Largo Reports 2021 Net Income of $22.6 Million and Strong Financial Position; Focused on “Two-Pillar” Strategy as a Leading Vanadium Supplier Benefiting from Strong Vanadium Fundamentals with an Emerging Clean Energy Division
Largo Reports 2021 Net Income of $22.6 Million and Strong
Financial Position; Focused on “Two-Pillar” Strategy as a Leading
Vanadium Supplier Benefiting from Strong Vanadium
Fundamentals with an Emerging Clean Energy Division
All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated.
Full Year 2021 Highlights
• Revenues of $198.3 million, a 65% increase over 2020; Revenues per pound sold1 of
$7.89, a 49% increase over 2020
• Net income of $22.6 million vs. net income of $6.8 million in 2020; Basic earnings
per share of $0.35 vs. $0.12 per share in 2020
• Cash balance of $83.8 million exiting 2021 and a net working capital surplus of
$118.3 million
• Annual V2O5 production 10,319 tonnes (22.7 million lbs)3 vs. 11,825 tonnes (26.0
million lbs)3 in 2020
• Annual operating costs of $133.0 million vs. $88.4 million in 2020, and cash
operating costs excluding royalties per pound1 of V2O5 equivalent sold of $3.37 vs.
$2.56 in 2020; 5% above 2021 annual guidance for cash operating costs excluding
royalties per pound1
• Total V2O5 equivalent sales of 11,393 tonnes, an 11% increase over 2020
• Issued 3rd annual Sustainability Report covering the Company’s new performance
targets and disclosures and vanadium’s role in the global green economy; The
Company continued to improve its overall Environmental, Social and Governance
(“ESG”) strategy now reflected in improved ratings and scores
• Largo Clean Energy (“LCE”) entered into its first battery sales contract with Enel
Green Power España. LCE will deliver a 5-hour 6.1 MWh VCHARGE System and
it received a notice to proceed on July 30, 2021
• Additional units of sustainably produced vanadium secured through offtake
agreement with Gladieux Metals Recycling ("GMR"): In November 2021, the
Company's subsidiary, Largo Resources USA Inc., signed a 10-year exclusive off-
take agreement with GMR for the purchase of all standard and high purity grade
vanadium products from GMR's recycling facility located in Freeport, Texas
• The Company completed the construction and ramp up of its vanadium trioxide
(“V2O3”) plant on budget in Q4 2021 and provided samples to prospective clients for
product specification analysis. The Company began the process of shipping V2O3 to
customers in Q1 2022
Q4 2021 Highlights
• Revenues of $50.3 million, 19% above Q4 2020; Revenues per pound soldi,ii of $7.88,
a 54% increase over Q4 2020
• Net income of $0.8 million vs. net income of $6.9 million in Q4 2020; Basic earnings
per share of $0.01 vs. $0.12 per share in Q4 2020
• Operating costs of $37.7 million vs. $31.6 million in Q4 2020, and cash operating
costs excluding royalties per pound1 of V2O5 equivalent sold of $3.68 vs. $2.56 in Q4
2020
Vanadium Market Update3
• The average benchmark price per kg of ferrovanadium in Europe is up
approximately 90% and, in the U.S., up approximately 100% since the start of 2022;
The average benchmark price per pound of V2O5 in Europe was $12.25 as of March
11, 2022, up approximately 40% since the start of 2022
• Demand remains strong in all the Company’s key markets and the Company
expects additional pressure on overall vanadium supply as a result of ongoing global
logistical challenges and geopolitical tensions
• The average benchmark price per pound of V2O5 in Europe was $8.30 in Q4 2021, a
57% increase from the average of $5.29 seen in Q4 2020; The average benchmark
price for 2021 was $8.24, a 44% increase from the average of $5.71 for 2020
• The average benchmark price per kg of ferrovanadium in Europe was $32.29 in Q4
2020, a 33% increase from the average of $24.36 seen in Q4 2020; The average
benchmark price for 2021 was $34.31, a 37% increase from the average of $24.99
for 2020
TORONTO--(BUSINESS WIRE)--March 16, 2022--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today released financial and operating results for the three and
twelve months ended December 31, 2021. The Company reported annual vanadium pentoxide
(“V2O5”) equivalent sales of 11,393 tonnes at a cash operating cost excluding royalties per
pound1 of $3.37. 2021 revenues increased 65% to $198.3 million compared to 2020 mainly due
to a strengthening of vanadium prices and an increase in annual sales.
Paulo Misk, President and CEO of Largo, stated: “The Company generated net income of $22.6
million in 2021 versus $6.8 million last year, aided by a 44% in the average European V2O5
price and a 37% increase ferrovanadium benchmark price3. The improvement in vanadium
prices allowed Largo to end the year on a positive note despite some operational challenges
experienced during the year, particularly in Q4 2021 with abnormally high rainfall at our
vanadium production operations in Brazil.”
He continued: “2021 was an important year for Largo as we continued to focus our efforts on
maximizing value for the Company with our “two-pillar” strategy, which presents a very
compelling value proposition for our shareholders. Firstly, investors should expect to benefit
from the rising profitability of our established vanadium supplier business as we enter what we
believe to be a bull market for vanadium. Secondly and over time, investors are expected to
benefit from the incremental earnings from the manufacture and sale of our vanadium-based
energy storage systems in the context of a remarkable growth projection for long-duration
storage needs over the next five years. In support of this, our recently filed technical report
outlines a significant growth and optimization plan for our Maracás Menchen Mine, supported
by enhanced cash flows from the expected expansion of vanadium production and sale of
titanium dioxide pigment. We also remain optimistic that the ongoing work to advance Largo
Physical Vanadium Corp. could provide potential advantages for Largo and its energy storage
business.”
He concluded: “Largo remains a key global player in the vanadium sector through the
production and supply of some of the world’s highest quality vanadium. Looking ahead, the
Company expects a structural vanadium supply deficit to persist as new economy use-cases
emerge and vanadium redox flow batteries begin to play a bigger role in addressing the need for
long duration energy storage. The Company plans to continue capitalizing on current trends in
the vanadium market which should support the successful execution of its growth plans over the
coming years.”
Financial Results
(thousands of U.S. dollars, except for basic earnings
(loss)
per share and diluted earnings (loss) per share)
Three months ended Year ended
December
31,
2021
December
31,
2020
December 31,
2021
December
31,
2020
Revenues $50,326 $42,254 $198,280 119,987
Operating costs (37,746) (31,604) (133,010) (88,390)
Direct mine and production costs (21,370) (18,547) (75,126) (48,929)
Net income (loss) before tax (337) 6,023 31,759 7,723
Income tax (expense) recovery (402) 282 (5,430) (139)
Deferred income tax recovery (expense) 1,528 576 (3,758) (823)
Net income (loss) 789 6,881 22,571 6,761
Basic earnings (loss) per share $0.01 $0.12 $0.35 $0.12
Diluted earnings (loss) per share $0.01 $0.11 $0.35 $0.11
Cash provided before non-cash working
capital items $6,102 $7,539 $55,362 $12,065
Net cash provided by (used in) operating activities 3,427 4,741 39,777 (59,508)
Net cash (used in) provided by financing activities (2) 2,589 (6,902) 30,232
Net cash used in investing activities (6,985) (5,070) (27,399) (18,106)
Net change in cash (3,777) 4,250 4,645 (48,354)
As at
December
31,
2021
December
31,
2020
Cash $83,790 $79,145
Working capital4 118,310 92,950
Maracás Menchen Mine Operational and Sales Results
2021 2020
Q1 Q2 Q3 Q4 Full Year Q4 Full Year
Total Ore Mined (tonnes) 263,966 340,734 366,484 277,783 1,248,967 338,226 1,087,518
Ore Grade Mined - Effective
Grade5 (%) 1.22 1.15 1.10 1.00 1.12 1.18 1.29
Concentrate Produced (tonnes) 100,467 98,372 113,879 86,129 398,847 108,609 412,661
Grade of Concentrate (%) 3.21 3.23 3.32 3.13 3.23 3.24 3.28
Global Recovery6 (%) 77.4 79.9 83.7 76.0 79.7 80.6 81.4
V2O5 Produced (Flake + Powder)
(tonnes) 1,986 3,070 3,260 2,003 10,319 3,340 11,825
V2O5 produced (equivalent
pounds3) 4,378,375 6,768,184 7,187,061 4,415,854 22,749,473 7,363,431 26,069,631
V2O5 Equivalent Sold (tonnes) 2,783 3,027 2,685 2,899 11,393
3,746
10,260
Produced V2O5 equivalent sold
(tonnes) 2,654 2,819 2,549 2,843 10,864
Purchased V2O5 equivalent sold
(tonnes) 129 208 136 56 529
Cash Operating Costs Excluding
Royalties per pound ($/lb)1 2.87 3.39 3.53 3.68 3.37 2.56 2.56
Revenues per pound sold ($/lb)1 6.49 8.14 9.10 7.88 7.89 5.12 5.31
Annual 2021 Financial Highlights
• During 2021, the Company recognized revenues of $198.3 million from sales of 11,393
tonnes of V2O5 equivalent (2020 – 10,260 tonnes). This represents a 65% increase in
revenues over 2020 ($120.0 million) mainly due to higher vanadium prices and sales in
2021.
• Operating costs of $133.0 million in 2021 (2020 – $88.4 million) include direct mine and
production costs of $75.1 million (2020 – $48.9 million). The increase in direct mine and
production costs is primarily attributable to an increase in sales, the impact of a lower
global recoveries, the impact of abnormally elevated levels of rainfall experienced in Q4
2021, which negatively impacted the operational performance and increased costs for
critical consumables, including heavy fuel oil (“HFO”) and diesel.
• Cash operating costs excluding royalties per pound1 were $3.37 in 2021, compared with
$2.56 in 2020. The increase seen in 2021 compared with 2020 is largely due to the
reasons as noted above.
• The Company recorded net income of $22.6 million in 2021, representing an 232%
increase over net income of $6.8 million in 2020, primarily due to a 65% increase in
revenues.
• Professional, consulting and management fees were $17.9 million in 2021, compared
with $8.3 million in 2020. The increase is primarily attributable to costs incurred during
the year in connection with Largo Clean Energy (“LCE”). In addition, the Company’s
corporate segment continued to incur increased insurance, legal, regulatory and
compliance costs in Q4 2021 as a result of the Nasdaq listing earlier in 2021, U.S.
regulatory requirements and ongoing strategic initiatives.
• Technology start-up costs relate to activities at LCE focused on supporting the future
deployments of its VCHARGE vanadium redox flow battery system (Q4 2021 – $2.4
million and 2021 – $3.1 million) and costs related to initial activities for the Company’s
titanium project (Q4 2021 and 2021 – $0.7 million).
• Other general and administrative expenses were $6.4 million in 2021, compared with
$3.3 million in 2020. The increase is primarily attributable to costs incurred in connection
with LCE that was not fully operational in 2020. This contributed to the increases seen in
travel, occupancy, information technology, depreciation and amortization and office
costs.
Additional Corporate Updates
• Creation of Largo Physical Vanadium Corp.: On February 3, 2022, the Company
announced the creation of Largo Physical Vanadium Corp. and a proposed qualifying
transaction pursuant to the policies of the TSX Venture Exchange with Column Capital
Corp., a capital pool company, the terms of which are set out in a non-binding letter of
intent dated February 1, 2022. Upon completion of the proposed qualifying transaction
and subject to receipt of applicable regulatory approvals, among other things, it is
anticipated that the resulting issuer will be named Largo Physical Vanadium Corp. and
will become a publicly-listed physical vanadium holding company that will purchase and
hold physical vanadium, among other things, for use in the Company's VCHARGE
batteries.
• Growth and Optimization of the Maracás Menchen Mine Presented in Updated
Technical Report Reflects Increased Value of Largo’s Vanadium-Titanium Plans:
On November 3, 2021, the Company announced the results of an updated mining plan for
its Maracás Menchen Mine to provide enhanced access to the vanadium needed for the
Company to continue to execute on its energy storage transition strategy. The updated
technical report highlights a $2.0 billion after-tax NPV7 and $4.2 billion after-tax life of
mine cash flow from the expected increase in V2O5 production and future production and
sale of titanium dioxide pigment. An independent technical report has been prepared and
filed in respect of the Company’s Maracás Menchen Mine in accordance with National
Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101").
• ESG Progress in 2021: The Company continues to improve its overall ESG performance
and public disclosures, as described in Largo’s 2020 Sustainability Report issued in
August 2021. This is reflected in improved ratings and scores received in 2021 such as
MSCI (improved from BBB to A) and EcoVadis (improved from 44/100 to 60/100 – top
83% percentile of mining respondents). Largo began its journey towards net zero by
identifying the main sources of greenhouse gas (“GHG”) emissions and reporting on
Scope 1 and Scope 2 in its 2020 Sustainability Report. The Company continues to
explore opportunities for the reduction of its Scope 1 and 2 GHG emissions reductions
and is reviewing the use of carbon offsets to reduce its Scope 3 emissions, in particular
maritime transportation.
• Ilmenite Concentration Plant and Titanium Dioxide Pigment Project Progress in
2022: In Q1 2022, the Company purchased approximately 90% of the required equipment
for its ilmenite concentration plant project, including flotation, desliming, filtration and
thickening area equipment. The Company expects to begin construction in mid-March
2022 and begin producing ilmenite concentrate in early 2023.
• Additional Units of Sustainably Produced Vanadium Secured through Offtake
Agreement with GMR: The Company believes that its offtake agreement supports the
expected growth plans and is aligned with Largo’s continued focus on sustainability and
integrated ESG principles.
• Heavy Rainfall Impacts Operations in Maracás: The production of 2,003 tonnes of
V2O5 in Q4 2021 was 40% lower than the 3,340 tonnes of V2O5 produced in Q4 2020.
Lower quarterly production was due to the abnormally elevated levels of rainfall in
November and December 2021. An effective water diversion channel system has been
implemented to mitigate the impacts of future rains. The Q4 2021 global recovery of
76.0% was lower than the 80.6% seen in Q4 2020 as a result of the instability of the
production processes. This is a consequence of the heavy rains which restricted the
availability of ore in the mine to feed the plant. In Q4 2021, 277,783 tonnes of ore were
mined with an effective grade of 1.00% of V2O5. Ore mined in Q4 2021 was 18% lower
than in Q4 2020. The Company produced 86,129 tonnes of concentrate with an effective
grade of 3.13%.
• Q1 2022 Production and Sales Impacts: Subsequent to Q4 2021, the Company
scheduled a six-day shutdown of the processing plant in January 2022 in order to perform
maintenance on the plant cooler engine system and power substations. Following this
shutdown, production in January 2022 and February 2022 was 702 and 731 tonnes of
V2O5 equivalent, respectively. February production was impacted by a nonplanned
corrective maintenance shutdown (5 days) to repair a support the cooler support bearing.
Subsequent to Q4 2021, sales in January 2022 and February 2022 were 954 and 571
tonnes of V2O5 equivalent, respectively. Lower sales in February 2022 was due to a
combination of shipment delays and a decrease in spot sales as the Company took actions
to increase its available inventory levels.
Annual 2021 Webcast and Conference Call Information
The Company will host a webcast and conference call on Thursday, March 17th at 10:00 a.m.
ET, to discuss its annual 2021 results and progress.
Webcast and Conference Call Details:
Details of the webcast and conference call are listed below:
Date: Thursday, March 17, 2022
Time: 10:00 a.m. ET
Webcast
Registration
Link:
https://produceredition.webcasts.com/starthere.jsp?ei=1531547&tp_key=73b5ede5f4
Dial-in
Number:
Local: +1 (647) 794-4605
North American Toll Free: +1 (888) 204-4368
Conference
ID: 1507085
Replay
Number:
Local / International: + 1 (647) 436-0148
North American Toll Free: +1 (888) 203-1112
Replay Passcode: 1507085
Website: To view press releases or any additional financial information, please visit the Investor Resources
section of the Company’s website at: www.largoinc.com/English/investor-resources
A playback recording will be available on the Company's website for a period of 60-days
following the conference call.
The information provided within this release should be read in conjunction with Largo's annual
consolidated financial statements for the years ended December 31, 2021 and 2020 and its
management's discussion and analysis for the year ended December 31, 2021 which are available
on our website at www.largoinc.com or on the Company’s respective profiles at www.sedar.com
and www.sec.gov.
Mr. Paul Sarjeant B.Sc. P.Geo., is a qualified person as defined under NI 43-101 and has
reviewed the technical information in this press release. Mr. Sarjeant is Manager, Geology of the
Company.
About Largo
Largo has a long and successful history as one of the world’s preferred vanadium companies
through the supply of its VPURETM and VPURE+TM products, which are sourced from one of
the world's highest-grade vanadium deposits at the Company's Maracás Menchen Mine in Brazil.
Following the acquisition of vanadium redox flow battery technology in 2020, Largo is
undergoing a strategic transformation to vertically integrate its world-class vanadium products
with its VCHARGE vanadium battery technology to support the planet's on-going transition to
renewable energy and a low carbon future. Largo’s VCHARGE batteries are uniquely capable of
supporting reliability and grid stability as electricity systems move away from fossil-fuel
generation. VCHARGE batteries are cost effective due to a variety of innovations, enabling an
efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its
25+ year lifespan.
Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange
under the symbol "LGO". For more information, please visit www.largoinc.com.
Forward-looking Information:
This press release contains forward-looking information under Canadian securities legislation
("forward-looking information"), some of which may be considered "financial outlook" for the
purposes of applicable Canadian securities legislation. 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 information
contained in this press release includes, but is not limited to, statements with respect to the
timing and amount of estimated future production and sales; costs of future activities and
operations; production and sale of titanium dioxide pigment, expansion of vanadium production,
and related impacts on cash flow; the successful vertical integration of the Company; timing and
cost related to the build-out of the ilmenite plant and titanium dioxide pigment processing plant;
the extent of capital and operating expenditures; the effectiveness of our efforts to mitigate
effects of future rains on operations at the Maracás Menchen Mine; the impact of global delays
and related price increases on the Company’s global supply chain and future V2O5 equivalent
sales; and the completion by Largo Physical Vanadium Corp. of a qualifying transaction with
Column Capital Corp. and listing of the resulting issuer on the TSX Venture Exchange;
purchases of vanadium products from GMR.
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, other vanadium commodities, iron ore,
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; the
availability of financing for operations and development; the Company’s ability to procure
equipment and operating supplies in sufficient quantities and on a timely basis; that the
estimates of the resources and reserves at the Maracás Menchen Mine and the geological,
operational and price assumptions on which these are based are within reasonable bounds of
accuracy (including with respect to size, grade and recovery); the Company’s ability to attract
and retain skilled personnel and directors; the ability of management to execute strategic goals;
that we will be able to build, finance and operate our vanadium redox flow (“VRFB”) business;
that we will be able to protect and develop our technology and maintain our intellectual
property; that we will be able to market, sell and deliver our VCHARGE± battery system on
specification and at a competitive price; that the Company’s current plans for iron ore, ilmenite,
titanium dioxide pigment and VRFBs can be achieved; that we will be able to secure the required
production resources to build our VCHARGE± battery system; and that VRFB technology will
generally be adopted in the market.
Forward-looking information is subject to known and unknown risks, uncertainties and other
factors that may cause actual results, level of activity, performance or achievements to be
materially different from those expressed or implied by such forward-looking information,
including but not limited to those risks described in the annual information form of Largo and in
its public documents filed on www.sedar.com and 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&As which also apply.