Largo Highlights Continued Progress in Cost Reduction Initiatives at its Vanadium Operation in Brazil
Largo Highlights Continued Progress in Cost
Reduction Initiatives at its Vanadium
Operation in Brazil
All amounts expressed are in U.S. dollars, denominated by “$”.
TORONTO--(BUSINESS WIRE)--August 19, 2024--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO), a leading producer and supplier of high-quality vanadium
products and ilmenite, today highlights its cash operating cost1 metrics, emphasizing the
Company’s focus on cost reduction initiatives at the Maracás Menchen Mine in Brazil. The
Company has made continued progress in reducing costs at its vanadium operation in Brazil,
which have started to yield positive results, excluding the impact of certain non-recurring items.
During the fourth quarter of 2023 and the first and second quarter of 2024, the Company’s cash
operating costs excluding royalties per pound1 were impacted by certain non-recurring items,
mainly the impact of write-downs of the Company’s produced vanadium finished product
inventories due to the declining price environment. These write-downs do not fully represent the
Company's ongoing operational efficiency or the success of its cost reduction initiatives,
especially when presented on a cost per pound basis. When these adjustments are excluded, the
underlying unit costs more accurately demonstrate Largo’s sustained focus on optimizing its cost
structure.
The table below provides a detailed breakdown of the Company’s cash operating costs per pound
sold1:
2023 2024
Q1 Q2 Q3 Q4 Q1 Q2
Cash operating costs excluding royalties per pound1
($/lb)i 5.15 5.18 5.44 5.44 6.12 5.97
Write-down of produced vanadium products ($)i - - - 2,215,000 4,526,000 6,688,000
Produced V2O5 sold (lbs)i 5,741,000 5,000,000 4,693,000 5,437,000 5,753,000 3,776,000
Adjusted cash operating costs excluding royalties per
pound1 ($/lb) 5.15 5.18 5.44 5.04 5.33 4.20
i. As per the Company’s management’s discussion and analysis for the stated period.
Daniel Tellechea, Director and Interim CEO of Largo, commented: "We believe it is important to
communicate to our stakeholders that the Company’s ongoing efforts to streamline operations
and reduce costs are beginning to bear fruit, as evidenced by the declining trend in our unitary
cash costs at the Maracás Menchen Mine. Despite the impact of non-recurring items in recent
quarters, our team remains laser-focused on achieving further efficiencies, ensuring that Largo
is well-positioned to navigate current market challenges and deliver long-term value to our
shareholders.”
About Largo
Largo is a globally recognized vanadium company known for its high-quality VPURETM and
VPURE+TM products, sourced from its Maracás Menchen Mine in Brazil. The Company is
currently focused on ramping up production of its ilmenite concentrate plant and is undertaking a
strategic evaluation of its U.S.-based clean energy business, including its advanced VCHARGE
vanadium battery technology to maximize the value of the organization. Largo's strategic
business plan centers on maintaining its position as a leading vanadium supplier with a growth
strategy to support a low-carbon future.
Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange
under the symbol "LGO". For more information on the Company, please visit
www.largoinc.com.
Cautionary Statement Regarding Forward-looking Information:
This press release contains “forward-looking information” and “forward-looking statements”
within the meaning of applicable Canadian and United States securities legislation. Forward-
looking information in this press release includes, but is not limited to, statements with respect to
the timing and amount of estimated future production and sales; the future price of commodities;
costs of future activities and operations, including, without limitation, the effect of inflation and
exchange rates; the effect of unforeseen equipment maintenance or repairs on production; timing
of ilmenite production; the ability to produce high purity V2O5 and V2O3 according to customer
specifications; the extent of capital and operating expenditures; the ability of the Company to
make improvements on its current short-term mine plan; the impact of global delays and related
price increases on the Company’s global supply chain and future sales of vanadium products;
and the timing of annual kiln maintenance and its impact on production and inventories.
The following are some of the assumptions upon which forward-looking information is based:
that general business and economic conditions will not change in a material adverse manner;
demand for, and stable or improving price of V2O5 and other vanadium products, ilmenite and
titanium dioxide pigment; receipt of regulatory and governmental approvals, permits and
renewals in a timely manner; that the Company will not experience any material accident,
labour dispute or failure of plant or equipment or other material disruption in the Company’s
operations at the Maracás Menchen Mine or relating to Largo Clean Energy, specially in
respect of the installation and commissioning of the EGPE project; the availability of financing
for operations and development; the availability of funding for future capital expenditures; the
ability to replace current funding on terms satisfactory to the Company; the ability to mitigate
the impact of heavy rainfall; the reliability of production, including, without limitation, access to
massive ore, the Company’s ability to procure equipment, services and operating supplies in
sufficient quantities and on a timely basis; that the estimates of the resources and reserves at the
Maracás Menchen Mine are within reasonable bounds of accuracy (including with respect to
size, grade and recovery and the operational and price assumptions on which such estimates are
based); the accuracy of the Company’s mine plan at the Maracás Menchen Mine, the
competitiveness of the Company’s vanadium redox flow battery ("VRFB") technology; the
ability to obtain funding through government grants and awards for the Green Energy sector,
the accuracy of cost estimates and assumptions on future variations of VCHARGE battery system
design, that the Company’s current plans for ilmenite and VRFBs can be achieved; the
Company’s “two-pillar” business strategy will be successful; the Company’s ability to protect
and develop its technology; the Company’s ability to maintain its IP; the competitiveness of the
Company’s product in an evolving market; the Company’s ability to market, sell and deliver
VCHARGE batteries on specification and at a competitive price; the Company’s ability to
successfully deploy VCHARGE batteries in foreign jurisdictions; the Company’s ability to secure
the required resources to build and deploy VCHARGE batteries, and the adoption of VRFB
technology generally in the market; the Company’s sales and trading arrangements will not be
affected by the evolving sanctions against Russia; and the Company’s ability to attract and
retain skilled personnel and directors; and the ability of management to execute strategic goals.
Forward-looking statements 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 statements that certain actions, events or results “may”, “could”,
“would”, “might” or “will be taken”, “occur” or “be achieved”. All information contained in
this news release, other than statements of current and historical fact, is forward looking
information. Forward-looking statements are subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of activity, performance or
achievements of Largo to be materially different from those expressed or implied by such
forward-looking statements, including but not limited to those risks described in the annual
information form of Largo and in its public documents filed on www.sedarplus.ca and available
on www.sec.gov from time to time. Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made. Although management of
Largo has attempted to identify important factors that could cause actual results to differ
materially from those contained in forward-looking statements, there may be other factors that
cause results not to be as anticipated, 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. Largo does not undertake to update any forward-
looking statements, except in accordance with applicable securities laws. Readers should also
review the risks and uncertainties sections of Largo’s annual and interim MD&A which also
apply.
Trademarks are owned by Largo Inc.
Non-GAAP2 Measures
The Company uses certain non-GAAP measures in this press release, which are described in the
following section. Non-GAAP financial measures and non-GAAP ratios are not standardized
financial measures under IFRS, the Company's GAAP, and might not be comparable to similar
financial measures disclosed by other issuers. These measures are intended to provide additional
information and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
Cash Operating Costs Per Pound
The Company’s press release refers to cash operating costs per pound and cash operating costs
excluding royalties per pound, which are non-GAAP ratios based on cash operating costs and
cash operating costs excluding royalties, which are non-GAAP financial measures, in order to
provide investors with information about a key measure used by management to monitor
performance. This information is used to assess how well the Maracás Menchen Mine is
performing compared to its plan and prior periods, and to also to assess its overall effectiveness
and efficiency.
Cash operating costs includes mine site operating costs such as mining costs, plant and
maintenance costs, sustainability costs, mine and plant administration costs, royalties and sales,
general and administrative costs (all for the Mine properties segment), but excludes depreciation
and amortization, share-based payments, foreign exchange gains or losses, commissions,
reclamation, capital expenditures and exploration and evaluation costs. Operating costs not
attributable to the Mine properties segment are also excluded, including conversion costs,
product acquisition costs, distribution costs and inventory write-downs.
Cash operating costs excluding royalties is calculated as cash operating costs less royalties.
Cash operating costs per pound and cash operating costs excluding royalties per pound are
obtained by dividing cash operating costs and cash operating costs excluding royalties,
respectively, by the pounds of vanadium equivalent sold that were produced by the Maracás
Menchen Mine.
Cash operating costs, cash operating costs excluding royalties, cash operating costs per pound
and cash operating costs excluding royalties per pound, along with revenues, are considered to
be key indicators of the Company’s ability to generate operating earnings and cash flow from its
Maracás Menchen Mine. These measures differ from measures determined in accordance with
IFRS, and are not necessarily indicative of net earnings or cash flow from operating activities as
determined under IFRS.
The following table provides a reconciliation of cash operating costs and cash operating costs
excluding royalties, cash operating costs per pound and cash operating costs excluding royalties
per pound for the Maracás Menchen Mine to operating costs as per the Q2 2024 unaudited
condensed interim consolidated financial statements.
Three months ended Six months ended
June 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Operating costsii $ 36,379 $ 43,029 $ 86,086 $ 88,960
Professional, consulting and management feesiii 476 624 938 1,468
Other general and administrative expensesiv 306 315 585 624
Less: ilmenite costsii (1,042 ) — (1,089 ) —
Less: iron ore costsii (402 ) (220 ) (402 ) (493 )
Less: conversion costsii (2,018 ) (2,220 ) (4,041 ) (4,138 )
Less: product acquisition costsii (1,310 ) (3,753 ) (3,360 ) (7,931 )
Less: distribution costsii (1,724 ) (2,525 ) (3,542 ) (3,972 )
Less: inventory write-downv (912 ) (683 ) (466 ) (683 )
Less: depreciation and amortization expenseii (5,396 ) (6,202 ) (13,473 ) (13,453 )
Cash operating costs 24,357 28,365 61,236 60,382
Less: royaltiesii (1,814 ) (2,450 ) (3,487 ) (4,895 )
Cash operating costs excluding royalties 22,543 25,915 57,749 55,487
Produced V2O5 sold (000s lb) 3,776 5,000 9,529 10,741
Cash operating costs per pound ($/lb) $ 6.45 $ 5.67 $ 6.43 $ 5.62
Cash operating costs excluding royalties per pound ($/lb) $ 5.97 $ 5.18 $ 6.06 $ 5.17
Cash operating costs excluding royalties 22,543 25,915 57,749 55,487
Less: Write-down of produced vanadium productsvi 6,688 - 11,214 -
Adjusted cash operating costs excluding royalties per pound
($/lb) $ 4.20 $ 5.18 $ 4.88 $ 5.17
ii. As per note 20 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements.
iii. As per the Mine properties segment in note 16 of the Company’s Q2 2024 unaudited condensed interim
consolidated financial statements.
iv. As per the Mine properties segment in note 16 less the increase in legal provisions of $1.0 million (for the six
months ended June 30, 2024) as noted in the "other general and administrative expenses" section on page 6 of
the Company’s Q2 2024 management’s discussion and analysis.
v. As per note 5 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements for
ilmenite finished products and warehouse supplies and including a write-down of vanadium purchased products
of $0.3 million for Q2 2024 and $nil for the six months ended June 30, 2024 ($nil and $nil in the same prior
year periods).
vi. As per note 5 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements for the
write-down of vanadium finished products less the write-down for vanadium purchased products of $0.3 million
in Q2 2024 and $nil for the six months ended June 30, 2024 ($nil and $nil in the same prior year periods).
1 The cash operating costs excluding royalties and adjusted cash operating costs excluding
royalties are reported on a non-GAAP basis. Refer to the “Non-GAAP Measures” section of this
press release.
2 GAAP – Generally Accepted Accounting Principles.
Contacts
Investor Relations
Alex Guthrie
Senior Manager, External Relations
+1.416.861.9778