Largo Reports Third Quarter 2021 Financial Results with Net Income of $9.2 Million; Advances to Implement Largo’s Complementary Value Propositions
Largo Reports Third Quarter 2021 Financial
Results with Net Income of $9.2 Million;
Advances to Implement Largo’s
Complementary Value Propositions
All amounts expressed are in U.S. dollars, denominated by “$”. Q3 2021 and Other
Significant Highlights
• Net income of $9.2 million, a 261% increase over Q3 2020; Basic earnings per share
of $0.14
• Revenues of $53.9 million, 96% higher than Q3 2020; Revenues per lb sold1 of $9.10,
a 69% increase over Q3 2020
• Cash balance of $87.6 million exiting Q3 2021
• Battery Development Funding: Largo Clean Energy (“LCE”) selected to receive
$4.2 million in funding from the U.S. Department of Energy (“DOE”) to scale up
U.S.-based manufacturing of flow battery and long duration storage systems
• First Battery Sales Contract: On July 20, 2021, LCE entered into its first
VCHARGE vanadium redox flow battery (“VRFB”) sales contract with Enel Green
Power España (“Enel”); LCE will deliver a 5 hour, 6.1 MWh VCHARGE system for
a project in Spain and received a Notice to Proceed on July 30, 2021
• 2020 Sustainability Report Released: Significant progress made on environmental,
social and governance priorities in furthering the Company and vanadium’s role in
the global green economy
• Total V2O5 equivalent sales of 2,685 tonnes, a 16% increase over Q3 2020
• Production of 3,260 tonnes (7.2 million lbs2) of V2O5, a 5% increase over Q3 2020
• Cash operating costs excluding royalties1 of $3.53 per lb of V2O5 vs. $3.14 per lb in
Q3 2020
• Solid Vanadium Demand: Average Fastmarkets European V2O5 price of
approximately $9.40 per lb in Q3 2021, a 76% increase over the average in Q3 2020
• Corporate Name Change and Rebrand: In line with the Company’s Board
approved strategy to vertically integrate is foundational mining business and
growing energy storage division, Largo announced that it has changed its name
from Largo Resources Ltd. to Largo Inc.
• Pre-Feasibility Study Results Released: On November 3rd, 2021, the Company
announced its technical report results outlining a significant expansion of V2O5
production and reserves supported by new cash flow generation from titanium
dioxide (“TiO2”) pigment co-product sales. The result is a 20-year mine life and a
$2.0 Billion after-tax NPV7% for the Maracás Menchen Mine
• 2021 Production and Sales Guidance: Production guidance of 11,400 to 11,800
tonnes of V2O5 equivalent; Sales guidance of 11,200 to 11,800 tonnes of V2O5
• UPDATED: The Company will host a webcast and conference call for its Q3 2021
results on Thursday, November 11th at 10:00 a.m. ET
TORONTO--(BUSINESS WIRE)--November 10, 2021--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today announces its third quarter 2021 financial results
highlighted by revenues of $53.9 million and net income of $9.2 million. The Company recently
announced results of a pre-feasibility study which forecasts materially increased profitability
through enhanced access to vanadium and achieved important milestones in the development of
its vanadium-based energy storage business.
Ian Robertson, Co-Chair of Largo, commented: “We believe that our two distinct, but related
value propositions are clear – our shareholders own both an experienced new-economy
vanadium production business demonstrating clear value upside, together with an emerging
energy transition business, which provides the opportunity for incremental earnings from the
manufacture and sale of vanadium-based energy storage systems. Our recently announced pre-
feasibility study results support both businesses through materially enhanced forecast
profitability from our vanadium and TiO2 production business and improved market share for
our energy storage products. We believe the updated Largo brand embodies our commitment to
deliver shareholder value accretion through the vertical integration of our two business
propositions.”
Paulo Misk, President and CEO of Largo, stated: “The expansion of V2O5 production and
incremental cash flows generated by the production and sale of TiO2 pigment provide clear
upside to our shareholders. We were very pleased to report a 305%7 increase in Proven and
Probable reserve tonnage and a 128%7 increase in Measured and Indicated resource tonnage
for the Maracás Menchen Mine. We believe TiO2 production from the Company’s existing non-
magnetic concentrate will enable Largo to enhance its operational competitiveness and together
with its energy storage business transition, should lead to increased shareholder value for the
Company. Strong vanadium prices in the third quarter resulted in the Company’s revenue and
revenues per pound sold1 increasing 96% and 69%, respectively, over the same quarter in 2020.
Despite lower sales results during Q3 2021 mainly due to global logistical delays, our
operational results improved significantly over the prior quarter driven by improved recoveries
and increased throughput.”
Financial Results
Three months ended Nine months ended
September
30,
2021
September
30,
2020
September
30,
2021
September
30,
2020
Revenues $ 53,861 $ 27,474 $ 147,954 77,733
Operating costs (32,126) (20,977) (95,264) (56,786)
Direct mine and production costs (18,613) (11,354) (53,756) (31,028)
Net income before tax 13,469 3,352 32,096 1,700
Income tax expense (2,569) (421) (5,028) (421)
Deferred income tax expense (1,707) (382) (5,286) (1,399)
Net income (loss) 9,193 2,549 21,782 (120)
Basic earnings (loss) per share $ 0.14 $ 0.05 $ 0.34 $ 0.00
Diluted earnings (loss) per share $ 0.14 $ 0.04 $ 0.34 $ 0.00
Cash provided before non-cash
working capital items $ 20,314 $ 4,820 $ 49,260 $ 4,526
Net cash provided by (used in)
operating activities 15,512 382 36,350 (64,249)
Net cash provided by (used in)
financing activities 78 126 (6,900) 27,643
Net cash used in investing activities (6,145) (4,435) (20,414) (13,036)
Net change in cash 6,898 (3,320) 8,422 (52,604)
As at
September
30,
2021
December
31, 2020
Cash $ 87,567 $ 79,145
Working capital3 121,710 92,950
Maracás Menchen Mine Operational and Sales Results
Q3 2021 Q3 2020
Total Ore Mined (tonnes) 366,484 287,969
Ore Grade Mined - Effective Grade (%)4 1.10 1.28
Concentrate Produced (tonnes) 113,879 104,921
Grade of Concentrate (%) 3.32 3.32
Global Recovery (%)5 83.7 84.2
V2O5 produced (Flake + Powder) (tonnes) 3,260 3,092
V2O5 produced (equivalent pounds) 1 7,187,061 6,816,685
Total V2O5 equivalent sold (tonnes) 2,685
Produced V2O5 equivalent sold (tonnes) 2,549 2,320
Purchased V2O5 equivalent sold (tonnes) 136
Cash operating costs excluding royalties1 ($/lb) 3.53 3.14
Revenues per pound1 ($/lb) 9.10 5.37
Q3 2021 Financial Highlights
• During Q3 2021, the Company recognized revenues of $53.9 million from sales of 2,685
tonnes of V2O5 equivalent (Q3 2020 - 2,320 tonnes). This represents a 96% increase in
revenues over Q3 2020 ($27.5 million) due to higher vanadium prices during the quarter.
• Revenues per pound sold1 were $9.10 in Q3 2021 compared to $5.37 per pound sold in
Q3 2020, representing an increase of 69%.
• Operating costs of $32.1 million in Q3 2021 (Q3 2020 – $21.0 million) include direct
mine and production costs of $18.6 million (Q3 2020 – $11.3 million). The increase in
direct mine and production costs is primarily attributable to the increase in sales as well
as the impact of cost increases for critical consumables.
• Cash operating costs excluding royalties1 were $3.53 per lb in Q3 2021, compared with
$3.14 for Q3 2020. The increase seen in Q3 2021 compared with Q3 2020 is largely due
to the impact of cost increases for critical consumables and a slight decrease in global
recoveries5, with 83.7% achieved in Q3 2021, compared with 84.2% achieved in Q3
2020.
• The Company recorded net income of $9.2 million in Q3 2021, representing an 261%
increase over net income of $2.5 million in Q3 2020.
• Professional, consulting and management fees were $4.9 million in Q3 2021, compared
with $2.1 million in Q3 2020. The increase is primarily attributable to costs incurred
during the quarter in connection with LCE that was not operational in Q3 2020. In
addition, the Company incurred increased legal and regulatory costs in Q3 2021 in
relation to the Nasdaq listing process and U.S. regulatory requirements.
• Cash provided before working capital items of $20.3 million for Q3 2021 increased 321%
compared to $4.8 million in Q3 2020. The increase resulted largely from higher revenue
during the quarter resulting from higher realized vanadium prices.
• Cash of $87.6 million and working capital of $121.7 million as of September 30, 2021,
compared to $79.1 million and $92.9 million, respectively, as of December 30, 2020.
Additional Corporate Highlights
• Developing Largo’s Vertically Integrated Energy Storage Business: On July 22, 2021, the
Company announced the appointment of Mr. Ian Robertson as Co-Chair of the Board of
Directors of Largo and as Interim President of LCE. Since then, LCE has passed all tests
required for Underwriters Laboratory certification of the VCHARGE energy storage
system, substantially completed Phase I of Largo’s Massachusetts manufacturing facility,
was selected for $4.2 million in DOE funding for further development of manufacturing
capabilities and continued to develop its sales pipeline with active customer discussions
representing storage requirements of over 6,000 MWh.
• Solid Q3 2021 Production Results; Strong Finish to the Year Expected: Production from
the Maracás Menchen Mine was 3,260 tonnes of V2O5 in Q3 2021, representing a 5%
increase over Q3 2020 and the second-best quarter of production since commencement of
operations. The Company achieved an excellent global recovery3 of 83.7% in Q3 2021,
being 1% lower than Q3 2020 but 5% higher than the 79.9% achieved in Q2 2021. Lower
V2O5 production in October 2021 of 874 tonnes was due to an unplanned mill shutdown
and power outages caused by heavy rains which fell over the region during the month.
• Vanadium Sales Impacted by Global Logistical Delays: Increased delays and global
logistical challenges have impacted all aspects of the Company’s supply chain resulting
in lower V2O5 equivalent sales of 2,685 tonnes in Q3 2021. Diligent planning and a
comprehensive sales strategy have allowed the Company to deliver on all its commercial
commitments up to this point. The Company expects to exit the year with a solid quarter
of production and sales results in Q4 2021.
Updated Q3 2021 Webcast and Conference Call Information
The Company will host a webcast and conference call on Thursday, November 11th at 10:00
a.m. ET, to discuss its third quarter 2021 results and progress.
Webcast and Conference Call Details:
Date: Thursday, November 11, 2021
Time: 10:00 a.m. ET
Webcast Registration Link: https://produceredition.webcasts.com/starthere.jsp?ei=1510027&tp_key=8437e02a6
Dial-in Number: Local / International: +1 (647) 792-1241
North American Toll Free: +1 (866) 269-4261
Conference ID: 6358846
Replay Number: Local / International: + 1 (647) 436-0148
North American Toll Free: +1 (888) 203-1112
Replay Passcode: 6358846
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 nine months
ended September 30, 2021 and 2020 and its management's discussion and analysis (“MD&A”)
for the three and nine months ended September 30, 2021 which are available on our website at
www.largoresources.com or on the Company’s respective profiles at www.sedar.com and
www.sec.gov.
Technical Information
The technical and scientific information contained in this press release has been reviewed by,
and was prepared under the supervision of, Porfrio Cabaleiro Rodriguez, Mining Engineer, BSc
(Mine Eng), FAIG, GE21 director, who is an independent Qualified Person under National
Instrument 43-101 – Standards of Disclosure for Mineral Projects. The scientific and technical
information contained in this press release was previously disclosed by the Company on
Thursday, November 4, 2021, in the press release entitled “Enhanced Access to Vanadium and
Profitability Indicated by Pre-Feasibility Study Strengthens Foundation for Strategic
Commitment to Energy Storage Business”.
About Largo
Largo is a Canadian-based company that has historically been solely committed to the
production and supply of high-quality vanadium products. The Company believes that the
development and sale of vanadium-based utility scale electrical energy storage systems to
support the planet's on-going transition to renewable energy presents both an attractive economic
opportunity for the use of the Company's vanadium products and an opportunity to enhance the
Company's sustainability. The Company is confident that using 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, in its VCHARGE vanadium redox flow battery
technology results in a competitive and practical long duration energy storage product.
Consequently, the Company is undergoing a strategic transformation through the creation of
energy storage business operations to be vertically integrated with its highly efficient vanadium
production mining operations, to create a unique competitive advantage in the rapidly growing
long duration energy storage market.
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; costs of future activities and operations; the ability to
increase shareholder value through the vertical integration of the Company; 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 V2O5 equivalent sales and the filing of a National
Instrument 43-101 Technical Report on the Maracás Menchen Mine within 45 days of the
announcement of the Technical Report results. 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 ability to successfully conclude award negotiations
with the DOE, 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.
Non-GAAP6 Measures
The Company uses certain non-GAAP financial performance measures in its press release and
MD&A, which are described in the following section.
Revenues Per Pound
The Company’s press release refers to revenues per pound sold, a non-GAAP performance
measure that is used to provide investors with information about a key measure used by
management to monitor performance of the Company.
This measure, along with cash operating costs and total cash costs, is 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 and sales activities. This revenues per pound measure does not have
any standardized meaning prescribed by IFRS and differs from measures determined in
accordance with IFRS. This measure is 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. This measure is not necessarily indicative of net earnings or cash flow
from operating activities as determined under IFRS.
The following table provides a reconciliation of this measure per pound sold to revenues as per
the Q3 2021 unaudited condensed interim consolidated financial statements.
Three months ended Nine months ended
September
30,
2021
September
30,
2020
September
30,
2021
September
30,
2020
Revenues - V2O5
produced1 $ 28,627 $ 76,381
V2O5 sold - produced
(000s lb) 3,308 10,265
V2O5 revenues per pound
of V2O5 sold - produced
($/lb)
$
8.65
$
7.44
Revenues - V2O5
purchased2 $ — $ 455
V2O5 sold - purchased
(000s lb) — 55
V2O5 revenues per pound
of V2O5 sold - purchased
($/lb)
$
—
$
8.27
Revenues - V2O52 $ 28,627 $ 76,836
V2O5 sold (000s lb) 3,308 10,320
V2O5 revenues per pound
of V2O5 sold
($/lb)
$
8.65
$
7.45
Revenues - FeV
produced1 $ 22,621 $ 63,908
FeV sold - produced
(000s kg) 716 2,321
FeV revenues per kg of
FeV sold - produced
($/lb)
$
31.59
$
27.53
Revenues - FeV
purchased2 $ 2,613 $ 7,210
FeV sold - purchased
(000s kg) 88 265
FeV revenues per kg of
FeV sold - purchased
($/lb)
$
29.69
$
27.21
Revenues - FeV2 $ 25,234 $ 71,118
FeV sold (000s kg) 804 2,586
FeV revenues per kg of
FeV sold
($/lb)
$
31.39
$
27.50
Revenues2 $ 53,861 $ 27,474 $ 147,954 $ 77,733
V2O5 equivalent sold
(000s lb) 5,919 5,115 18,727 14,348
Revenues per pound sold
($/lb)
$
9.10
$
5.37
$
7.90
$
5.42
i.
Calculated from note 16 from the Company’s unaudited condensed interim consolidated financial statements for
the three and nine months ended September 30, 2021 and 2020: V 2O5 revenues of $28,627 less revenues from
purchased products of $nil gives revenues from produced products of $28,627. FeV revenues of $25,234 less
revenues from purchased products of $2,613 gives revenues from produced products of $22,621.
ii. As per note 16.
Cash Operating Costs Per Pound
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.