Largo Reports First Quarter 2023 Financial Results and Provides Update to 2023 Operational and Sales Outlook
Largo Reports First Quarter 2023 Financial
Results and Provides Update to 2023
Operational and Sales Outlook
All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated.
Q1 2023 and Other Highlights
• Revenues of $57.4 million, a 35% increase over Q1 2022, mainly due to greater sales
quantities at a higher revenue per lb sold1; Revenues per pound sold1 of $9.14, a 5%
increase over Q1 2022
• Operating costs of $45.9 million vs. $29.0 million in Q1 2022, and cash operating
costs excluding royalties per pound1 of V2O5 equivalent sold of $5.15 vs. $3.97 in Q1
2022
• Net loss of $1.2 million vs. a net loss of $2.0 million in Q1 2022
• Cash provided before working capital items of $8.2 million, a 42% increase over Q1
2022
• In January 2023, the Company secured two debt facilities: a two-year debt facility
of $15.0 million, bearing interest at 6.85% per annum with payments due quarterly
and principal repayments starting after a grace period of 180 days, and a three-year
debt facility of $10.0 million, bearing interest at 8.36% per annum with an initial fee
of 0.70% and payments due semi-annually with principal repayments starting after
a grace period of 360 days
• Cash balance of $61.6 million, debt of $65.0 million and a net working capital2
surplus of $119.3 million exiting Q1 2023
• Total V2O5 equivalent sales of 2,849 tonnes (including 245 tonnes of purchased
material), a 28% increase over Q1 2022; V2O5 production 2,111 tonnes (4.6 million
lbs3) vs. 2,441 tonnes (4.4 million lbs3) in Q1 2022
• The Company has adjusted its annual 2023 V2O5 equivalent production guidance to
9,000 – 11,000 tonnes from 11,000 – 12,000 tonnes, its annual 2023 V2O5 equivalent
sales guidance to 8,700 – 10,700 tonnes from 10,300 – 11,300 tonnes and its cash
operating cost excluding royalties per lb sold guidance to $4.85 – 5.65 from $4.85 –
5.25
• Q1 2023 results conference call and webcast: Thursday, May 11th at 1:00 p.m. ET
Vanadium Market Update4
• Spot demand remained strong in Q1 2023, primarily due to higher-than-expected
demand from the aerospace sector with demand in the energy storage market
anticipated to increase in future quarters largely due to anticipated Chinese
vanadium redox flow battery (“VRFB”) deployments
• The average benchmark price per pound of V2O5 in Europe was $10.39 in Q1 2023,
a 3% decrease from the average of $10.72 seen in Q1 2022; The average benchmark
price per kg of ferrovanadium (“FeV”) in Europe was $39.46 in Q1 2023, a 15%
decrease from the average of $46.17 seen in Q1 2022, mainly due to lower spot
demand from the steel sector in the quarter
TORONTO--(BUSINESS WIRE)--May 10, 2023--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today released financial and operating results for the three
months ended March 31, 2023. The Company reported quarterly vanadium pentoxide (“V2O5”)
equivalent sales of 2,849 tonnes at a cash operating cost excluding royalties per pound1 sold of
$5.15.
Daniel Tellechea, Interim CEO and Director of Largo, stated: “While first quarter results were in
line with our annual 2023 guidance, we have revised our 2023 production, sales and cost
guidance due to heavy rain in December causing the Company to delay its infill drilling
campaign for 2023, which is required for further refinement of the Company's short-term mining
model. Returning to normalized production levels remains the top priority for Largo as we work
through this period of adjustment in our mining operations.”
He continued: “However, we should not overlook the upcoming catalysts for the Company in
2023. We continued to progress with the construction of our ilmenite concentration plant during
the first quarter and expect to complete construction in Q2 2023, with commissioning and ramp
up following shortly thereafter. In addition, installation of our 6.1 megawatt-hour vanadium
battery in Spain continued during Q1 2023 with final provisional acceptance scheduled for Q3
2023.” He concluded: “As for the market, vanadium prices decreased approximately 6% in April
2023 as a result of lower short-term steel demand. Despite this, we believe vanadium's long-term
and medium-term fundamentals remain strong, with considerable demand growth expected in the
future from battery applications.”
Financial Results
(thousands of U.S. dollars ($), except for basic (loss)
per share and diluted (loss) per share)
Three months ended
March 31, 2023 March 31, 2022
Revenues 57,421 42,688
Operating costs (45,931) (28,958)
Direct mine and production costs (28,419) (17,560)
Net income before tax 715 814
Income tax (expense) (333) (602)
Deferred income tax (expense) (1,589) (2,166)
Net (loss) (1,207) (1,954)
Basic (loss) per share ($0.02) ($0.03)
Diluted (loss) per share ($0.02) ($0.03)
Cash provided before working capital items 8,150 $5,751
Net cash provided by (used in) operating activities 4,953 (4,050)
Net cash provided by financing activities 25,305 385
Net cash (used in) investing activities (23,406) (4,268)
Net change in cash 7,104 (5,396)
As at
March 31,
2023
December 31,
2022
Cash 61,575 54,471
Debt 65,000 40,000
Working capital surplus2 119,345 115,171
Maracás Menchen Mine Operational and Sales Results
Q1 2023 Q1 2022
Total Ore Mined (tonnes) 341,967 303,652
Ore Grade Mined - Effective Grade5 (%) 0.81 1.27
Concentrate Produced (tonnes) 78,695 92,324
Grade of Concentrate (%) 2.99 3.21
Global Recovery6 (%) 83.0 77.5
V2O5 Produced (Flake + Powder) (tonnes) 2,111 2,442
V2O5 produced (equivalent pounds3) 4,653,953 5,383,682
V2O5 Equivalent Sold (tonnes) 2,849 2,232
Produced V2O5 equivalent sold (tonnes) 2,604 2,153
Purchased V2O5 equivalent sold (tonnes) 245 79
Cash Operating Costs Excluding Royalties per pound ($/lb) 1 5.15 3.97
Revenues per pound sold ($/lb)1 9.14 8.67
Q1 2023 Financial Highlights
• During Q1 2023, the Company recognized revenues of $57.4 million from sales of 2,849
tonnes of V2O5 equivalent (Q1 2022 – 2,232 tonnes). This represents a 35% increase in
revenues over Q1 2022 ($42.7 million) and is mainly due to greater sales quantities at a
higher revenue per lb sold1.
• Operating costs of $45.9 million in Q1 2023 (Q1 2022 – $29.0 million) include direct
mine and production costs of $28.4 million (Q1 2022 – $17.6 million), conversion costs
of $1.9 million (Q1 2022 – $1.8 million), product acquisition costs of $4.2 million (Q1
2022 – $1.6 million), royalties of $2.4 million (Q1 2022 – $2.0 million), distribution
costs of $1.4 million (Q1 2022 – $1.4 million), depreciation and amortization of $7.3
million (Q1 2022 – $4.3 million) and iron ore costs of $0.3 million (Q1 2022 - $0.2
million). The increase in direct mine and production costs is attributable to low ore
availability due in part to the heavy rains in December 2022, as well as a shutdown for
the completion of the planned maintenance and refractory refurbishment in the kiln.
Higher mining costs, the lack of production stability and the ramp up following the
shutdown negatively impacted costs in Q1 2023. In addition, as compared with Q1 2022,
the Company experienced cost increases in critical consumables, including sodium
carbonate, as well as increased consumption of ammonium sulfate.
• Cash operating costs excluding royalties per pound1 sold were $5.15 in Q1 2023,
compared with $3.97 in Q1 2022. The increase seen in Q1 2023 compared with Q1 2022
is largely due to the reasons noted above for operating costs, with the previously noted
plant shutdowns negatively impacting operational and financial performance for the
quarter.
• Professional, consulting and management fees were $5.5 million in Q1 2023, compared
with $5.9 million in Q1 2022, representing a 6% decrease. The decrease is primarily due
to lower costs incurred for Largo Physical Vanadium Corp. (“LPV”) in Q1 2023 than in
the previous comparative quarter.
• Other general and administrative expenses were $3.3 million in Q1 2023, compared with
$1.7 million in Q1 2022. The increase is primarily attributable to increased depreciation
in Q1 2023 from the Company's software intangible asset, as well as increased IT related
costs in support of the Company's enterprise resource planning ("ERP") software
implementation. The Company also saw increased costs at LCE, which are primarily
related to increased travel costs arising from its battery installation activities in Spain.
• Share-based payments in Q1 2023 decreased from Q1 2022 by 266% to an expense
recovery of $1.3 million. The decrease was attributable to the reversal of share-based
payment expenditures on forfeited unvested stock options and restricted share units
("RSUs") as well as a reduced number of stock options and RSUs granted in Q1 2023, as
compared with Q1 2022.
• Finance costs were $1.4 million in Q1 2023, compared with $0.2 million in Q1 2022. The
increase is attributable to increased debt, as well as an initial financing fee on the
Company's new debt facilities.
• Technology start-up costs were $2.8 million in Q1 2023, representing a 7% decrease over
Q1 2022. These costs relate to activities at LCE focussed on the deployment of its initial
VCHARGE VRFB system in Spain with the quarter seeing increased activity by the field
service team and higher transportation and installation costs.
• Cash provided by financing activities in Q1 2023 increased from cash provided by
financing activities in Q1 2022 by $24.9 million. The movement is primarily due to the
receipt of debt of $25.0 million.
• Cash used in investing activities in Q1 2023 of $23.4 million is an increase from the $4.3
million seen in Q1 2022. This is primarily due to capital expenditures for the ilmenite
project and purchases of vanadium assets by LPV of $8.6 million.
Additional Corporate Updates
• Q1 2023 Production Overview: Production of 2,111 tonnes of V2O5 in Q1 2023 was
14% lower than the 2,442 tonnes of V2O5 produced in Q1 2022. In Q1 2023, the
Company experienced reduced massive ore inventory arising from the heavy rainfall in
December 2022. The planned kiln maintenance and refractory refurbishment initially
scheduled for February was completed in January during the stoppage in operations. In
Q1 2023, the transition in mining contractor was completed and 341,967 tonnes of ore
were mined with an effective grade5 of 0.81% of V2O5. The ore mined in Q1 2023 was
13% higher than in Q1 2022. The Company produced 78,695 tonnes of concentrate with
an effective grade5 of 2.99%. The global recovery6 achieved in Q1 2023 was 83.0%, an
increase of 7.1% from the 77.5% achieved in Q1 2022 and 11.1% higher than the 74.7%
achieved in Q4 2022. The global recovery6 in January was 83.1%, with 82.9% achieved
in February and 82.7% achieved in March. Subsequent to Q1 2023, production in April
2023 was 676 tonnes of V2O5 equivalent.
• Q1 2023 High Purity Production: In Q1 2023, the Company produced 1,041 V2O5
equivalent tonnes of high purity products, including 813 tonnes of high purity V2O5 and
228 tonnes of high purity vanadium trioxide (“V2O3”). This represented 49% of the total
quarterly production.
• Q1 2023 Sales Overview and Outlook: In Q1 2023, the Company sold 2,849 tonnes of
V2O5 equivalent (Q1 2022 – 2,232 tonnes), including 245 tonnes of purchased products
(Q1 2022 – 79 tonnes). Logistical challenges and transport costs have eased from their
highs and the Company expects further improvements in the coming quarters and the
Company continued to deliver on all its commercial commitments. The Company has
also committed to the purchase of 60 tonnes per month of V2O5 from third parties for the
remainder of the year. Subsequent to Q1 2023, sales in April 2023 were 1,101 tonnes of
V2O5 equivalent, including 78 tonnes of purchased material.
• Stack Manufacturing Facility Improvements at LCE: All building improvements at
Largo Clean Energy’s (“LCE”) facility in Wilmington, Massachusetts were completed
during Q1 2023. Stack manufacturing has moved into its final location and LCE will now
begin the process of restarting and scaling up the capacity to 12.5 megawatts (“MW”) by
the end of the year, with an ultimate capacity of 100 MW by the end of 2025. The sub-
scale and chemistry teams have moved into their new lab, which, following an upgrade
over the next two quarters, will increase the material and core technology testing capacity
to support new vendors and performance improvements.
• Promotion of Paul Vollant to Chief Commercial Officer: Effective May 9, 2023,
Largo has promoted Paul Vollant to Chief Commercial Officer in order to oversee all
sales and strategic business development efforts related to the commodity division of the
Company. His promotion reflects an unwavering commitment and support of the
Company's sales efforts to date, including the establishment and oversight of Largo's
sales and trading department. Mr. Vollant is highly experienced in the sales and
marketing of metals and minerals and has specialized in strategic metals, particularly
vanadium and titanium. Mr. Vollant joined Largo in 2019 as Director of Sales and
Trading and was subsequently promoted to Vice President of Commercial in 2021.
Update of 2023 Production and Sales Strategy Outlook
The Company is in the process of reviewing its short-term mine model to incorporate on-going
infill drilling at the Campbell Pit. Based on results to date and expected future results, the
Company has adjusted its annual 2023 production, sales and cash cost guidance.
Revised 2023 Production, Sales and Cost Guidance
Tonnes V2O5 Q2 Q3 Q4 2023
Low High Low High Low High Low High
Production 2,200 2,400 2,400 3,300 2,400 3,300 9,000 11,000
Sales1 1,900 2,300 2,000 2,600 2,200 3,300 8,700 10,700
i. The revised annual 2023 sales guidance does not include purchased material.
Cash Operating Cost Excluding Royalties ($/lb sold) 1 $4.85 – 5.65
Q1 2023 Webcast and Conference Call Information
To join the conference call without operator assistance, you may register and enter your phone
number at https://emportal.ink/40oF5sO to receive an instant automated call back.
You can also dial direct to be entered to the call by an Operator via dial-in details below.
Conference Call Details
Date: Thursday, May 11, 2023
Time: 1:00 p.m. ET
Dial-in Number: Local: +1 (416) 764-8650
North American Toll Free: +1 (888) 664-6383
Conference ID: 09350530
Webcast
Registration Link: https://app.webinar.net/NxAb5Ek3Yjp
RapidConnect
Link https://emportal.ink/40oF5sO
Replay Number:
Local / International: + 1 (416) 764-8677
North American Toll Free: +1 (888) 390-0541
Replay Passcode: 350530#
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
unaudited condensed interim financial statements for the three months ended March 31, 2023
and 2022 and its management's discussion and analysis for the three months ended March 31,
2023 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.
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.
Aiming to enhance value creation at Largo, the Company is in the process of implementing an
ilmenite concentration plant using feedstock sourced from its existing operations in addition to
advancing its U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s
VCHARGE vanadium batteries contain 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.
Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based
on two pillars: 1.) leading vanadium supplier with an outlined growth plan and 2.) U.S.-based
energy storage business 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, 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.
Forward‐looking information in this press release also includes, but is not limited to, statements
with respect to our ability to build, finance and successfully operate a VRFB business, the
projected timing and cost of the completion of the EGPE project; our ability to protect and
develop our technology, our ability to maintain our IP, the competitiveness of our product in an
evolving market, our ability to market, sell and deliver our VCHARGE batteries on specification
and at a competitive price, our ability to successfully deploy our VCHARGE batteries in foreign
jurisdictions; our ability to negotiate and enter into a joint venture with Ansaldo Green Tech on
terms satisfactory to the Company and the success of such joint venture; the receipt of necessary
governmental permits and approvals on a timely basis, our ability to secure the required
resources to build and deploy our VCHARGE batteries, and the adoption of VRFB technology
generally in the market.
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 commodities; 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 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 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 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; 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
or Largo Clean Energy 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.sedar.com 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&As which also
apply.
Trademarks are owned by Largo Inc.
Q1 2023 Net Income Reconciliation
Q1 2023
Total V2O5 equivalent sold 000s lbs 6,281 A
tonnes1 2,849
Produced V2O5 equivalent sold 000s lbs 5,741 B
tonnes1 2,604
Revenues per pound sold $/lb $ 9.14 C
Cash operating costs per pound $/lb $ 5.58 D
1. Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
Q1 2023
Revenues
$ 57,421
A x C
2,849 tonnes of V2O5 equivalent sold (Q1 2022 - 2,232
tonnes), with revenues per pound sold of $9.14 (Q1 2021 -
$8.67)