Largo Reports Second Quarter 2023 Financial Results, Including Further Progress on its Cost Reduction Initiatives and Commissioning of its Ilmenite Production as a By-Product of its Vanadium Operations
Largo Reports Second Quarter 2023
Financial Results, Including Further
Progress on its Cost Reduction Initiatives and
Commissioning of its Ilmenite Production as
a By-Product of its Vanadium Operations
All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated.
Q2 2023 and Other Highlights
• Revenues of $53.1 million vs. revenues of $84.8 million Q2 2022; Revenues per
pound of V2O5 sold1 of $9.42 vs. $11.69 per pound sold in Q2 2022, mainly driven by
a sharp decrease in V2O5 prices during the quarter, which was partially offset by an
increase in the Company’s high purity vanadium sales
• Operating costs of $43.0 million vs. $50.7 million in Q2 2022; Cash operating costs
excluding royalties per pound1 of V2O5 equivalent sold of $5.18 vs. $4.23 in Q2 2022
• Net loss of $6.0 million vs. net income of $18.0 million in Q2 2022; Basic loss per
share of $0.09
• Cash provided before working capital items of $3.8 million vs. $25.4 million in Q2
2022; Cash provided by operating activities of $18.1 million vs. $2.9 million in Q2
2022
• Cash balance of $64.0 million, net working capital2 surplus of $103.1 million and
debt of $65.0 million exiting Q2 2023
• V2O5 production 2,639 tonnes (5.8 million lbs3) vs. 3,084 tonnes in Q2 2022 and
2,111 tonnes in Q1 2023; V2O5 equivalent sales of 2,557 tonnes vs. 3,291 tonnes in Q2
2022
• Commissioning of the Company’s ilmenite concentration plant has commenced and
is expected to be completed in Q3 2023, at which point a gradual ramp-up of
ilmenite production in Q4 2023; Ilmenite concentrate will become a by-product of
the Company’s vanadium operations in Brazil
• Hot commissioning of Largo Clean Energy’s (“LCE”) 6.1 megawatt-hour (“MWh”)
Enel Green Power España (“EGPE”) vanadium redox flow battery (“VRFB”)
deployment remains ongoing, with provisional acceptance by EGPE expected in Q3
2023
• The Company published its 2022 Sustainability Report entitled: “Building a low-
carbon future together” highlighting the development and improvement of its
ongoing sustainability programs
• Q2 2023 results conference call: Thursday, August 10th at 1:00 p.m. ET
Vanadium Market Update4
• The average benchmark price per lb of V2O5 in Europe was $8.46 in Q2 2023, a
19% decrease from the average of $10.39 seen in Q1 2023 and a 24% decrease from
the average of $11.08 seen in Q2 2022; The average benchmark price per kg of
ferrovanadium in Europe was $33.47 in Q2 2023, a 15% decrease from the average
of $39.46 seen in Q1 2023 and a 24% decrease from the average of $43.83 seen in Q2
2022
• Lower vanadium prices can be attributed to weaker demand in the Chinese
construction market; however, these prices been partially offset by higher VRFB
deployments in China and increased aerospace demand
• The average European benchmark V2O5 price at June 30, 2023 was approximately
$7.98 per lb, compared with approximately $10.13 per lb at March 31, 2023 and
$9.15 per lb at June 30, 2022
• According to Vanitec, demand in energy storage applications has increased by
141% from Q1 2022 to Q1 2023
TORONTO--(BUSINESS WIRE)--August 9, 2023--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today released financial and operating results for the three and
six months ended June 30, 2023. The Company reported revenues of $53.1 million from
vanadium pentoxide (“V2O5”) equivalent sales of 2,557 tonnes.
Daniel Tellechea, Interim CEO and Director of Largo, stated: “A sharp decrease in V2O5 prices
combined with lower sales in Q2 2023 impacted the Company’s financial performance for the
quarter. Higher production at the end of the second quarter is positively impacting in-transit
inventory and should support higher availability and sales in the coming months. Our primary
focus continues to be on delivering production and sales targets safely, optimizing our mine
plan, as well as implementing additional cost reduction measures at both the mine site and at
LCE to support profit margins going forward. The Company is beginning to see a reduction in
key consumable costs at its mine site and has implemented a cost reduction plan at LCE.”
He continued: “Chinese and European steel sector spot demand for vanadium was weaker in Q2
2023, however, strong demand from the aerospace industry offset this during the quarter.
Importantly, recent estimates indicate that energy storage demand is expected to increase
significantly in the future, driven primarily by new VRFB deployments to 2030, with a CAGR of
14%8.”
Financial Results
(thousands of U.S. dollars, except for basic earnings (loss) per
share and diluted earnings (loss) p er share)
Three months ended Six months ended
June 30,
2023
June 30,
2022
June 30,
2023
June 30,
2022
Revenues 53,110 84,804 110,531 127,492
Operating costs (43,029) (50,704) (88,960) (79,662)
Direct mine and production costs (24,976) (23,905) (53,395) (41,465)
Net income (loss) before tax (4,647) 22,409 (3,932) 23,223
Income tax recovery (expense) 295 (7,115) (38) (7,717)
Deferred income tax (expense) recovery (1,614) 2,671 (3,203) 505
Net income (loss) (5,966) 17,965 (7,173) 16,011
Basic earnings (loss) per share (0.09) 0.28 (0.11) 0.25
Diluted earnings (loss) per share (0.09) 0.28 (0.11) 0.25
Cash provided before non-cash working capital items 3,841 25,400 11,991 31,151
Net cash provided by (used in) operating activities 18,057 2,902 23,010 (1,148)
Net cash (used in) provided by financing activities (1,756) (15,679) 23,549 (15,294)
Net cash used in investing activities (14,283) (11,383) (37,689) (15,651)
Net change in cash 2,405 (25,516) 9,509 (30,912)
As at
June 30, 2023
December 31,
2022
Cash 63,980 54,471
Debt 65,000 40,000
Working capital2 103,147 115,171
Maracás Menchen Mine Operational and Sales Results
Q2 2023 Q2 2022
Total Ore Mined (tonnes) 489,892 378,273
Ore Grade Mined - Effective Grade5 (%) 0.86 1.18
Total Mined – Dry Basis (tonnes) 3,671,842 2,503,696
Concentrate Produced (tonnes) 99,083 124,317
Grade of Concentrate (%) 3.34 3.28
Global Recovery 6 (%) 81.0 81.8
V2O5 Produced (Flake + Powder) (tonnes) 2,639 3,084
High purity V2O5 equivalent produced (tonnes) 983 587
V2O5 produced (equivalent pounds 3) 5,817,992 6,799,048
V2O5 Equivalent Sold (tonnes) 2,557 3,291
Produced V2O5 equivalent sold (tonnes) 2,268 2,783
Purchased V2O5 equivalent sold (tonnes) 289 508
Cash Operating Costs Excluding Royalties per pound ($/lb) 1 5.18 4.23
Revenues per pound sold ($/lb) 1 9.42 11.69
Q2 2023 Financial Highlights
• The Company recognized revenues of $53.1 million from sales of 2,557 tonnes of V2O5
equivalent (Q2 2022 – 2,849 tonnes) in Q2 2023. This represents a 37% decrease in
revenues over Q2 2022 ($84.8 million) mainly due to lower sales and vanadium prices
for the quarter. Reconciliation of the Company’s revenues per pound sold1 and total
quantities sold of each product are provided in the “Non-GAAP7 Measures” section of
this press release.
• Operating costs of $43.0 million (Q2 2022 – $50.7 million) include direct mine and
production costs of $25.0 million (Q2 2022 – $23.9 million), conversion costs of $2.2
million (Q2 2022 – $2.3 million), product acquisition costs of $3.8 million (Q2 2022 –
$9.6 million), royalties of $2.5 million (Q2 2022 – $3.7 million), distribution costs of
$2.5 million (Q2 2022 – $2.9 million), inventory write-down of $0.7 million (Q2 2022 –
$2.3 million), depreciation and amortization of $6.2 million (Q2 2022 – $5.5 million) and
iron ore costs of $0.2 million (Q2 2022 - $0.2 million). The increase in direct mine and
production costs is attributable to an increase in total ore mined and the move to a new
mining contractor in Q3 2022. Higher mining costs, the change in production levels
across the period and the ramp up following the challenges experienced in the prior
quarter negatively impacted costs. In addition, as compared with Q2 2022, the Company
continued to experience elevated costs in critical consumables. The Company is actively
working to manage its usage of these consumables and is also starting to see a softening
in consumable prices.
• Cash operating costs excluding royalties1 per pound sold were $5.18 per lb, compared
with $4.23 for Q2 2022. The increase seen in Q2 2023 compared with Q2 2022 is largely
due to the reasons noted above.
• Professional, consulting and management fees of $5.8 million decreased from Q2 2022
by 9%. The decrease was mainly due to lower expenses incurred in the mine properties
segment in Q2 2023 over Q2 2022, which is primarily attributable to additional
compensation costs incurred in Q2 2022.
• Other general and administrative expenses of $3.3 million decreased from Q2 2022 by
35% (or $1.8 million), which is primarily attributable to the increase in legal provisions
recognized in Q2 2022 in the mine properties segment.
• Finance costs of $2.0 million in Q2 2023 increased by $1.7 million from Q2 2022, which
is primarily attributable to interest on the increased debt level in Q2 2023 as compared
with Q2 2022, as well as a write-down of vanadium assets of $0.2 million.
• Exploration and evaluation costs of $1.3 million in Q2 2023 increased by $1.1 million
from Q2 2022. This was driven by infill drilling and geological model work at the
Maracás Menchen Mine and diamond drilling at Campo Alegre de Lourdes.
• Following the completion of its short-term infill drilling program in the Campbell Pit, the
resulting geological model update and the decision to prioritize operating flexibility in the
near-term mine planning, the Company has decided to accelerate its pre-stripping mining
rates. Accordingly, it has revised its guidance for capitalized waste stripping costs for
2023. Expenditures of $11.7 million were capitalized during the six months ended June
30, 2023, and the Company now plans to incur approximately $15.0 million in the
remainder of 2023. The Company believes that increased operating flexibility at its open
pit mine will, amongst other things, assist in preventing weather related disruptions at the
mine.
• Cash provided by operating activities continues to be impacted by expenditures at LCE,
with a net loss of $5.3 million recognized in Q2 2023 (Q2 2022 – $5.4 million).
Additional Corporate Updates
• Production: V2O5 production in April, May and June 2023 was 676 tonnes, 945 tonnes
and 1,018 tonnes, respectively, for a total of 2,639 tonnes of V2O5 produced in Q2 2023.
• The Company completed its 2023 infill drilling campaign, which resulted in a
further refinement of the Company's short-term mining model. The Company
achieved a normalized production level in June following the completion of
upgrades to the crushing circuit and an improvement in mining performance as
compared with Q1 2023. These upgrades are expected to reduce operational
maintenance costs and provide more flexibility in the blending of ores to stabilize
V2O5 production.
• In Q2 2023, the Company produced 983 V2O5 equivalent tonnes of high purity
products, including 706 tonnes of high purity V2O5 and 277 tonnes of high purity
vanadium trioxide (“V2O3“). This represented 37% of the Company’s total
quarterly production.
• The global recovery6 achieved in Q2 2023 was 81.0%, a decrease of 1.0% from
the 81.8% achieved in Q2 2022 and 2.4% lower than the 83.0% achieved in Q1
2023. The global recovery6 in April, May and June 2023 was 81.3%, 80.4%,
81.3%, respectively.
• The total material moved in the mine in June was a record 1,349,405 tonnes of
waste and 108,104 tonnes of ore (dry basis). In Q2 2023, 489,892 tonnes of ore
were mined with an effective grade5 of 0.86% of V2O5. The ore mined in Q2 2023
was 30% higher than in Q2 2022. The Company produced 99,083 tonnes of
concentrate with an effective grade5 of 3.34%.
• Subsequent to Q2 2023, production in July 2023 was 644 tonnes of V2O5
equivalent as a result of process restrictions following the accident in July at its
chemical plant. However, the Company accumulated intermediate stocks of
vanadium material that is expected to be processed in August, offsetting a portion
of weaker July V2O5 output.
• Sales: In Q2 2023, the Company sold 2,557 tonnes of V2O5 equivalent (Q2 2022 – 3,291
tonnes), including 289 tonnes of purchased products (Q2 2022 – 508 tonnes). Produced
V2O5 equivalent sold decreased, with 2,268 tonnes sold in Q2 2023, as compared with
2,783 tonnes in Q2 2022. The Company delivered both standard grade and high purity
V2O5, as well as vanadium trioxide ("V2O3") and ferrovanadium (“FeV”) to customers
globally. Subsequent to Q2 2023, sales in July 2023 were 860 tonnes of V2O5 equivalent.
• Largo Clean Energy: During Q2 2023, LCE continued to make progress on the delivery
of the EGPE contract, which remains a priority focus. LCE finalized the pumping of
electrolyte for EGPE's VCHARGE VRFB deployment and completed cold
commissioning of the system in June. The battery system was also successfully
interconnected with the grid and the system inverter was successfully utilized to form the
chemistry. The battery is currently performing charge-discharge cycles as part of the
ongoing hot commissioning phase, which is anticipated to be completed in Q3 2023,
along with provisional acceptance of the system by EGPE.
• During Q2 2023, Mr. Francesco D'Alessio was appointed as President of LCE.
The Company continues to evaluate all strategic options for LCE in order to fully
maximize its unique value proposition in the energy storage sector. This includes
but is not limited to the potential strengthening and formalization of existing
industry and commercial relationships, developing additional collaborative
partnerships, evaluating alternative deployment strategies, and performing a
comprehensive review of cost reduction measures.
• In accordance with this strategic evaluation, LCE has implemented a cost
reduction plan and expects to realize savings of approximately 50% in its
expenditures at LCE going forward.
• Ilmenite Plant: Construction of the ilmenite concentration plant was completed in Q2
2023. Commissioning of this new facility has commenced and is expected to be
completed in Q3 2023. A gradual ramp-up of ilmenite concentrate production will occur
in Q4 2023.
• Exploration: During Q2 2023, the Company completed approximately 5,000 metres of
reverse circulation (“RC”) infill drilling in the Campbell Pit and 3,500 metres of diamond
drilling in the near mine deep drilling program. The Campbell Pit geological model was
updated in Q2 2023 and delivered to the mine planning team. This model will continue to
be updated quarterly and will assist with mine planning activities going forward.
• Largo Physical Vanadium Corp. (“LPV”): LPV continued its acquisition of vanadium
assets, with $1.5 million spent during Q2 2023. LPV has deployed over 90% of its capital
and is focussed on marketing and strategic initiatives to establish its business model.
Q2 2023 Webcast and Conference Call Information
The Company will host a webcast and conference call on Thursday, August 10th at 1:00 p.m.
ET, to discuss its second quarter 2023 results and progress.
Webcast and Conference Call Details:
Details of the webcast and conference call are listed below:
Conference Call Details
Date: Thursday, August 10, 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: 72903885
Webcast
Registration Link: https://app.webinar.net/YkB4eW6Ey1v
RapidConnect
Link https://emportal.ink/3rk2Eqz
Replay Number:
Local / International: + 1 (416) 764 -8677
North American Toll Free: +1 (888) 390 -0541
Replay Passcode: 903885#
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 consolidated financial statements for the three and six months
ended June 30, 2023 and 2022, and its management's discussion and analysis for the three and
six months ended June 30, 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 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.) vanadium production from its operations in Brazil and 2.) energy
storage business in the U.S. to support a low carbon future through its clean energy division.
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 commissioning and ramp-up of the ilmenite plan, ilmenite production; the
ability to sell ilmenite, V2O5 or other vanadium commodities on a profitable basis, the ability to
produce high purity V2O5 and V2O3 according to customer specifications; the extent of capital
and operating expenditures; the improvements to mine planning based on the results of drilling
campaigns; the affect of the re-assay program results on measured and indicated resource
estimates. 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, the affect of the workforce reduction on operating costs, 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, 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 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.