shortly
     The Knelson concentrator has arrived at site
     Consultants have been contracted to assist with equipment imports and
        minimization of taxes
     Final permitting documents have been submitted
     Scheduling of the first concentrate delivery is on track for the end of July 2011

SUMMARIZED FINANCIAL RESULTS

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2010, the Company had a net working capital of $176,986 (see Non GAAP
Measures) compared to a working capital deficit of $310,322 at December 31, 2009.

In March 2010, the Company completed a private placement by issuing 36,363,637 special warrants of
the Company at a price of $0.22 per special warrant, for gross proceeds of $8,000,000. Each special
warrant entitled the holder thereof to receive one unit of the Company on the exercise or deemed
exercise of the special warrant, each unit being comprised of one common share of the Company and
one-half of one common share purchase warrant. Each whole warrant entitles the holder thereof to
purchase one common share at a price of $0.35 until March 5, 2011. The special warrants automatically
exercised on May 3, 2010. In connection with the placement, a cash fee of $278,850 was paid to the
agents representing 6.5% of the gross proceeds of the brokered portion of the placement. The Company
also issued to the agents 1,352,000 warrants exercisable into 1,352,000 compensation options for no
additional consideration. Each compensation option entitles the holder thereof to receive one common
share and one-half of one common share purchase warrant at a price of $0.22 until March 8, 2011. Each
whole warrant will entitle the holder thereof to purchase one common share at a price of $0.35 until March
7, 2011.

In September 2010, the Company closed an equity financing by issuing 29,397,055 units of the Company
at a price of $0.17 per unit, of which 11,161,764 units were offered pursuant to an agency agreement
between the Company and Byron Securities Ltd. and Cormark Securities Inc. (the “Agents”). The
remaining units were sold by the Company on a non-brokered basis. The financing generated gross
proceeds of $4,997,500. Each unit is comprised of one common share of the Company and one common
share purchase warrant. Each warrant is exercisable for one common share of the Company at a price of
$0.25 until September 16, 2011. The Agents received a cash commission equal to $134,826 and 781,323
broker warrants that will entitle them to acquire an equal number of units at a price of $0.17 per unit on or
before September 16, 2011.

During the year ended December 31, 2010, the Company has also received $2,040,334 through the
exercise of 12,774,236 warrants as an average price of $0.16 and $15,000 through the exercise of
150,000 options.

On August 27, 2010, the Company entered into a bridge loan agreement pursuant to which it borrowed
$750,000 from a corporation. In consideration for the loan, the Company paid a fee of $22,500 and issued
500,000 warrants of the Company to the lender. Each warrant entitles the lender to receive one common
share of the Company at a price of $0.17, expiring on August 31, 2011. The fair value of warrants of

                                                     14
                                  LARGO RESOURCES LTD
$35,000 was estimated on the date of grant using the Black Scholes pricing model with the following
assumptions: expected dividend yield of 0%; expected volatility of 101% risk-free interest rate of 1.25%;
and an expected average life of 1 year. The loan amount plus accrued interest of $4,192 was repaid on
September 16, 2010. The Company and the lender have a common director.

Subsequent to December 31, 2010, the Company entered into an agreement to issue a Promissory Note
(the “Note”) in the amount of US$4,000,000. The Note bears interest at LIBOR plus 8%. The Note is
convertible into common shares of the Company at the option of the holder at the market price of the
Company’s shares on the date of conversion. The US$4,000,000 will be advanced to the Company in
four tranches. During 2010, the Company received an advance of US$610,000 ($606,706) on the first
tranche. The remainder of the first tranche of US$516,333 (for a total of $1,126,333) was received on
January 20, 2011. The second and third tranche of US$890,000 and US$1,000,000 was received on
February 11, 2011 and April 4, 2011 respectively. The first tranche is repayable in monthly installments of
US$66,255 beginning in February 2012 and ending in July 2013. Accordingly, the entire amount
outstanding at December 31, 2010 has been presented as long-term. The Note is secured by the
Company’s interest in two of its subsidiaries.

RESULTS OF OPERATIONS

For the three months and year ended December 31, 2010 compared to the three months and year ended
December 31, 2009:

The Company recorded a net loss of $1,343,525 and $3,411,003 during the three months and year ended
December 31, 2010 compared to a net income of $43,974 and $840,064 respectively during the same
periods of 2009. The net loss during year ended December 31, 2010 and 2009 resulted primarily from
consulting and professional fees, shareholder communication and general office expenses of $2,305,187
(December 31, 2009: $1,183,520).

Stock based compensation is a non-cash expense included in professional, consulting and management
costs. The Company applies the fair value method of accounting for stock-based compensation. During
the three months and the year ended December 31, 2010,125,000 and 9,425,000 (December 31, 2009:
nil and 4,300,000 respectively) stock options were granted to directors, officers, employees and
consultants of the Company. This resulted in stock based compensation expense of $59,500 and
$778,700 (December 31, 2009: $nil and $230,318) respectively recorded to the Statement of Operations
and Deficit and $nil and $754,800 (December 31, 2009: $nil and $91,752) respectively recorded to the
interest in mineral properties during the three months and year ended December 31, 2010. The Company
uses stock based compensation to attract and maintain quality people. The mining industry has been very
competitive and this type of compensation is an attractive incentive. The timing of grants varies from year
to year based on milestones achieved and plan availability, consequently the quarterly expense can vary
widely.

Upon removing stock based compensation expense, consulting and professional fees increased by
$55,935 and $359,343 respectively during the three months and the year ended December 31, 2010
compared to the same periods in 2009. The increases resulted primarily from bonuses of $294,500 being
paid during the third quarter of 2010 (December 31, 2009 - $77,000) to the consultants, directors and
officers of the Company. During 2009, the Company had reduced consultant’s fees as resources were
limited. Shareholder communications and travel expenses increased by $69,456 and $243,141
respectively during the three months and year ended December 31, 2010 over the comparable periods of
2009 as a result of increased travel and promotional activities as the Company has been marketing its
projects.

Finance costs increased by $nil and $57,500 during the three months and year ended December 31,
2010 compared to the same periods in 2009. During the third quarter of 2010, the Company entered into a
bridge loan agreement pursuant to which it borrowed $750,000. In consideration for the loan, the Company
paid a fee of $22,500 and issued 500,000 warrants of the Company to the lender. Each warrant entitles
the lender to receive one common share of the Company at a price of $0.17, expiring on August 31,
2011. The fair value of warrants of $35,000 was estimated on the date of grant using the Black Scholes
pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 101%

                                                    15
                                 LARGO RESOURCES LTD
risk-free interest rate of 1.25%; and an expected average life of 1 year. The loan amount plus accrued
interest of $4,192 was repaid on September 16, 2010. The Company and the lender have a common
director.

The Company also recorded foreign exchange gains in the amounts of $21,960 and $43,701 for the three
months and year ended December 31, 2010 (2009 – $20,889 and $129,162 respectively). The Company
has a promissory note denominated in US dollars and funds certain operations, exploration and
administrative expenses in Brazil on a cash call basis using the Brazilian real converted from its
Canadian dollar bank accounts held in Canada. The Company is therefore subject to gains and losses
due to fluctuations in these currencies relative to the Canadian dollar.

The Company entered into flow-through share subscription agreements during the year ended December
31, 2009, whereby it renounced to investors a total of $1,505,000 of qualifying Canadian Exploration
Expenses as described in the Income Tax Act of Canada, with an effective date of December 31, 2009.
The Company was committed to incur the expenditures on or before December 31, 2010. The Company
is required to pay tax of approximately 3% per annum on the unspent amount between March 1, 2010
and December 31, 2010. At December 31, 2010, the Company fulfilled its commitment and recorded
accrued interest penalty of $18,284. The Company has also recorded interest expense related to its short
term loan of $750,000 which was borrowed and repaid within the third quarter and its long term loan from
a Corporation in the amount of US$610,000 as described in the Liquidity and Capital Resources section
of this report.

QUARTERLY INFORMATION
The quarterly results have been as follows (Tabular amounts in $000 except for per share amounts):

         Summary Financial Information for the Eight Quarters Ended December 31, 2010
                 Period         Revenue       Total   Net Income Basic & Diluted Long Term
                                             Assets      (Loss)  Net Income (Loss) Financial
                                                                     per Share      Liabilities
                                   $            $          $             $              $
          st                      Nil        65,123     (1,344)         0.00            0
         4 Quarter 2010
          st                      Nil        63,828     (1,041)         0.00            0
         3 Quarter 2010
         2st                        Nil      57,800      (346)           0.00            0
               Quarter 2010
         1st                        Nil      55,748      (680)           0.00            0
               Quarter 2010
          st                        Nil      46,890        44            0.00            0
         4 Quarter 2009
          st                        Nil      45,340      (169)           0.00            0
         3 Quarter 2009
          st                        Nil      43,686      (449)           0.00            0
         2 Quarter 2009
          st                        Nil      43,996      (266)           0.00            0
         1 Quarter 2009

As the Company has no revenue at this point in time, the net income or loss results primarily from
corporate overheads including stock based compensation. Stock based compensation is a non-cash
expense representing an estimate of the fair value of options granted to directors, officers, employees
and consultants of the Company calculated by applying the Black Scholes option pricing model.

The general trend in increasing assets has resulted from the Company raising funds through private
placements and investing in its exploration and development properties in Brazil and the Yukon.




                                                  16
                                       LARGO RESOURCES LTD
ANNUAL INFORMATION

The annual results have been as follows: (Tabular amounts in $000 except for per share amounts):

                                                         2010               2009                2008
                                                      December 31        December 31         December 31
                                                     Twelve months      Twelve months       Twelve months

Net (loss)                                                 (3,411)           (840)             (7,640)
(Loss) per share, basic and fully diluted                   (0.01)          (0.00)              (0.06)
Total assets                                               65,123           46,890             44,189
Total long term financial liabilities                          -               -                   -


CASH FLOWS

Cash used in operating activities before changes in non-cash working capital was $377,219 and
$1,689,456 respectively during the three months and year ended December 31, 2010 compared to a
usage of $233,049 and $949,503 during the same periods of 2009 as described in the Results of
Operations section of this report. Non-cash working capital increased $965,990 and $310,655
respectively during the three months and year ended December 31, 2010, compared to increase of
$575,695 and $17,894 respectively during the same periods of 2009. The net change in non-cash
working capital reported on the cash flow statement identifies the changes in current assets and current
liabilities that occurred during the period. An increase in a liability (or a decrease in an asset) is a source
of funds; while a decrease in a liability (or an increase in an asset) account is a use of funds.

Cash provided by financing activities was $1,197,299 and $14,582,541 respectively during the three
months and year ended December 31, 2010 compared to $931,434 and $5,092,003 during the same
periods in 2009. The Company participated in private placement financings during the year ended
December 31, 2010 generating cash proceeds, net of cash financing costs, of $11,920,499 as discussed
in the Liquidity and Capital Resources section of this report. The Company also received cash of
$2,040,334 from the exercise of 12,774,236 warrants and $15,000 from the exercise of 150,000 options
during the year ended December 31, 2010. In addition, the Company received US$610,000 ($606,706)
through the issuance of a promissory note. The Company also generated cash from a short term bridge
loan of $750,000 which was borrowed and paid back during the third quarter of 2010. During the year
ended December 31, 2009, the Company raised $5,232,003 from private placements and paid back a
short term loan of $140,000.

Cash from investing activities used $2,749,231 and $12,745,653 respectively during the three months
and year ended December 31, 2010 compared to $898,858 and $3,975,891 used during the three
months and year ended December 31, 2009. Expenditures on exploration properties used $1,579,760
and $12,621,132 during three months and year ended of 2010 compared to $638,715 and $2,496,776
respectively during the comparative periods of 2009. The Company paid a deposit of $357,411 with
respect to its equipments purchased on Currais Novos Tungsten property. Exploration accounts payable
used $967,845 and generated $92,800 respectively during the three months and year ended December
31, 2010 compared to a use of $348,884 and $1,567,856 respectively during the same periods of 2009.
The Company invested in Northern Dancer, Maracas, Campo Alegre De Lourdes and Currais Novos
properties during the year ended December 31, 2010, through programs as described under the
Exploration properties and activities section of this report. The changes in accounts payable attributable
to property exploration relate the activities surrounding these projects, whereby cash is used when
accounts payable are reduced and cash is generated when accounts payable increase.

TRANSACTIONS WITH RELATED PARTIES

During the year ended December 31, 2010, the Company was charged $60,000 (December 31, 2009 -
$55,000) by a corporation controlled by a director of the Company for administrative services. These
amounts are included in consulting and management fees on the statement of operations.


                                                      17
                                  LARGO RESOURCES LTD
The Company shares its premises with other corporations that have common directors and the Company
reimburses the related corporations for its proportional share of the expenses. At December 31, 2010 an
amount of $37,994 (2009 - $nil) was included in accounts payable in relation to these expenses. These
amounts are non-interest bearing, unsecured with no fixed terms of repayment.

Other amounts owing to directors and officers of the Company and included in accounts payable and
accrued liabilities relating to consulting fees at December 31, 2010 were $174,550 (2009 - $119,650).
These amounts are unsecured, non-interest bearing with no fixed terms of repayment.

On December 1, 2008, the Company was advanced $140,000 (net of a $10,000 arrangement fee)
pursuant to a loan agreement with a corporation whose sole director is also a director of a Company. The
principal amount was repaid on February 28, 2009.

Aberdeen International Inc. (“Aberdeen”) and Consolidated Thompson Iron Mines participated in the
February 2009 private placement, subscribing for 3,333,333 and 16,666,667 units respectively.
Consolidated Thompson Iron Mines and the Company had an officer and two directors in common.
Aberdeen and the Company have an officer and two directors in common.

Officers and directors of the Company subscribed for a total of 1,616,667 units of the February 5, 2009
private placement.

Officers and directors of the Company subscribed for a total of 1,950,000 units of the July 14, 2009
private placement.

One officer of the Company subscribed for a total of 100,000 flow-through units of the July 31, 2009
private placement.

Officers and directors of the Company subscribed for a total of 1,999,997 units of the September 16, 2010
private placement.

On August 27, 2010, the Company entered into a bridge loan agreement pursuant to which it borrowed
$750,000 from a corporation. In consideration for the loan, the Company paid a fee of $22,500 and issued
500,000 warrants of the Company to the lender. Each warrant entitles the lender to receive one common
share of the Company at a price of $0.17, expiring on August 31, 2011. The fair value of the warrants of
$35,000 was estimated on the date of grant using the Black-Scholes pricing model with the following
assumptions: expected dividend yield of 0%; expected volatility of 101% risk-free interest rate of 1.25%;
and an expected average life of 1 year. The loan amount plus accrued interest of $4,192 was repaid on
September 16, 2010. The Company and the lender have a common director

The above transactions are measured at the exchange amount which is the amount of consideration
established and agreed to by the related parties.

DIRECTORS AND OFFICERS COMPENSATION

During the three months and year ended December 31, 2010, the Company paid or accrued $106,500
and $566,000 (2009 - $87,500 and $353,000 respectively) to officers of the Company and $79,500 and
$533,000 (2009 - $69,000 and $251,000 respectively) to directors of the Company as remuneration for
services provided.

During the year ended December 31, 2010, The Company paid bonuses of $140,000 (2009 - $45,500)
and issued 2,175,000 (2009 - 725,000) options to officers of the Company, as well, the Company paid
bonuses of $215,000 (2009 - $59,500) and issued 2,725,000 (2009 - 2,550,000) options to directors of
the Company.

Stan Bharti, a director of the Company is an officer and director of a company that provides administrative
services to the Company. The administrative company has a contract for $5,000 per month.



                                                    18
                                  LARGO RESOURCES LTD
Subsequent to the end of the year, Tim Mann’s consulting contract was renegotiated. Effective January
31, 2011, Mr. Mann is to receive $20,000 per month for the services he provides the Company as Chief
Operating Officer. He also received a one-time bonus of $60,000 and is eligible; to receive a $300,000
bonus upon the successful full financing of the Maracas project which is to be determined by the board of
directors.

More detailed information regarding the compensation of officers and directors of the Company is
disclosed in the management information circular and such information is incorporated by reference
herein. The management information circular is available under the profile of the Company on SEDAR at
www.sedar.com.

OUTSTANDING SHARE DATA

As at April 20, 2011, 644,122,078 common shares of the Company are outstanding. Under the share
option plan of the Company, 24,081,250 remain outstanding with exercise prices ranging from $0.10 to
$1.50, with expiry dates ranging between June 20, 2011 and August 9, 2015. If exercised 24,081,250
common shares would be issued for proceeds of $12,154,825.

As at April 20, 2011, 132,711,496 share purchase warrants are outstanding with exercise prices ranging
between $0.17 and $0.50, expiring between September 16, 2011 and April 11, 2015. If exercised
132,711,496 common shares would be issued for proceeds of $60,493,022. In addition, 339,248
potential warrants with exercise prices of 0.25 expiring on September 16, 2011 would be issued for
proceeds of $84,811 upon the exercise of 678,495 compensation options exercisable for $0.17 and
expiring on September 16, 2011.

SUBSEQUENT EVENTS

Subsequent to December 31, 2010, the Company purchased MNFB by making a cash payment of
US$6,000,000. The completion of this transaction brings the Company’s total interest in the project to
90%. The Company signed an agreement with Itau Brazil for a bridge loan in the amount of
US$6,000,000 in order to complete payment. The bridge loan facility bears interest at 6% per annum and
is secured against all of the shares of MNFB and Vanadio de Maracas Ltda., such security will be
extinguished immediately upon repayment. Repayment of the principal and interest relating to this bridge
loan is due on April 27, 2011.

On April 11, 2011, the Company closed a non-brokered private placement through the issuance of
85,714,286 units and 242,718,844 subscription receipts for aggregate gross proceeds to the Company of
$114,951,596. Each unit and each subscription receipt was issued at a price of $0.35 per unit or
subscription receipt. Each unit is comprised of one common share and one-third of one common share
purchase warrant of the Company, where each whole warrant entitles the holder to acquire one further
common share at a price of $0.50 for a period of 48 months from the date of issuance. Each subscription
receipt is convertible, at no additional cost, into one unit on the same terms above upon the satisfaction of
certain escrow release conditions or if exercised at the discretion of the holder. A cash commission of 5%
of the gross proceeds was paid. In addition, certain finders will be paid a finders’ fee equal to 5% of the
subscription raised by such finders. Three investors were given the ability to each appoint one director to
the Board of Directors of the Company.

Subsequent to December 31, 2010, 10,775,295 common share purchase warrants expired unexercised.
A total of 17,447,909 common share purchase warrants were exercised for gross proceeds to the
Company of $4,615,481. This includes the exercise of 90,000 warrants which were issued upon the
exercise of 180,000 warrants which were exercisable into one common share and one half of one
common share purchase warrant. A total 652,500 options were exercised for gross proceeds to the
Company of $129,062 and 1,322,500 options expired unexercised.

On January 20, 2011, the Company signed a supply agreement for the sale of concentrate from the
Currais Novos property. The price of concentrate is set at the London Metal Bulletin Tungsten APT
European free market US Dollar per metric ton unit low price average for the month prior to shipment
(“LMB Low”). The term of the agreement is from July 1, 2011 to October 30, 2015, subject to a two-year
                                                     19
                                  LARGO RESOURCES LTD
extension. On of after April 15, 2012, if the Company fails to ship a monthly minimum as specified in the
agreement, the Company must either i) purchase the material from a third-party supplier and deliver to
the purchaser in accordance with the terms of the agreement or ii) make a cash payment in an amount of
equal to the difference between 77% of the LMB Low and 85% of the LMB Low for each metric ton unit
not delivered to the purchaser. The purchaser also agreed to fund up to an additional USD$2,000,000, if
required, for capital expenditures at the Currais Novos property.

On January 20, 2011 the Company granted 100,000 stock options. Each option is exercisable at $0.40 for
a period of five years. The options vested immediately.


CAPITAL MANAGEMENT
The capital structure of the Company as at December 31, 2010 consists of equity attributable to common
shareholders comprised of capital stock, warrants and contributed surplus.

The Company manages and adjusts its capital structure based on available funds in order to support the
acquisition, exploration and development of mineral properties. The Board of Directors does not
establish quantitative return on capital criteria for management, but rather relies on the expertise of the
Company's management to sustain future development of the business.

The properties in which the Company currently has an interest are in the exploration and development
stage; as such the Company is dependent on external financing to fund its activities. In order to carry
out planned exploration and development, and pay for administrative costs, the Com pany will spend its
existing working capital and raise additional amounts as needed. The Company will continue to assess
new properties and seek to acquire an interest in additional properties if it feels there is sufficient
geological or economic potential and if it has adequate financial resources to do so.

Management reviews its capital management approach on an ongoing basis and believes that this
approach, given the relative size of the Company, is reasonable.

There were no changes in the Company's approach to capital management during the year ended
December 31, 2010. Neither the Company nor its subsidiaries are subject to externally imposed capital
requirements.

FINANCIAL RISK FACTORS

The Company's risk exposures and the impact on the Company's financial instruments are
summarized below. There have been no changes in the risks, objectives, policies and procedures from
the previous period.

Fair Value
Canadian generally accepted accounting principles require that the Company disclose information about
the fair value of its financial assets and liabilities. Fair value estimates are made at the balance sheet
dates based on relevant market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties in significant matters of judgment and
therefore cannot be determined with precision. Changes in assumptions could significantly affect these
estimates.

The carrying amounts for cash, amounts receivable, accounts payable and accrued liabilities and loans
payable on the balance sheets approximate fair values because of the limited term of these instruments.

At December 31, 2010, the Company’s financial instruments that are carried at fair value, consisting of
cash have been classified as Level 1 within the fair value hierarchy.

Credit risk
The Company's credit risk is primarily attributable to cash and cash equivalents and amounts receivable.
The Company has no significant concentration of credit risk arising from operations. Cash equivalents

                                                    20
                                   LARGO RESOURCES LTD
consist of guaranteed investment certificates and bankers acceptances, which have been invested with
reputable financial institutions, from which management believes the risk of loss to be remote. The
Company did not hold any cash equivalents at December 31, 2010. Financial instruments included in
amounts receivable consist of goods and services tax due from the Federal Government of Canada and
receivables from related and unrelated companies. Management believes that the credit risk
concentration with respect to these financial instruments is remote.

Liquidity risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to
meet liabilities when due. As at December 31, 2010, the Company had a cash balance of $1,366,525
(2009- $908,438) to settle current liabilities of $1,673,730 (2009 - $1,333,740). All of the Company's
current trade financial liabilities have contractual maturities of less th an 30 days.

Market risk
(a) Interest rate risk
The Company has cash balances and an interest-bearing note at December 31, 2010. The Company’s
interest bearing note has a fixed rate of 8.86% The Company's current policy is to invest excess cash in
investment-grade short-term deposit certificates issued by its banking institutions. The Company
periodically monitors the investments it makes and is satisfied with the credit ratings of its banks. The
Company considers interest rate risk to be minimal as investments and interest bearing debt are short
term. It is intended that future financing will be secured through a mixture of debt related to the
development of the Maracas project and private equity placements.

(b) Foreign currency risk
The Company's functional currency is the Canadian dollar. The Company has certain property
commitments and a promissory note denominated in US dollars and is exposed to currency fluctuations in
the US dollar relative to the Canadian dollar. The Company also funds certain operations, exploration
and administrative expenses in Brazil on a cash call basis using the Brazilian real converted from its
Canadian dollar bank accounts held in Canada. The Company currently does not hedge its foreign
exchange risk but may choose to do so in the future.

(c)     Price risk
The Company will be exposed to price risk with respect to commodity prices, specifically vanadium,
tungsten and molybdenum. The Company closely monitors commodity prices to determine the
appropriate course of action to be taken. The Company’s future operations will be significantly affected
by changes in the market prices of these commodities. Prices fluctuate on a daily basis and are affected
by numerous factors beyond the Company’s control. The supply and demand for ore, the level of interest
rates, the rate of inflation, investment decisions by large holders of ore and stability of exchange rates can
all cause significant fluctuations in prices. Such external economic factors may in turn be influenced by
changes in international investment patterns and monetary systems and political developments.

Sensitivity analysis

Amounts receivable are classified as receivables, which are measured at amortized cost. Accounts
payable and accrued liabilities and Notes payable are classified as other financial liabilities, which are
measured at amortized cost.

As at December 31, 2010, the Company estimates that the carrying and fair value amounts of the
Company’s financial instruments are approximately the same.

A 10% change in the value of the Canadian dollar compared to the other foreign currencies in which the
Company transacts would result in a corresponding foreign exchange gain/loss of approximately
$155,000 based on the balances of monetary assets and liabilities at December 31, 2010.


As at December 31, 2010, the Company had long-term debt with a face value of approximately
US$610,000 ($606,706) (Note 7). Sensitivity to a plus or minus 1% change in the LIBOR interest rate
would affect the net loss by plus or minus $6,000.
                                                     21
                                   LARGO RESOURCES LTD
The Company does not currently carry debt where fluctuations in the prime interest rate would give rise to
interest rate exposure.

Price risk is remote as the Company is not a producing entity.

SIGNIFICANT ACCOUNTING POLICIES

The Company's significant accounting policies are subject to estimates and, key judgments about future
events, many of which are beyond management's control. A detailed summary of the Company’s
significant accounting policies is included in note 2 of the Company’s Annual Audited Consolidated
Financial Statements for the year ended December 31, 2010.

INTERNATIONAL FINANCIAL REPORTING STANDARDS

In February 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed January 1, 2011, as the
date International Financial Reporting Standards (“IFRS”) will replace current Canadian generally
accepted accounting principles (“GAAP”) for publicly accountable enterprises. As a result, the Company
will report under IFRS starting with the interim period ending March 31, 2011, with restatement for
comparative purposes of amounts reported under Canadian GAAP.

IFRS Project Update

The Company’s IFRS conversion plan consists of three phases: Scoping and Diagnostic; Detailed
Evaluation; and Implementation and Review. The Scoping and Diagnostic phase included the completion
of a high-level impact assessment to identify key areas that may be affected by the conversion and the
development of a detailed implementation plan. The Detailed Evaluation phase included a detailed
analysis of the IFRS – Canadian GAAP differences and accounting policy choices under IFRS, and the
initial assessment of the nonfinancial reporting related impacts. The three phases have been completed.

Based on the work completed to date, the transition to IFRS did not result in significant impacts to the
Company’s business activities or its covenants, capital requirements or compensation arrangements. The
transition did not result in significant changes to key controls during or after the transition to IFRS.
Changes to financial reporting processes and data systems were required as a result of changes in
accounting policies, and internal control and disclosure control documentation is being updated
accordingly. The initial training of finance personnel is ongoing.

The International Accounting Standards Board responsible for the development and publication of IFRS
has a significant number of projects underway, many of which could impact the differences between
Canadian GAAP and IFRS applicable to the Company. Changes in IFRS could result in additional
adjustments and/or changes to the adjustments currently being recognized in the IFRS opening balance
sheet. Accordingly, the Company continues to monitor and evaluate changes in IFRS, and to update the
conversion plan as required.

The Company has identified several areas where potential differences between Canadian GAAP and
IFRS could result in changes to the amounts reported by the Company in its financial statements. While
the quantification of these potential changes has not yet been finalized, the areas where the changes are
most anticipated include:

Asset Retirement Obligations

Under IFRS, a liability must be recognized at the time when the entity becomes legally or constructively
obliged to rehabilitate a disturbance resulting from mining activities, while under Canadian GAAP, a
liability is only recognized when the entity is legally bound. Discount rates used should reflect the risks
specific to the decommissioning provision. Unlike IFRS, under Canadian GAAP discount rates for asset
retirement obligations are based on the entity’s credit-adjusted risk-free rate. IFRS requires re-
measurement of the liability at each reporting date whereas Canadian GAAP requires re-measurement of
the liability in the event of changes in the amount or timing of cash flows required to settle the obligation.
Over and above this, IAS 37, Provisions, Contingent Liabilities and Contingent Assets, requires the re-

                                                     22
                                   LARGO RESOURCES LTD
measurement of the provision for reclamation and rehabilitation if there is a change in the current market-
based discount rate. However, under Canadian GAAP HB 3110 Asset Retirement Obligations, the
provision for reclamation and rehabilitation is not adjusted for changes in the discount rate.

Property, Plant and Equipment

IFRIC 1, Changes in Decommissioning, Restoration and Similar Liabilities, contains guidance on
accounting for changes in decommissioning, restoration and similar liabilities due to timing in the revision
of estimated outflows and revisions to the risk-free discount rate. Where changes occur, these changes
are required to be capitalized as part of the cost of the underlying assets and depreciated prospectively
over the remaining life of the asset to which they relate.

IFRS requires identifying and measuring the cost of significant individual components of assets which
have different useful lives than the core asset. Significant components are then separately depreciated
based on their individual useful lives.


Share-based payments

While there is convergence between IFRS and Canadian GAAP in that share-based payments are
recognized as an expense, there are a number of measurement differences. Under Canadian GAAP, the
Company records forfeitures on unvested stock options as they occur. Unlike Canadian GAAP,
IFRS requires that the rate of forfeiture be estimated every reporting period and an adjustment be made
to stock based compensation expense. Canadian GAAP also allows the vesting of employee stock
options to be recognized to operations on a straight-line basis whereas IFRS requires the use of a graded
vesting model.

Income Taxes

IFRS requires a deferred tax asset or liability to be recognized for exchange gains and losses related to
nonmonetary assets and liabilities that are re-measured into the functional currency using the historical
exchange rates. Under Canadian GAAP, a deferred tax asset or liability is not recognized for a temporary
difference arising from the difference between the historical exchange rate and the current exchange rate
translations of the cost of non-monetary assets and liabilities of integrated foreign operations.

Furthermore, Canadian GAAP requires that the current and long-term portions of future income tax
assets, and future income tax liabilities, be shown separately on the financial statements, whereas IFRS
does not.

Exploration Expenditures

IFRS 6 applies to exploration and evaluation expenditures incurred by an entity in connection with the
exploration and evaluation of mineral resources. An entity may choose to defer on the balance sheet
nearly all exploration and evaluation expenditures or recognize all such expenditures in operations as
incurred. IFRS currently allows an entity to retain its existing accounting policies related to the exploration
and evaluation of mineral properties, subject to some restrictions.

Impairment of Assets
IAS 36, Impairment of Assets (“IAS 36”) uses a one-step approach for testing and measuring asset
impairments, with asset carrying values being compared to the higher of their value in use and fair value
less costs to sell. Value in use is defined as being equal to the present value of future cash flows
expected to be derived from the asset in its current state. In the absence of an active market, fair value
less costs to sell may also be determined using discounted cash flows. The use of discounted cash flows
under IFRS to test and measure asset impairment differs from Canadian GAAP where undiscounted
future cash flows are initially used to compare against the asset’s carrying value to determine if
impairment exists. This may result in more frequent adjustments in the carrying value of assets under
IFRS. However, under IAS 36, previous impairment losses may be reversed where circumstances change
such that the impairment has been reduced. This also differs from Canadian GAAP, which prohibits the
reversal of previously recognized impairment losses.
                                                      23
                                  LARGO RESOURCES LTD

IFRS 1, First-Time Adoption of IFRS
IFRS 1 provides the framework for the first-time adoption of IFRS and specifies that, in general, an entity
shall apply the principles under IFRS retrospectively. Certain optional exemptions and mandatory
exceptions to retrospective application are provided for under IFRS 1. Prior to reporting the first IFRS
compliant financial statements for the quarter ending March 31, 2011, the Company may decide to apply
certain exemptions contained in IFRS 1.


i) Business combinations
IFRS 1 provides an option to not restate business combinations that occurred prior to the transition date
or to only restate business combinations that occurred after a designated date prior to the transition date.

ii) Fair value as deemed cost
IFRS 1 allows an entity to initially measure an item of property, plant and equipment upon transition to
IFRS at fair value on the transition date or at an event-driven fair value (i.e. a fair value determined
through a business combination or initial public offering). This elective exemption can be applied on an
individual asset basis.

iii) Cumulative translation account (“CTA”)
IFRS 1 allows cumulative translation differences for all foreign operations to be deemed zero at the date
of transition to IFRS, with future gains or losses on subsequent disposal of any foreign operations to
exclude translation differences arising from prior to the date of transition to IFRS.

iv) Decommissioning liabilities
Under IFRS 1, an entity can elect to not apply the provisions of IFRIC 1 - Changes in Existing
Decommission, Restoration and Similar Liabilities, as they relate to changes in such liabilities before the
date of transition to IFRS.
When applying this exemption, an entity determines its decommissioning liabilities at the transition date,
discounts the liabilities back to the dates when they first arose using management’s best estimate of the
historical risk-adjusted discount rates, and depreciates these amounts forward to the transition date to
determine the amount to be included in the depreciated cost of the assets.

v) Share-based Payment
IFRS 1 encourages, but does not require a first time adopter to apply IFRS 2 – Share-based Payment
(“IFRS 2”) to equity instruments that were granted on or before November 7, 2002, or were granted after
November 7, 2002 but vested before the Company’s IFRS transition date. Accordingly, an entity may
elect not to retrospectively apply IFRS 2 to these equity instruments.

vi) Borrowing costs
IFRS 1 permits an entity to apply the transitional provisions of IAS 23 - Borrowing Costs (“IAS 23”) as an
alternative to full retrospective application. Under these provisions, the Company may elect to only apply
IAS 23 to qualifying assets for which the commencement date for capitalization is on or after the date of
transition (or an elected earlier date).

Future Accounting Pronouncements

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests

In January 2009, the CICA issued Section 1582 “Business Combinations” to replace Section 1581.
Prospective application of the standard is effective January 1, 2011, with early adoption permitted. This
new standard effectively harmonizes the business combinations standard under Canadian GAAP with
International Financial Reporting Standards (“IFRS”). The new standard revises guidance on the
determination of the carrying amount of the assets acquired and liabilities assumed, goodwill and
accounting for non-controlling interests at the time of a business combination. The CICA concurrently
issued Section 1601 “Consolidated Financial Statements” and Section 1602 “Non-Controlling Interests,”
which replace Section 1600 “Consolidated Financial Statements.”


                                                    24
                                  LARGO RESOURCES LTD
Section 1601 provides revised guidance on the preparation of consolidated financial statements and
Section 1602 addresses accounting for non-controlling interests in consolidated financial statements
subsequent to a business combination. The Company will adopt these standards on January 1, 2011 and
is currently assessing the impact these will have on the Company’s financial statements.

RISKS AND UNCERTAINTIES

The operations of the Company are speculative due to the high-risk nature of its business, which is the
acquisition, financing, exploration, development and operation of mining properties. These risk factors
could materially affect the Company’s future operating results and could cause actual events to differ
materially from those described in forward–looking information relating to the Company.

Nature of Mining, Mineral Exploration and Development Projects

Mining operations generally involve a high degree of risk. The Company’s operations are subject to the
hazards and risks normally encountered in the mineral exploration, development and production,
including environmental hazards, explosions, unusual or unexpected geological formations or pressures
and periodic interruptions in both production and transportation due to inclement or hazardous weather
conditions. Such risks could result in damage to, or destruction of, mineral properties or producing
facilities, personal injury, environmental damage, delays in mining, monetary losses and possible legal
liability.

Development projects have no operating history upon which to base estimates of future cash operating
costs. For development projects, resource and reserve estimates and estimates of cash operating costs
are, to a large extent, based upon the interpretation of geological data obtained from drill holes and other
sampling techniques, and feasibility studies, which derive estimates of cash operating costs based upon
anticipated tonnage and grades of ore to be mined and processed, ground conditions, the configuration of
the ore body, expected recovery rates of minerals from the ore, estimated operating costs, anticipated
climatic conditions and other factors. As a result, actual production, cash operating costs and economic
returns could differ significantly from those estimated. Indeed, current market conditions are forcing many
mining operations to increase capital and operating cost estimates. It is not unusual for new mining
operations to experience problems during the start-up phase, and delays in the commencement of
production often can occur.

Mineral exploration is highly speculative in nature. There is no assurance that exploration efforts will be
successful. Even when mineralization is discovered, it may take several years until production is possible,
during which time the economic feasibility of production may change. Substantial expenditures are
required to establish proven and probable mineral reserves through drilling. Because of these
uncertainties, no assurance can be given that exploration programs will result in the establishment or
expansion of mineral resources or mineral reserves. There is no certainty that the expenditures made by
the Company towards the search and evaluation of mineral deposits will result in discoveries or
development of commercial quantities of ore.

No Revenues
To date the Company has recorded no revenues from operations and the Company has not commenced
commercial production on any property. There can be no assurance that significant losses will not occur
in the near future or that the Company will be profitable in the future. The Company’s operating expenses
and capital expenditures may increase in subsequent years as consultants, personnel and equipment
associated with advancing exploration, development and commercial production of the Company’s
properties. The Company expects to continue to incur losses unless and until such time as it enters into
commercial production and generates sufficient revenues to fund its continuing operations. The
development of the Company’s properties will require the commitment of substantial resources to conduct
time-consuming development. There can be no assurance that the Company will generate any revenues
or achieve profitability.




                                                    25
                                  LARGO RESOURCES LTD
Liquidity Concerns and Future Financings

The Company will require significant capital and operating expenditures in connection with the
development of its properties. There can be no assurance that the Company will be successful in
obtaining required financing as and when needed. Volatile markets may make it difficult or impossible for
the Company to obtain debt financing or equity financing on favourable terms, if at all. Failure to obtain
additional financing on a timely basis may cause the Company to postpone or slow down its development
plans, forfeit rights in some or all of its properties or reduce or terminate some or all of its activities.

Foreign Exchange

Mineral commodities are sold in United States dollars and consequently, the Company is subject to
foreign exchange risks relating to the relative value of the Canadian dollar as compared to the US dollar.
To the extent Largo generates revenue upon reaching the production stage on its properties, it will be
subject to foreign exchange risks as revenues will be received in US dollars while operating and capital
costs will be incurred primarily in Canadian dollars and the Brazilian real. A decline in the US dollar
would result in a decrease in the real value of Largo’s revenues and adversely affect its financial
performance.

Mineral Resource and Mineral Reserve Estimates May be Inaccurate

There are numerous uncertainties inherent in estimating mineral resources and mineral reserves,
including many factors beyond the control of the Company. The accuracy of any mineral resource or
mineral reserve estimate is a function of the quantity and quality of available data and of the assumptions
made and judgments used in engineering and geological interpretation. These amounts are estimates
only and the actual level of mineral recovery from such deposits may be different. Differences between
management’s assumptions, including economic assumptions such as metal prices and market
conditions, could have a material adverse effect on the Company’s financial position and results of
operations.

Differences between management’s assumptions, including economic assumptions such as metal prices
and market conditions, and actual events could have a material adverse effect on the Company’s mineral
reserve estimates.

Licences and Permits, Laws and Regulations

The Company’s exploration and development activities, including mine, mill, road, rail and other
transportation facilities, require permits and approvals from various government authorities and
cooperation from certain First Nations groups, and are subject to extensive federal, provincial, state and
local laws and regulations governing prospecting, development, production, exports, taxes, labour
standards, occupational health and safety, mine safety and other matters. Such laws and regulations are
subject to change, can become more stringent and compliance can therefore become more costly. In
addition, the Company may be required to compensate those suffering loss or damage by reason of its
activities. There can be no guarantee that Largo will be able to maintain or obtain all necessary licences,
permits and approvals that may be required to explore and develop its properties, commence
construction or operation of mining facilities.

Mineral Commodity Prices

The profitability of the Company’s operations will be dependent upon the market price of mineral
commodities. Mineral prices fluctuate widely and are affected by numerous factors beyond the control of
the Company. The level of interest rates, the rate of inflation, the world supply of mineral commodities
and the stability of exchange rates can all cause significant fluctuations in prices. Such external
economic factors are in turn influenced by changes in international investment patterns, monetary
systems and political developments. The price of mineral commodities has fluctuated widely in recent
years, and future price declines could cause commercial production to be impracticable, thereby having a
material adverse effect on the Company’s business, financial condition and result of operations.

Environmental
                                                    26
                                   LARGO RESOURCES LTD

The Company’s activities are subject to extensive federal, provincial state and local laws and regulations
governing environmental protection and employee health and safety. Environmental legislation is evolving
in a manner that is creating stricter standards, while enforcement, fines and penalties for non-compliance
are also increasingly stringent. The cost of compliance with changes in governmental regulations has the
potential to reduce the profitability of operations. Further, any failure by the Company to comply fully with
all applicable laws and regulations could have significant adverse effects on the Company, including the
suspension or cessation of operations.

Title to Properties

The acquisition and maintenance of titles to resource properties is a very detailed and time-consuming
process. The Company holds its interest in certain of its properties through mining claims. Title to, and the
area of, the mining claims may be disputed. There is no guarantee that such title will not be challenged or
impaired. There may be challenges to the title of the properties in which the Company may have an
interest, which, if successful, could result in the loss or reduction of the Company’s interest in the
properties.

Uninsured Risks

The Company maintains insurance to cover normal business risks. In the course of exploration and
development of mineral properties, certain risks, and in particular, unexpected or unusual geological
operating conditions including explosions, rock bursts, cave ins, fire and earthquakes may occur. It is not
always possible to fully insure against such risks as a result of high premiums or other reasons. Should
such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs
and a decline in the value of the common shares of the Company.

Competition

Largo competes with many other mining companies that have substantially greater resources than the
Company. Such competition may result in the Company being unable to acquire desired properties,
recruit or retain qualified employees or acquire the capital necessary to fund its operations and develop
its properties. The Company’s inability to compete with other mining companies for these resources
would have a material adverse effect on the Company’s results of operation and business.
Dependence on Outside Parties

Largo has relied upon consultants, engineers and others and intends to rely on these parties for
development, construction and operating expertise. Substantial expenditures are required to construct
mines, to establish mineral reserves through drilling, to carry out environmental and social impact
assessments, to develop metallurgical processes to extract the metal from the ore and, in the case of new
properties, to develop the exploration and plant infrastructure at any particular site. If such parties’ work is
deficient or negligent or is not completed in a timely manner, it could have a material adverse effect on
Largo.

Qualified Personnel

Recruiting and retaining qualified personnel in the future is critical to the Company’s success. As the
Company develops the Maracas and Northern Dancer properties toward commercial production, the need
for skilled labour will increase. The number of persons skilled in the exploration and development of
mining properties is limited and competition for this workforce is intense. The development of the
Company’s properties may be significantly delayed or otherwise adversely affected if the Company
cannot recruit and retain qualified personnel as and when required.

Availability of Reasonably Priced Raw Materials and Mining Equipment

Largo will require a variety of raw materials in its business as well as a wide variety of mining equipment.
To the extent these materials or equipment are unavailable or available only at significantly increased
prices, the Company’s production and financial performance could be adversely impacted.
Failure to Meet Production Targets and Cost Estimates
                                                      27
                                  LARGO RESOURCES LTD

The Company prepares future production and capital cost estimates. If commercial production
commences, actual production and costs may vary from the estimates for a variety of reasons such as
estimates of grade, tonnage, dilution and metallurgical and other characteristics of the ore varying from
the actual ore mined, revisions to mine plans, risks and hazards associated with mining, adverse weather
conditions, unexpected labour shortages or strikes, equipment failures and other interruptions in
production capabilities. If commercial production begins, production costs may also be affected by
increased mining costs, variations in predicted grades of the deposits, increases in level of ore impurities,
labour costs, raw material costs, inflation and fluctuations in currency exchange rates. Failure to achieve
production targets or cost estimates could have a material adverse impact on the Company’s sales,
profitability, cash flow and overall financial performance. In the event that the Company obtains debt
financing, repayment terms associated with such financing will likely be based on production schedule
estimates. Any failure to meet such timelines or to produce amounts forecast may constitute defaults
under such debt financing, which could result in the Company having to repay loans.

Share Price Fluctuations

The market price of securities of many companies, particularly development stage companies, experience
wide fluctuations in price that are not necessarily related to the operating performance, underlying asset
values or prospects of such companies. There can be no assurance that fluctuations in the Company’s
share price will not occur.

Conflicts of Interest

Certain of the Company’s directors and officers serve or may agree to serve as directors or officers of
other companies and, to the extent that such other companies may participate in ventures in which the
Company may participate, the directors of Largo may have a conflict of interest in negotiating and
concluding terms respecting such participation.

Litigation

Largo has entered into legally binding agreements with various third parties on a consulting, joint venture
and partnership basis. The interpretation of the rights and obligations that arise from such agreements is
open to interpretation and Largo may disagree with the position taken by the various other parties
resulting in a dispute that could potentially initiate litigation and cause Largo to incur legal costs in the
future. Given the speculative and unpredictable nature of litigation, the outcome of any such disputes
could have a material adverse effect on Largo.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s Consolidated Financial Statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial
Statements and reported amounts of revenues and expenses during the reported period. Such estimates
and assumptions affect the carrying value of assets, impact decisions as to when exploration and
development costs should be capitalized or expensed, and estimates for asset retirement obligations and
reclamation costs. Other significant estimates made by the Company include factors affecting valuations
of stock based compensation and the valuation of income tax accounts. The Company regularly reviews
its estimates and assumptions, however, actual results could differ from these estimates and these
differences could be material

COMMITMENTS AND CONTINGENCIES

The Company entered into flow-through share subscription agreements during the year ended December
31, 2009, whereby it renounced to investors a total of $1,505,000 of qualifying Canadian Exploration
Expenses as described in the Income Tax Act of Canada, with an effective date of December 31, 2009.
The Company is committed to incur the expenditures on or before December 31, 2010. The Company
will be required to pay an interest penalty of approximately 3% per annum on the unspent amount

                                                     28
                                  LARGO RESOURCES LTD
between March 1, 2010 and December 31, 2010. At December 31, 2010, the Company fulfilled its
commitment.

The Company is party to certain management and consulting contracts. Minimum commitments remaining
under the agreements are approximately $323,000 all payable within one year. These contracts also
require that additional payments of up to $3,144,000 be made upon the occurrence of certain events such
as change of control. As the likelihood of these events taking place is not determinable, the contingent
payments have not been reflected in these financial statements.

The Company’s mining and exploration activities are subject to various federal, provincial and
international laws and regulations governing the protection of the environment. These laws and
regulations are continually changing and generally becoming more restrictive. The Company conducts its
operations so as to protect public health and the environment and believes its operations are materially in
compliance with all applicable laws and regulations. The Company has made, and expects to make in
the future, expenditures to comply with such laws and regulations.

NON-GAAP PERFORMANCE MEASURES

The Company has included the non-GAAP performance measure below in this document. This non-
GAAP performance measure does not have any standardized meaning prescribed by GAAP and,
therefore, may not be comparable to similar measures presented by other companies. The Company
believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors
use this information to evaluate the Company’s performance. Accordingly, they are intended to provide
additional information and should not be considered in isolation or as a substitute for measures of
performance prepared with GAAP. The definition for this performance measure and reconciliation of the
non-GAAP measure to reported GAAP measures is as follows:


Working Capital                                 December 31, 2010            December 31, 2009

Current assets

Cash                                        $                1,366,525 $                  908,438

Amounts receivable                                             342,745                     38,849
Prepaid expenses                                               141,446                     76,131

                                            $                1,850,716 $                1,023,418

Current liabilities                         $
Accounts payable, accrued liabilities                        1,673,730 $                1,333,740
                                                             1,673,730                  1,333,740


Working capital                             $                 176,986    $              (310,322)

OFF BALANCE SHEET ITEMS

The Company does not have any off balance sheet items.


April 20, 2011




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