Largo Reports Fourth Quarter and Full Year 2022 Financial Results; Highlights Recent Strength in the Vanadium Market and Progress on its Two-Pillar Strategy as a Tier 1 Vanadium Supplier and Emerging Clean Energy Battery Producer
Largo Reports Fourth Quarter and Full Year
2022 Financial Results; Highlights Recent
Strength in the Vanadium Market and
Progress on its Two-Pillar Strategy as a Tier
1 Vanadium Supplier and Emerging Clean
Energy Battery Producer
All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated.
Q4 & Full Year 2022 Highlights
• Revenues of $47.5 million in Q4 2022, 6% below Q4 2021; Revenues per pound sold1
of $7.77 in Q4 2022, largely in line with $7.88 recognized in Q4 2021
• Operating costs of $44.5 million in Q4 2022 vs. $37.7 million in Q4 2021, and cash
operating costs excluding royalties per pound1 of V2O5 equivalent sold of $5.15 in
Q4 2022 vs. $3.68 in Q4 2021
• Net loss of $15.6 million in Q4 2022 vs. net income of $1.0 million in Q4 2021; Basic
loss per share of $0.24 in Q4 2022 vs. basic earnings per share of $0.01 in Q4 2021
• In Q4 2022, the Company’s net loss included approximately $6.3 million of non-
recurring expenditures
• Revenues of $229.3 million in 2022, a 16% increase over 2021; Revenues per pound
sold1 of $9.38 in 2022, a 19% increase over 2021
• Operating costs of $169.7 million in 2022 vs. $133.0 million in 2021, and cash
operating costs excluding royalties per pound1 of V2O5 equivalent sold of $4.57 in
2022 vs. $3.37 in 2021; 2% above upper range of revised 2022 guidance for cash
operating costs excluding royalties per pound1
• Net loss of $2.2 million in 2022 vs. net income of $22.6 million in 2021; Basic loss per
share of $0.03 in 2022 vs. basic earnings per share of $0.35 in 2021
• In 2022, the Company's net loss included approximately $15.0 million of non-
recurring expenditures
• V2O5 production of 2,004 tonnes in Q4 2022 vs. 2,003 tonnes in Q4 2021; Annual
V2O5 production of 10,436 tonnes in 2022 vs. 10,319 tonnes in 2021 and 6% below
lower range of revised production guidance
• Quarterly sales of 2,772 tonnes of V2O5 equivalent (inclusive of 118 tonnes of
purchased material) in Q4 2022 vs. 2,899 tonnes in Q4 2021; Annual V2O5
equivalent sales of 11,091 (inclusive of 1,057 tonnes of purchased material) tonnes in
2022 vs. 11,393 tonnes in 2021 and within revised sales guidance of 11,000 – 12,000
tonnes
Vanadium Price Update2
• The average benchmark price per pound of V2O5 in Europe was $8.25 in Q4 2022,
being largely in line with the average of $8.23 seen in Q3 2022 and $8.30 in Q4 2021;
The average benchmark price as of March 3, 2023 was $10.78, a 44% increase from
the lows of 2022
• The average benchmark price per kg of ferrovanadium (“FeV”) in Europe was
$33.35 in Q4 2022, a 3% decrease from the average of $32.29 seen in Q4 2021; The
average FeV benchmark price as of March 3, 2023 was $40.88, a 30% increase from
the lows of 2022
TORONTO--(BUSINESS WIRE)--March 9, 2023--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, 2022. The Company reported annual vanadium pentoxide
(“V2O5”) equivalent sales of 11,091 tonnes at a cash operating cost excluding royalties per
pound1 sold of $4.58. Revenues in 2022 increased 16% over 2021 to $229.3 million mainly due
to a strengthening of vanadium prices in the year.
Daniel Tellechea, Interim CEO and Director of Largo, stated: “For Largo, 2022 was a
challenging year, which led to an underperformance on both production and cost metrics,
particularly in Q4 2023 with the mining disruption caused by record rainfall at our mine, cost
inflation of key raw materials and sizeable non-recurring expenditures. Although we continue to
navigate an inflationary environment, we anticipate delivering and capitalizing on a 10%
increase in production for 2023 over 2022, particularly with the recent strengthening of
vanadium prices.” He continued: “This recent increase is due in part to increased demand from
the energy storage sector, especially in China, where new vanadium redox flow battery
(“VRFB”) deployments totaling around 2 GWh or approximately 10% of global vanadium
output are planned for the next 12-24 months. Importantly, the VRFB sector accounted for the
second largest source of vanadium demand outside of the steel sector in Q3 2022, according to
Vanitec, a global vanadium organization. Other key markets including steel, aerospace, and
chemical have also shown considerable demand growth in recent months.”
He continued: “As for growth plans this year, Largo’s ilmenite project remains on track and is
expected to generate a new source of revenue for the Company. We anticipate providing
guidance on ilmenite production for 2023 once commissioning of the plant has been completed.
We continue to make progress on the installation of our first VRFB in Spain and our negotiations
toward the formation of a joint venture with Ansaldo Green Tech (“Ansaldo”) for the
deployment of VRFBs in the Europe, Middle East and Africa power generation markets. Lastly,
safety and sustainability remain key priorities for Largo and we are pleased to be recently
ranked in the top quartile of our peer group as measured by certain ESG rating agencies for
2022.”
Financial Results
Three months ended Year ended
(thousands of U.S. dollars, except for basic earnings (loss)
per share and diluted earnings (loss) per share)
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Revenues 47,501 $50,326 229,251 198,280
Operating costs (44,455) (37,746) (169,719) (133,010)
Direct mine and production costs (28,401) (21,370) (94,521) (75,126)
Net income (loss) before tax (17,224) (337) 4,039 31,759
Income tax (expense) recovery 1,336 (402) (7,688) (5,430)
Deferred income tax recovery (expense) 252 1,528 1,423 (3,758)
Net income (loss) (15,636) 789 (2,226) 22,571
Basic earnings (loss) per share (0.24) 0.01 (0.03) 0.35
Diluted earnings (loss) per share (0.24) 0.01 (0.03) 0.35
Cash (used)provided before non-cash working
capital items (14,055) 6,102 21,424 55,362
Net cash provided by (used in) operating activities (5,429) 3,427 3,460 39,777
Net cash (used in) provided by financing activities 24,078 (2) 26,435 (6,902)
Net cash used in investing activities (26,819) (6,985) (60,147) (27,399)
Net change in cash (8,242) (3,777) (29,319) 4,645
As at
December 31,
2022
December 31,
2021
Cash 54,471 83,790
Debt 40,000 15,000
Working capital3 116,493 118,310
Maracás Menchen Mine Operational and Sales Results
2022 2021
Q1 Q2 Q3 Q4 Full Year Q4 Full Year
Total Ore Mined (tonnes) 303,652 378,273 351,450 326,552 1,359,927 277,783 1,248,967
Ore Grade Mined - Effective Grade4
(%)
1.27
1.18
1.02
0.96
1.11
1.00
1.12
Concentrate Produced (tonnes) 92,324 124,317 99,513 90,797 406,951 86,129 398,847
Grade of Concentrate (%) 3.21 3.28 3.26 2.94 3.18 3.13 3.23
Global Recovery5 (%) 77.5 81.8 80.7 74.7 79.1 76.0 79.7
V2O5 Produced (Flake + Powder)
(tonnes)
2,442
3,084
2,906
2,004
10,436
2,003
10,319
V2O5 produced (equivalent lbs6) 5,383,682 6,799,048 6,406,626 4,418,058 23,007,414 4,415,854 22,749,474
V2O5 Equivalent Sold (tonnes) 2,232 3,289 2,796 2,774 11,091 2,899 11,393
Produced V2O5 equivalent sold (tonnes) 2,153 2,780 2,445 2,656 10,034 2,843 10,864
Purchased V2O5 equivalent sold
(tonnes)
79
509
351
118
1,057
56
529
Cash Operating Costs Excluding
Royalties per pound ($/lb)1
3.97
4.23
4.86
5.15
4.57
3.68
3.37
Revenues per pound sold ($/lb)1 8.67 11.69 8.80 7.77 9.38 7.88 7.89
Q4 & Full Year 2022 Financial Results Overview
• During 2022, the Company recognized revenues of $229.3 million from sales of 11,091
tonnes of V2O5 equivalent (2021 – 11,393 tonnes). This represents a 16% increase in
revenues over 2021 ($198.3 million) mainly due to higher vanadium prices in the year,
particularly with revenues recognized in Q2 2022. During Q4 2022, the Company
recognized revenues of $47.5 million (Q4 2021 – $50.3 million) from sales of 2,772
tonnes of V2O5 equivalent (Q4 2021 - 2,899 tonnes).
• Operating costs of $169.7 million in 2022 (2021 – $133.0 million) include direct mine
and production costs of $94.5 million (2021 – $75.1 million), conversion costs of $8.1
million (2021 – $9.3 million), product acquisition costs of $24.4 million (2021 –$9.7
million), royalties of $10.4 million (2021 – $8.9 million), distribution costs of $9.2
million (2021 – $5.3 million), inventory write-down of $2.3 million (2021 – $3.2
million), depreciation and amortization of $20.9 million (2021 – $21.5 million) and iron
ore costs of $1.0 million (2021 – $0.05 million), partially offset by insurance proceeds of
$1.0 million (2021 – $nil).
• Operating costs of $44.5 million in Q4 2022 (Q4 2021 – $37.7) include direct mine and
production costs of $28.4 million (Q4 2021 – $21.4 million), conversion costs of $2.2
million (Q4 2021 – $2.6 million), product acquisition costs of $3.8 million (Q4 2021 –
$1.0 million), royalties of $2.1 million (Q4 2021 – $2.3 million), distribution costs of
$2.3 million (Q4 2021 – $1.5 million), inventory write-down of $0.4 million (Q4 2021 –
$3.2 million), depreciation and amortization of $6.0 million (Q4 2021 – $5.8 million) and
iron ore costs of $0.02 million (Q4 2021 – $nil), partially offset by insurance proceeds of
$1.0 million (Q4 2021 – $nil).
o The increases in direct mine and production costs are attributable to a decrease in
the global recovery5, cost increases in critical consumables, including heavy fuel
oil ("HFO") and ammonium sulfate, as well as increased consumption of these
critical consumables and sodium carbonate. Costs were further impacted by the
Company's mining contractor transition in Q3 2022 and corrective maintenance in
the plant throughout the year. Higher costs of production in the current and
previous periods in the year related to shutdowns caused by abnormally high
rainfall during Q4 2022, while corrective maintenance continued to impact
operating costs as a result of the time between production and sales.
• Cash operating costs excluding royalties per pound1 of V2O5 equivalent sold were $4.57
in 2022, compared with $3.37 in 2021. Cash operating costs excluding royalties per
pound1 sold were $5.15 in Q4 2022, compared with $3.68 in Q4 2021. The increase seen
in Q4 2022 and 2022 compared with Q4 2021 and 2021 is largely due to the impacts
noted previously, in addition to produced V2O5 equivalent sold having decreased in 2022
as compared with 2021, with 10,034 tonnes sold versus 10,864 tonnes.
• Professional, consulting and management fees were $25.3 million in 2022, compared
with $17.9 million in 2021. Professional, consulting and management fees were $5.7
million in Q4 2022, compared with $5.6 million in Q4 2021. For 2022, the increase is
primarily attributable to costs incurred earlier in the year in connection with LCE, which
was not fully operational earlier in 2021 and transaction and listing related costs incurred
by Largo Physical Vanadium Corp. (“LPV”) in connection with the completion of its
qualifying transaction.
• Other general and administrative expenses were $14.3 million in 2022, compared with
$6.4 million in 2021. Other general and administrative expenses were $3.5 million in Q4
2022, compared with $2.3 million in Q4 2021. For 2022, the increase is primarily due to
an increase in provisions as well as costs incurred in Q4 2022 in connection with LPV,
and in Largo Clean Energy Corp. (“LCE”) which has scaled up activities throughout
2022. The increase in provisions relates to a supply agreement for the Maracás Menchen
Mine which was filed with Brazilian courts in October 2014. The ruling requires the
Company to pay amounts due, plus interest and legal fees.
• Technology start-up costs were $12.7 million in 2022 (2021 – $3.8 million) and $8.2
million in Q4 2022 (Q4 2021 – 3.1 million). This includes a full write-down of battery
components inventory at LCE of $6.4 million (Q4 2022 and 2022) (Q4 2021 and 2021 –
$nil) to their expected net realizable value. Technology start-up costs relate to LCE's
activities related to ramping up its operations for the deployment of the VCHARGE
VRFB system and the titanium project in Brazil.
• Finance costs in Q4 2022 increased from Q4 2021 by 118% (or $0.4 million), which is
attributable to increased debt, as well as the initial financing fees on the Company's new
debt facilities.
• For 2022, cash provided by financing activities increased from cash used in financing
activities in 2021 by $33.3 million. The movement is primarily attributable to the receipt
of debt of $55.0 million and cash received from the sale of non-controlling interest of
$7.3 million (2021 - $nil), partially offset by the repayment of debt of $30.0 million
(2021 - $24.8 million) and share repurchases of $6.0 million. Cash provided by financing
activities in Q4 2022 increased from cash used in financing activities in Q4 2021 by
$24.1 million. This movement was primarily due to the receipt of new debt of $40.0
million, partially offset by a repayment of debt of $15.0 million.
• Cash used in investing activities in Q4 2022 of $26.8 million is an increase of $19.8
million from the $7.0 million seen in Q4 2021. This movement was primarily driven by
the purchase of vanadium assets and continued work on the ilmenite project. For 2022,
the increase from 2021 was $32.7 million. Expenditures in 2022 primarily relate to the
ilmenite project, mining equipment, costs relating to a software implementation and cash
outflows for purchased product vanadium assets.
Additional Company Updates
• Q4 and Full Year 2022 Operational Results: Production of 2,004 tonnes of V2O5 in Q4
2022 was in line with the 2,003 tonnes of V2O5 produced in Q4 2021, primarily due to
reduced massive ore inventory arising from the transition in mining contractors in Q3
2022 and due to unusually heavy rainfall in December 2022. In Q4 2022, the Company
produced 839 V2O5 equivalent tonnes of high purity products, including 650 tonnes of
high purity V2O5 and 189 tonnes of high purity vanadium trioxide (“V2O3”). This
represented 42% of the total quarterly production. In 2022, the Company produced 1,801
V2O5 equivalent tonnes of high purity products, including 1,368 tonnes of high purity
V2O5 and 433 tonnes of high purity V2O3. In Q4 2022, 326,552 tonnes of ore were mined
with an effective grade4 of 0.96% of V2O5. The ore mined in Q4 2022 was 18% higher
than in Q4 2021. The Company produced 90,797 tonnes of concentrate with an effective
grade4 of 2.94%. The global recovery5 achieved in Q4 2022 was 74.7%, a decrease of
1.7% from the 76.0% achieved in Q4 2021 and 7.4% lower than the 80.7% achieved in
Q3 2022. The global recovery5 in October 2022 was 75.0%, with 67.8% achieved in
November 2022 and 80.8% achieved in December 2022.
• Continued Focus on ESG in 2022: The Company continued to improve its overall
Environmental, Social and Governance (“ESG”) performance and public disclosures in
2022. This is reflected in additional improved ratings and scores, most notably its S&P
Global Corporate Sustainability Assessment (“CSA”) rating having improved
approximately 38%, placing the Company in the top quartile of its mining peer group for
2022. This improvement was largely driven by updates to Largo’s governance of ESG,
including new policies, ESG oversight at the Board level and climate-related disclosures,
as well as improved responses related to the Company’s on-going environmental
compliance in Brazil. The Company expects to issue its 2022 sustainability report in late
Q2 2023.
• Largo Clean Energy Recent Developments: During Q4 2022, LCE continued to make
significant progress on the delivery of the Enel Green Power España (“EGPE”) contract,
which remains a priority focus. Substantially all the hardware is either in transit to or is in
Spain awaiting installation. The Company shipped the remaining six of 12 electrolyte
storage containers in early 2023 and the Field Service team has been on site in Q1 2023
and work is ongoing to install and interconnect the AC and DC power systems.
Provisional acceptance, which requires the completion of as-build drawings, manuals,
final punch-list items, and operational testing by EGPE, is expected to be completed by
the end of May 2023. Additionally, LCE and Ansaldo continue to focus on the formation
of a joint venture for the manufacturing and commercial deployment of VRFBs in the
European, African and Middle East power generation markets. The Company’s
previously announced memorandum of understanding (“MOU”) has been extended to
March 31, 2023, to allow for the negotiation and entering into a joint venture and other
ancillary agreements. Ansaldo and LCE continue to develop a business path for the joint
venture to service the European markets with Long Duration Energy Storage ("LDES").
• Ilmenite Concentration Plant Progress: The Company progressed with the
construction of its ilmenite concentration plant at its Maracás Menchen Mine in Q4 2022.
The Company received all required flotation structures and is finalizing the building of its
desliming, flotation, filtration, warehouse and pipe rack structures ands expects
commissioning of the plant to be completed in Q2 2023.
• January and February 2023 Production and Sales: Subsequent to Q4 2022, the
Company produced 354 tonnes of V2O5 in January and 843 tonnes in February. The
Company also sold 1,080 tonnes of V2O5 equivalent (including 68 tonnes of purchased
material) in January 2023 and 750 tonnes (including 11 tonnes of purchased material) in
February. Production in January and February was largely impacted by low ore
availability in due to the heavy rains at the mine site and planned maintenance of the kiln
for its refractory refurbishment, with sales in February being impacted by a delay in sales
recognition. The Company expects to remain within its quarterly production and sales
guidance for Q1 2023.
• Largo Physical Vanadium Update: LPV’s net assets are now over 90% held in physical
vanadium products and near-term delivery commitments (approximately 2.9 million lbs
of V2O5 equivalent). The launch of LPV in September 2022 coincided with lower
vanadium prices, which allowed LPV to purchase vanadium units at favorable market
prices. LPV’s net asset value (“NAV”) is now C$2.56 per share or 28% above the closing
share price of C$2.00 per share on March 8, 2023. LPV believes its NAV to share price
discount offers current and new LPV investors an attractive investment case and closing
this disconnect is now LPV’s key focus. LPV management are working on a broad
marketing and communication campaign to raise awareness of its investment proposal.
• Director Resignation: Following the Company’s previously announced leadership
change on February 16, 2023, Mr. Paulo Misk has resigned from his position as a
Director of the Company effective March 7, 2023.
Annual 2022 Webcast and Conference Call Information
The Company will host a webcast and conference call on Friday, March 10, 2023, at 1:00 p.m.
ET, to discuss its fourth quarter and annual 2022 results and progress.
Details of the webcast and conference call are listed below:
To join the conference call without operator assistance, you may register and enter your phone
number at https://bit.ly/3Yho3fJ 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: Friday, March 10, 2023
Time: 1:00 p.m. ET
Dial-in Number: Local: +1 (647) 794-4605
North American Toll Free: +1 (888) 394-8218
Conference ID: 6338127
Webcast Registration
Link: https://app.webinar.net/Am3ND5Rleqn
RapidConnect Link https://bit.ly/3Yho3fJ
Replay Number:
Local / International: + 1 (647) 436-0148
North American Toll Free: +1 (888) 203-1112
Replay Passcode: 6338127
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, 2022 and 2021 and its
management's discussion and analysis for the year ended December 31, 2022 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 will be implementing a titanium
dioxide pigment 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
and cost related to the build-out of the ilmenite plant; the ability to produce vanadium trioxide
according to customer specifications; the extent of capital and operating expenditures; 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