Largo Reports Second Quarter 2024 Financial Results; Applauds China’s New Mandatory Steel Rebar Standards with Vanadium Use
Largo Reports Second Quarter 2024
Financial Results; Applauds China’s New
Mandatory Steel Rebar Standards with
Vanadium Use
All amounts expressed are in U.S. dollars, denominated by “$”.
Q2 2024 and Other Highlights
Revenues of $28.6 million ($26.2 million from vanadium sales and $2.4 million from
ilmenite sales) vs. revenues of $53.1 million ($53.1 million from vanadium sales) in
Q2 2023
Decline in revenues was largely driven by lower vanadium prices and lower
vanadium sales volumes; Revenues per lb sold3 of V2O5 equivalent of $6.46 vs. $9.42
in Q2 2023
Operating costs of $36.4 million vs. $43.0 million in Q2 2023; Cash operating costs
excluding royalties5 per pound sold of $5.97 vs. $5.18 per lb sold in Q2 2023
Net loss of $14.5 million (including $8.5 million in non-recurring items) vs. net loss
of $6.0 million (including $1.1 million in non-recurring items) in Q2 2023; Basic loss
per share of $0.23 vs. basic loss per share of $0.09 in Q2 2023
Cash balance of $35.8 million, net working capital1 surplus of $59.8 million and debt
of $84.7 million exiting Q2 2024
Production of 2,689 tonnes (5.9 million lbs2) of V2O5 vs. 2,639 tonnes in Q2 2023
V2O5 equivalent sales of 1,841 tonnes (inclusive of 128 tonnes of purchased material)
vs. 2,557 tonnes (inclusive of 289 tonnes of purchased material) sold in Q2 2023
The Company produced 8,625 tonnes and sold 12,261 tonnes of ilmenite concentrate
in Q2 2024; The significant increase in ilmenite sales over Q1 2024 (513 tonnes) was
expected and is primarily due to the catch-up in sales from the previous quarter
Kiln maintenance planned for Q1 2025 to be performed in Q4 2024; Revised 2024
ilmenite concentrate production and sales guidance as a result; 2024 vanadium
production, sales and cost guidance unchanged
The Company’s continues its negotiations regarding the previously announced
signing of a non-binding letter of intent by Largo Clean Energy Corp. (“LCE”) with
Stryten Energy LLC to establish a 50:50 joint venture in the United States remain
ongoing
Q2 2024 results conference call: Friday, August 9 at 10:00 a.m. ET
Vanadium Market Update3
The average benchmark price per lb of V2O5 in Europe was $5.93 in Q2 2024, a
30% decrease from the average of $8.46 seen in Q2 2023; The average benchmark
price per kg of ferrovanadium in Europe was $26.83 in Q2 2024, a 20% decrease
over the average of $33.47 in Q2 2023
Vanadium spot demand remained soft in Q2 2024, primarily due to continued
adverse conditions in the Chinese and European steel industries
The new mandatory Chinese rebar quality standard (GB1499.2-2024) announced on
June 25, 2024, will take effect on September 25, 2024, replacing voluntary guidelines
in place from 2018; The new standard has the potential to significantly increase
vanadium demand in the steel sector
TORONTO--(BUSINESS WIRE)--August 8, 2024--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today released financial results for the three and six months
ended June 30, 2024. The Company reported quarterly vanadium pentoxide (“V2O5”) equivalent
sales of 1,841 tonnes at a cash operating cost excluding royalties per pound5 sold of $5.97.
Daniel Tellechea, Director and Interim CEO of Largo, commented: "Despite a challenging
quarter marked by persistently lower vanadium prices and reduced sales volumes due to lower
production in the previous quarter, Largo remains resilient with a focus on returning to
profitability. Revenues of $28.6 million were significantly impacted by these factors, while our
operating costs declined primarily due to a 40% drop in direct mine and production costs, which
are recognized on a per-pound-sold basis. Our Q2 2024 cash operating costs also reflect
significant inventory write-downs for produced products, as we continue to navigate the current
lower vanadium price environment. Our ongoing cost reduction initiatives continue with a focus
on further streamlining operations and enhancing efficiencies. Additionally, we have
rescheduled our Q1 2025 annual kiln maintenance to November 2024 to mitigate the rainy
season's impact, ensuring it will not affect our 2024 vanadium production guidance. However,
this maintenance will affect our ilmenite concentrate production, and we have accordingly
revised our annual ilmenite production and sales guidance.”
He continued: "We are encouraged by the announcement and expected enforcement of China’s
new mandatory rebar standard, which we anticipate will lead to increased future vanadium
demand in the steel sector. While the short-term impact of the new standard remains difficult to
quantify, it is important to note that the steel sector accounts for nearly 90% of global vanadium
demand, and China is the largest steel rebar producing country in the world, producing
approximately 2.3 million tonnes of rebar in 2023.”
Financial and Operating Results – Highlights
(thousands of U.S. dollars, except as otherwise stated)
Three months ended Six months ended
June 30,
2024 June 30, 2023 June 30, 2024 June 30, 2023
Revenues 28,559 53,110 70,746 110,531
Operating costs (36,379) (43,029) (86,086) (88,960)
Net income (loss) (14,483) (5,966) (27,489) (7,173)
Basic earnings (loss) per share (0.23) (0.09) (0.43) (0.11)
Adjusted EBITDA4 (833) 6,002 (3,258) 13,835
Cash (used) provided before working capital items (5,180) 3,841 (12,448) 11,991
Cash operating costs excl. royalties5 ($/lb) 5.97 5.18 6.06 5.17
Cash 35,811 63,980 35,811 63,980
Debt 84,727 65,000 84,727 65,000
Total mined – dry basis (tonnes) 3,216,930 3,671,842 6,460,422 7,195,498
Total ore mined (tonnes) 568,588 489,892 1,172,819 831,859
Effective grade6 of ore mined (%) 0.69 0.86 0.61 0.84
V2O5 equivalent produced (tonnes) 2,689 2,639 4,418 4,750
Ilmenite concentrate produced (tonnes) 8,625 - 18,188 -
Q2 2024 Notes
The Company reported a net loss of $14.5 million for Q2 2024, compared to a net loss of
$6.0 million for Q2 2023, which is primarily attributable to a 46% decline in revenues,
driven by reduced sales volumes and lower vanadium prices. The Company’s net loss
was partially offset by 15% decrease in operating costs, a 52% decrease in professional,
consulting and management fees and a 56% decrease in technology start-up costs.
Operating costs decreased to $36.4 million in Q2 2024 from $43.0 million in Q2 2023,
which was primarily driven by a 40% reduction in direct mine and production costs,
reflecting a 28% decrease in vanadium sold during the quarter. Costs in Q2 2024 were
also impacted by the plant shutdown in Q1 2024 and the associated lower global
recoveries and higher costs as the plant resumed operations.
Cash operating costs excluding royalties5 of $5.97 per lb sold in Q2 2024 increased by
15% over Q2 2023 ($5.18 per lb) primarily due to the reasons noted above for operating
costs, particularly the lower global recovery seen in 2024 to date of 70.5% in Q1 2024
(Q1 2023 – 83.0%) and 72.8% in Q2 2024 (Q2 2023 – 81.9%). Additionally, lower
grades also impacted the financial performance. Further, inventory write-downs for
produced products of $6.7 million for Q2 2024 (Q2 2023 – $nil) had a significant impact
on the cash operating cost5 per pound reported above.
The Company has implemented a number of initiatives with the goal of reducing
production costs and improving productivity, including reducing haulage distances,
reducing the number of contractors and a comprehensive review of all contracts. These
initiatives are having an impact, with costs in June 2024 being 10% lower than forecast.
Professional, consulting and management fees in Q2 2024 decreased from Q2 2023 by
52% ($3.0 million), which was primarily attributable to the Company's focus on reducing
costs, as well as reduced headcounts and reduced activity at LCE as a result of the
initiation of its strategic review process. Technology start-up costs in Q2 2024 also
decreased from Q2 2023 by 56% ($0.9 million), which is primarily attributable to a
decrease in activities at LCE in 2024 as the installation of its battery project nears
conclusion.
In Q2 2024, the Company signed an inventory financing agreement for up to $10.0
million. Under the terms of this facility, which has an ultimate term of 16 months, the
Company will use its vanadium finished products inventory to secure drawdowns of up to
$10.0 million for a maximum period of 100 days.
Subsequent to Q2 2024, production and sales in were 1,002 tonnes and 697 tonnes of
V2O5 equivalent, respectively, in July 2024, with 4,058 tonnes of ilmenite concentrate
being produced during this period and 406 dry tonnes of ilmenite being sold.
In July 2024, the Company signed an additional inventory financing agreement for up to
$10.0 million. Under the terms of this facility, which has an ultimate term of 15 months,
the Company will use its vanadium finished products inventory to secure drawdowns of
up to $10.0 million for a maximum period of 90 days.
Annual Kiln Maintenance Rescheduled
The Company has rescheduled its annual kiln maintenance, originally planned for Q1 2025, to
November 2024. This proactive measure aims to mitigate potential disruptions caused by the
anticipated rainy season at the Maracás mine site, which typically occurs in December and
January. This maintenance period is anticipated to last between 15 to 25 days and is not expected
to affect the Company's annual 2024 production guidance of 9,000 to 11,000 tonnes of V2O5
equivalent. During the maintenance, the Company intends to build its magnetic concentrate
stockpile for future production. Additionally, the Company is reviewing and optimizing the
quality of its ilmenite concentrate to achieve greater revenues for this product in the future.
Ilmenite concentrate production and sales will be impacted during this period and consequently,
the Company has revised its annual ilmenite concentrate production and sales guidance, as
detailed in the table below.
Revised 2024 Ilmenite Concentrate Production and Sales Guidance
Tonnes Q3 Q4 2024
Low High Low High Low High
Production 10,000 15,000 12,000 17,000 40,000 50,000
Sales 5,000 15,000 10,000 15,000 27,000 42,000
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, 2024 and 2023 and its management's discussion and analysis (“MD&A”) for the
three and six months ended June 30, 2024 which are available on our website at
www.largoinc.com or on the Company’s respective profiles at www.sedarplus.com and
www.sec.gov.
About Largo
Largo is a globally recognized vanadium company known for its high-quality VPURETM and
VPURE+TM products, sourced from its Maracás Menchen Mine in Brazil. The Company is
currently focused on ramping up its ilmenite concentrate plant and is undertaking a strategic
evaluation of its U.S.-based clean energy business, including its advanced VCHARGE vanadium
battery technology to maximize the value of the organization. Largo's strategic business plan
centers on maintaining its position as a leading vanadium supplier with a growth strategy to
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 on the Company, 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;
and the timing of annual kiln maintenance and its impact on production and inventories.
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 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 vanadium redox flow battery ("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 ability to protect
and develop its technology; the Company’s ability to maintain its IP; the competitiveness of the
Company’s product in an evolving market; the Company’s ability to market, sell and deliver
VCHARGE batteries on specification and at a competitive price; the Company’s ability to
successfully deploy VCHARGE batteries in foreign jurisdictions; the Company’s ability to secure
the required resources to build and deploy VCHARGE batteries, and the adoption of VRFB
technology generally in the market; 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; and 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 ex pected”, “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 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.sedarplus.ca 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&A which also
apply.
Trademarks are owned by Largo Inc.
Non-GAAP7 Measures
The Company uses certain non-GAAP measures in this press release, which are described in the
following section. Non-GAAP financial measures and non-GAAP ratios are not standardized
financial measures under IFRS, the Company's GAAP, and might not be comparable to similar
financial measures disclosed by other issuers. 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.
Revenues Per Pound
The Company’s MD&A refers to revenues per pound sold, V2O5 revenues per pound of V2O5
sold, V2O3 revenues per pound of V2O3 sold and FeV revenues per kg of FeV sold, which are
non-GAAP financial measures that are used to provide investors with information about a key
measure used by management to monitor performance of the Company.
These measures, along with cash operating costs, are considered to be key indicators of the
Company’s ability to generate operating earnings and cash flow from its Maracás Menchen
Mine and sales activities. These measures differ from measures determined in accordance with
IFRS, and are not necessarily indicative of net earnings or cash flow from operating activities as
determined under IFRS.
The following table provides a reconciliation of revenues per pound sold, V2O5 revenues per
pound of V2O5 sold, V2O3 revenues per pound of V2O3 sold and FeV revenues per kg of FeV sold
to revenues and the revenue information presented in note 19 as per the Q2 2024 unaudited
condensed interim consolidated financial statements.
Three months ended Six months ended
June 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Revenues - V2O5 produced1 $ 12,733 $ 30,558 $ 34,291 $ 65,084
V2O5 sold - produced (000s lb) 2,024 3,083 5,137 6,881
V2O5 revenues per pound of V2O5 sold - produced ($/lb) $ 6.29 $ 9.91 $ 6.68 $9 . 4 6
Revenues - V2O5 purchased1 $ — $ 2,937 $ 988 $5 , 4 6 5
V2O5 sold - purchased (000s lb) — 396 176 705
V2O5 revenues per pound of V2O5 sold - purchased ($/lb) $ — $ 7.42 $ 5.61 $7 . 7 5
Revenues - V2O51 $ 12,733 $ 33,495 $ 35,279 $ 70,549
V2O5 sold (000s lb) 2,024 3,479 5,313 7,586
V2O5 revenues per pound of V2O5 sold ($/lb) $ 6.29 $ 9.63 $ 6.64 $9 . 3 0
Revenues - V2O3 produced1 $ 735 $ 2,358 $ 6,938 $3 , 8 4 1
V2O3 sold - produced (000s lb) 82 177 750 311
V2O3 revenues per pound of V2O3 sold - produced ($/lb) $ 8.96 $ 13.32 $ 9.25 $ 12.35
Revenues - V2O3 purchased1 $ — $ — $ — $1 , 1 5 5
V2O3 sold - purchased (000s lb) — — — 88
V2O3 revenues per pound of V2O3 sold - purchased ($/lb) $ — $ — $ — $ 13.13
Revenues - V2O31 $ 735 $ 2,358 $ 6,938 $4 , 9 9 6
V2O3 sold (000s lb) 82 177 750 399
V2O3 revenues per pound of V2O3 sold ($/lb) $ 8.96 $ 13.32 $ 9.25 $ 12.52
Revenues - FeV produced1 $ 10,910 $ 17,230 $ 23,159 $ 34,658
FeV sold - produced (000s kg) 512 579 1,081 1,147
FeV revenues per kg of FeV sold - produced ($/kg) $ 21.31 $ 29.76 $ 21.42 $ 30.22
Revenues - FeV purchased1 $ 1,832 $ 27 $ 2,952 $3 2 8
FeV sold - purchased (000s kg) 87 1 138 11
FeV revenues per kg of FeV sold - purchased ($/kg) $ 21.06 $ 27.00 $ 21.39 $ 29.82
Revenues - FeV1 $ 12,742 $ 17,256 $ 26,111 $ 34,986
FeV sold (000s kg) 599 580 1,219 1,158
FeV revenues per kg of FeV sold ($/kg) $ 21.27 $ 29.75 $ 21.42 $ 30.21
Revenues1 $ 26,210 $ 53,110 $ 68,328 $1 1 0 , 5 3 1
V2O5 equivalent sold (000s lb) 4,058 5,637 10,154 11,918