Largo Reports Fourth Quarter and Full Year 2021 Operational Results; Sales Exceeds Lower End of Guidance Despite Rain- Related Production Disruption in November-December; Provides 2022 Guidance
Largo Reports Fourth Quarter and Full Year 2021 Operational
Results; Sales Exceeds Lower End of Guidance Despite Rain-
Related Production Disruption in November-December; Provides
2022 Guidance
All amounts expressed are in U.S. dollars, denominated by “$”.
Q4 and FY 2021 Highlights
Quarterly sales of 2,899 tonnes of V2O5 equivalent in Q4 2021 vs. 3,751 tonnes in Q4
2020; Annual V2O5 equivalent sales of 11,393 tonnes in 2021, representing an 11%
increase over 2020 and exceeding lower-end of 2021 V2O5 sales guidance (11,200 –
11,800 tonnes)
Quarterly V2O5 production of 2,003 tonnes (4.4 million lbs1) in Q4 2021 vs. 3,340
tonnes in Q4 2020, which was the Company’s historic record quarterly production;
Annual V2O5 production of 10,319 tonnes (22.7 million lbs1) in 2021 vs. 11,825
tonnes in 2020
Quarterly global V2O5 recovery of 76.0% in Q4 2021 vs. 80.6% in Q4 2020; Annual
global V2O5 recovery of 79.7% in 2021 vs. 81.4% in 2020
Q4 2021 operational results were impacted by heavy rainfall at the Company’s
Maracás operations in November and December
2022 Guidance
Operating, Sales and Cost Guidance:
o V2O5 Equivalent Production and Sales of 12,000 – 12,750 tonnes
o Cash Operating Cost Excluding Royalties4 of $3.20 – 3.40/lb V2O5 sold
o Vanadium Distribution Costs of $7.0 – 8.0 million
o Corporate and Sales & Trading G&A of $10.0 – 11.0 million
o Largo Clean Energy G&A of $15.0 – 18.0 million
Capital Expenditures Guidance:
o Sustaining5 of $9.0 – 10.0 million
o Ilmenite Concentration Plant of $29.0 – 30.0 million
o Titanium Dioxide (“TiO2”) Pigment Processing Plant of $9.0 – 10.0 million
o Capitalized Stripping of $10.0 – 11.0 million
o Carry-Over of $2.0 – 3.0 million
o Largo Clean Energy capital expenditures of $1.5 – 2.5 million
The Company expects to deliver its first VCHARGE vanadium redox flow battery
(“VRFB”) sales contract with Enel Green Power España in Q3 2022
Planned 6-day Maracás processing shutdown in January: The Company has
planned this to perform maintenance on its plant cooler engine system and power
substations; V2O5 equivalent production is expected to be in the range of 750 – 800
tonnes in January
TORONTO--(BUSINESS WIRE)--January 17, 2022--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today announces annual production of 10,319 tonnes (22.7
million lbs1) of vanadium pentoxide (“V2O5”) and sales 11,393 tonnes of V2O5 equivalent from
its Maracás Menchen Mine in 2021.
Paulo Misk, President and CEO of Largo, stated: “Despite encountering global logistical delays
throughout the year and heavy rains in Brazil in Q4 2021, our team adapted to the challenges
presented and managed to exceed the lower range of the Company’s vanadium sales guidance in
2021. I am also pleased to report the Company had a strong finish to the year with V2O5
equivalent sales of 1,029 tonnes in December. Abnormally elevated levels of rainfall in
November and December significantly impacted operational results at the MaracásMenchen
Mine in Q4 2021 which our operations team worked diligently to implement an effective divert
channel system that is expected to prevent heavy rainfall impacts in the future. The Company
returned to normalized production levels following the planned 6-day maintenance shutdown
which took place early in January.”
He concluded: “Looking ahead, the Company remains focused on completing a significant
milestone following the delivery of its first VCHARGE VRFB to Enel in Q3 2022 and will begin
executing Phase 1 of its operational plan as presented in the Company’s recently released
technical report for the Maracás complex in Brazil. We believe the expected incremental cash
flows generated by the production and sale of ilmenite concentrate and TiO2 pigment and future
planned expansion of vanadium production will provide clear value creation upside to our
shareholders going forward. 2022 will undoubtedly present new challenges for our team but we
remain focused on the tremendous growth opportunity that exists in our profitable vanadium
business and our vanadium-based energy storage business from the deployment of additional
VRFB systems expected in the years ahead.”
Maracás Menchen Mine Operational and Sales Results
Q4 2021 Q4 2020 2021 2020
Total Ore Mined (tonnes) 277,783 338,226 1,248,967 1,087,518
Ore Grade Mined - Effective Grade (%)2 1.00 1.18 1.12 1.29
Concentrate Produced (tonnes) 86,129 108,609 398,847 412,661
Grade of Concentrate (%) 3.13 3.24 3.23 3.28
Global Recovery (%)3 76.0% 80.6 79.7 81.4
V2O5 produced (Flake + Powder) (tonnes) 2,003 3,340 10,319 11,825
V2O5 produced (equivalent pounds) 1 4,415,854 7,363,431 22,749,473 26,069,631
Total V2O5 equivalent sold (tonnes) 2,899 11,393
Produced V2O5 equivalent sold (tonnes) 2,843 10,864
Purchased V2O5 equivalent sold (tonnes) 56 3,751 529 10,260
Q4 and FY 2021 Operational Highlights
Operational Results Largely Impacted by Heavy Rainfall in Maracás: Production
from the MaracásMenchen Mine was 2,003 tonnes of V2O5 in Q4 2021, representing a
decrease of 40% over Q4 2020, which was historically the Company’s strongest
production quarter. Lower quarterly production was due to heavy rainfall at the
Company’s Maracás operation in November and December. Annual V2O5 production
was 10,319 tonnes in 2021, being 13% lower than 2020. Lower annual production was
due to the commissioning and ramp up activities associated with the Company’s kiln and
cooler upgrades in Q1 2021 and heavy rainfall in November and December. In Q4 2021,
global recoveries3 averaged 76.0% as compared to the 80.6% averaged in Q4 2020. The
Company achieved an annual average global V2O5 recovery3 rate of 79.7% in 2021,
representing a 2.0% decrease over the 81.4% averaged in 2020. The Company mined
1,248,967 tonnes of ore with an effective V2O5 grade2 of 1.00% in 2021 compared to
1,087,518 tonnes with an effective V2O5 grade2 of 1.29% in 2019. The decrease in global
recoveries3 and mined ore in 2021 is primarily due to the impacts mentioned above.
Lower End of Annual Sales Guidance Met: In Q4 2021, V2O5 equivalent sales were
2,899 tonnes, representing a 23% decrease over Q4 2020. Total V2O5 equivalent sales of
11,393 tonnes in 2021 exceeded the lower end of the Company’s 2021 annual sales
guidance (11,200 – 11,800 tonnes) and were 11% higher than total sales in 2020. The
Company continued to navigate challenges presented by global logistical delays in Q4
2021, which have impacted all aspects of the Company’s supply chain.
Summary of Rainfall Effects and Drainage Improvements: During November and
December, higher than expected rain volume of approximately 580 millimeters fell in
Maracás, representing an increase of 690% over monthly rainfall average (2014 – 2020)
and 360% over the rainfall average for the Q4 period (2014 – 2020). Following impacts
in Q4 2021 from abnormally higher rainfall levels, the Company installed a rainwater
diversion system surrounding the Campbell Pit and has revamped its pumping system.
The Company expects that these actions will prevent future impacts to operations from
higher-than-expected rainfall.
Vanadium Trioxide (“V2O3”) Plant: In Q4 2021, the Company completed the ramp up
of its V2O3 plant and provided samples to prospective clients for product specification
analysis. The Company expects to begin shipping V2O3 to customers in Q1 2022.
2022 Production, Sales and Cost Guidance
The Company has provided solid production, sales and cost guidance for 2022 and management
expects to maintain its global competitive position in the vanadium sector. A table summarizing
2022 production, sales and cost guidance has been provided below:
V2O5 Equivalent Production and Sales (tonnes) 12,000 – 12,750
Cash Operating Cost Guidance Excluding Royalties ($/lb sold)4 $3.20 – 3.40
Vanadium Distribution Costs $7.0 – 8.0 million
Corporate and Sales & Trading Selling, General and Administrative Expenses $10.0 – 11.0 million
Largo Clean Energy General and Administrative Expenses $15.0 – 18.0 million
2022 Capital Expenditures Guidance
In 2022, the Company plans to invest approximately $64.0 million on capital expenditures of
which approximately $2.0 million has been carried over from the 2021 capital expenditures
budget. The $64.0 million capital expenditure budget includes approximately $9.5 million for
sustaining capital requirements, $10.5 million for capitalized stripping, $29.5 million for the
construction of the Company’s ilmenite concentration plant, $9.5 million for its TiO2 processing
plant and $2.0 million for additional LCE development. For its ilmenite concentration plant
project, the Company’s current capex plans increased by $6.8 million versus its prior estimate
(see press release dated March 18, 2021) due to the incorporation of improvements in its ilmenite
concentration which should increase ilmenite concentrate grades to above 45% TiO2 from 40%.
The increase in overall capital expenditures versus prior years will allow Largo to advance its
planned growth projects to enhance future profitability and market competitiveness. The
Company expects to fund these capital expenditure projects through internal cash flows.
Sustaining Capital Expenditures5 $9.0 – 10.0 million
Capitalized Stripping Capital Expenditures $10.0 – 11.0 million
Ilmenite Concentration Plant Capital Expenditures $29.0 – 30.0 million
TiO2 Processing Plant Capital Expenditures $9.0 – 10. million
Carry-Over Capital Expenditures $2.0 – 3.0 million
Largo Clean Energy Capital Expenditures $1.5 – 2.5 million
About Largo
Largo has a long and successful history as one of the world’s preferred vanadium companies
through the supply of its VPURE™ and VPURE+™ 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 on the Company, please visit
www.largoinc.com.
Forward-looking Information:
This press release contains forward-looking information under Canadian securities legislation,
some of which may be considered "financial outlook" for the purposes of applicable Canadian
securities legislation ("forward-looking statements"). 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 timing of V2O3 shipments; costs of future activities
and operations; the incremental cash-flow to be generated by the production and sale TiO2
pigment and expanded vanadium production; the successful vertical integration of the Company;
timing and cost related to the build-out of the ilmenite plant and TiO2 pigment processing plant;
the extent of capital and operating expenditures; the continued impact of heavy rainfall on
operations at the Maracás Menchen Mine and the success of our mitigation efforts; the impact of
global delays and related price increases on the Company’s global supply chain and future
V2O5 equivalent sales. Forward‐looking information in this press release also includes, but is
not limited to, statements with respect to our ability to build, finance and operate a VRFB
business, our ability to protect and develop our technology, our ability to maintain our IP, our
ability to market, sell and deliver our VCHARGE± battery system on specification and at a
competitive price, our ability to secure the required production resources to build our
VCHARGE± battery system, , the timing of completion of the product development and stack
manufacturing facility in Massachusetts and the adoption of VRFB technology generally in the
market. 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 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.
Future Oriented Financial Information:
Any financial outlook or future oriented financial information contained in this press release, as
such term is defined by applicable securities laws, has been approved by management of Largo
as of the date hereof and is provided for the purpose of providing information about
management's current expectations and plans relating to the Company's 2022 guidance. Readers
are cautioned that any such future oriented financial information contained herein should not be
used for purposes other than those for which it is disclosed herein. The Company and its
management believe that the prospective financial information as to the Company's anticipated
2022 guidance has been prepared on a reasonable basis, reflecting management's best estimates
and judgments. However, because this information is highly subjective, it should not be relied on
as necessarily indicative of future results.
Non-GAAP6 Measures
The Company uses certain non-GAAP financial performance measures in this press release,
which are described in the following section.
Cash Operating Costs
The Company’s press release refers to cash operating costs per pound, a non-GAAP
performance measure, 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 plan and prior periods, and 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, 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
product acquisition costs and inventory write-downs. These costs are then divided by the pounds
of vanadium sold that were produced by the Maracás Menchen Mine to arrive at the cash
operating costs per pound. Prior to 2020, these costs were divided by the pounds of production
from the Maracás Menchen Mine, rather than pounds sold. These measures, along with
revenues, are considered to be one of the key indicators of the Company’s ability to generate
operating earnings and cash flow from its Maracás Menchen Mine. These cash operating costs
measures do not have any standardized meaning prescribed by IFRS and differ from measures
determined in accordance with IFRS. 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. These measures are not necessarily indicative
of net earnings or cash flow from operating activities as determined under IFRS.
1 Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
2 Effective grade represents the percentage of magnetic material mined multiplied by the
percentage of V2O5 in the magnetic concentrate.
3 Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching
recovery and chemical plant recovery.
4 Cash operating costs excluding royalties per pound reported are on a non-GAAP basis. Refer
to the “Non-GAAP Measures” section of this press release.
5 Includes capitalized waste stripping costs.
6 GAAP – Generally Accepted Accounting Principles
7 Drilling and engineering work performed on the Campbell Pit, and NAN and GAN deposits, in
addition to the inclusion of titanium dioxide (“TiO2”) has resulted in a significant increase in
reserves and resources
Contacts
Investor Relations
Alex Guthrie
Senior Manager, External Relations
+1.416.861.9778