Largo Reports Third Quarter 2022 Financial Results; Continues its Focus on Two-Pillar Growth Strategy
Largo Reports Third Quarter 2022 Financial
Results; Continues its Focus on Two-Pillar
Growth Strategy
All amounts expressed are in U.S. dollars, denominated by “$”.
Q3 2022 Highlights
• Revenues of $54.3 million vs. revenues of $53.9 million in Q3 2021; Revenues per lb
sold1 of $8.80 vs. $9.10 in Q3 2021
• Net loss of $2.6 million vs. net income of $9.2 million in Q3 2021; Basic loss per
share of $0.04 in Q3 2022; Inclusive of approximately $3.0 million in non-recurring
expenditures such as legal and listing costs for Largo Physical Vanadium Corp.
("LPV") and an increase in legal provisions
• Cash provided before working capital items of $4.3 million vs. $20.3 million in Q3
2021; Net cash provided by operating activities of $10.0 million vs. $15.5 million in
Q3 2021
• Operating costs of $45.6 million vs. $32.1 million in Q3 2021 and cash operating
costs excluding royalties per pound1 of V2O5 equivalent sold of $4.86 in Q3 2022 vs.
$3.53 in Q3 2021
• Cash balance of $62.7 million and a net working capital2 surplus of $114.1 million
exiting Q3 2022
• V2O5 equivalent sales of 2,796 tonnes (inclusive of 351 tonnes of purchased material)
vs. 2,685 tonnes (inclusive of 136 tonnes of purchased material) sold in Q3 2021
• Production of 2,906 tonnes (6.4 million lbs3) of V2O5 vs. 3,260 tonnes in Q3 2021
• Progress continued on the implementation of the Company’s ilmenite concentration
plant at the Maracás Menchen Mine, including receiving all required metallic
flotation structures and building of desliming, flotation, filtration, warehouse and
pipe rack structures; Expects commissioning to be completed in Q2 2023
• Largo Clean Energy (“LCE”) signed a non-binding MOU with Ansaldo Green Tech
in August 2022 to negotiate the formation of a joint venture for the manufacturing
and commercial deployment of vanadium redox flow batteries (“VRFB”) in the
European, African and Middle East power generation markets
• Published 2021 Sustainability Report and 2021 Taskforce on Climate-Related
Financial Disclosures (TCFD) Climate report, outlining the Company’s
commitment and approach to both sustainability and climate change
• Q3 2022 results conference call: Thursday, November 10th at 1:00 p.m. ET
Vanadium Market Update4
• The Company maintained a strong focus on developing new markets for its high
purity products and concluded its first sale of vanadium trioxide (“V203”) in Europe
in Q3 2022
• High purity vanadium demand has increased following ongoing recovery from 2020
COVID-19 impacts, which was partially offset by a softening of steel demand in Q3
2022
• The average benchmark price per lb of V2O5 in Europe was $8.23 in Q3 2022, a
12% decrease from the average of $9.40 seen in Q3 2021 and a 26% decrease from
the average of $11.08 seen in Q2 2022; The average benchmark price per kg of
ferrovanadium (“FeV”) in Europe was $33.85 in Q3 2022, a 12% decrease from the
average of $38.32 seen in Q3 2021 and a 24% decrease from the average of $44.22
seen in Q2 2022
TORONTO--(BUSINESS WIRE)--November 9, 2022--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today announces its third quarter 2022 financial results with
revenues of $54.3 million from V2O5 equivalent sales of 2,796 tonnes.
Paulo Misk, President and CEO of Largo, stated: “Global market uncertainties, including
continued inflationary pressures and a challenging supply chain environment, continued to affect
the Company in Q3 2022. Impacts to our financial performance in the third quarter 2022 were
largely attributable to lower sales of our produced material, the effects of lower production and
increased consumable costs. However, our team is confident in reaching its revised 2022
guidance and continues its focus on the Company’s growth strategy.” He continued: “Despite
near-term uncertainties, long-term market fundamentals for vanadium and outlined growth
opportunities for the Company remain highly attractive. I am optimistic that the expected upside
derived from our two-pillar strategy as a leading vanadium company will be positive for all
stakeholders as global conditions improve.”
Financial Results
(thousands of U.S. dollars, except for basic
earnings
(loss) per share and diluted earnings (loss) per
share)
Three months ended Nine months ended
Sept. 30, 2022 Sept. 30, 2021 Sept. 30, 2022 Sept. 30, 2021
Revenues 54,258 53,861 181,750 147,954
Operating costs (45,602) (32,126) (125,264) (95,264)
Direct mine and production costs (24,655) (18,613) (66,120) (53,756)
Net income (loss) before tax (1,960) 13,469 21,263 32,096
Income tax (expense) (1,307) (2,569) (9,024) (5,028)
Deferred income tax recovery (expense) 666 (1,707) 1,171 (5,286)
Net income (loss) (2,601) 9,193 13,410 21,782
Basic earnings (loss) per share (0.04) 0.14 0.21 0.34
Diluted earnings (loss) per share (0.04) 0.14 0.21 0.34
Cash provided before non-cash working capital
items 4,328 20,314 35,479 49,260
Net cash provided by operating activities 10,037 15,512 8,889 36,350
Net cash (used in) provided by financing
activities 17,651 78 2,357 (6,900)
Net cash (used in) investing activities (17,677) (6,145) (33,328) (20,414)
Net change in cash 9,835 6,898 (21,077) 8,422
As at
September 30, 2022 December 31, 2021
Cash 62,713 83,790
Working capital 114,097 118,310
Maracás Menchen Mine Operational and Sales Results
Q3 2022 Q3 2021
Total Ore Mined (tonnes) 351,450 366,484
Ore Grade Mined - Effective Grade5 (%) 1.02 1.10
Concentrate Produced (tonnes) 99,513 113,879
Grade of Concentrate (%) 3.26 3.32
Global Recovery6 (%) 80.7 83.7
V2O5 Equivalent Produced (Flake + Powder)
(tonnes) 2,906 3,260
V2O5 produced (equivalent pounds 3) 6,406,626 7,187,061
V2O5 Equivalent Sold (tonnes) 2,796 2,685
Produced V2O5 equivalent sold (tonnes) 2,445 2,549
Purchased V2O5 equivalent sold (tonnes) 351 135
Cash Operating Costs Excluding Royalties per
pound sold ($/lb)1 4.86 3.53
Revenues per pound sold ($/lb) 1 8.80 9.10
Q3 2022 and Other Financial Highlights
• The Company recognized revenues of $54.3 million from sales of 2,796 tonnes of V2O5
equivalent (Q3 2021 – 2,685 tonnes) in Q3 2022, in line with revenues of $53.9 million
in Q3 2021. Revenues per pound sold1 were $8.80 in Q3 2022 compared to $9.10 per
pound sold in Q3 2021, representing a 3% decrease.
• Operating costs of $45.6 million in Q3 2022 (Q3 2021 – $32.1 million) include direct
mine and production costs of $24.7 million (Q3 2021 – $18.6 million), conversion costs
of $1.7 million (Q3 2021 – $2.0 million), product acquisition costs of $7.2 million (Q3
2021 – $2.5 million), royalties of $2.5 million (Q3 2021 – $2.7 million), distribution
costs of $2.6 million (Q3 2021 – $1.3 million), inventory write-down of $1.7 million (Q3
2021 – $nil), depreciation and amortization of $5.1 million (Q3 2021 – $4.8 million) and
iron ore costs of $0.2 million (Q3 2021 – $0.1 million).
• The increase in direct mine and production costs is primarily attributable to a decrease in
the global recovery6, 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. Higher costs of production in the current and
previous periods related to shutdowns for the refractory refurbishment in the kiln and
cooler, repairs to the cooler support bearing, maintenance of the cooler engine system and
power substation, while reduced de-ammoniator and kiln availability continued to impact
operating costs as a result of the time between production and sales. The increase in
product acquisition costs is related to the increased amount of purchased products that
have been sold in the period. At September 30, 2022, the Company recognized an
inventory write-down for its purchased products, which was primarily due to the
decreases in the average benchmark prices at the end of Q3 2022 as noted above.
• Cash operating costs excluding royalties1 were $4.86 per lb sold in Q3 2022, compared
with $3.53 for Q3 2021. The increase seen in Q3 2022 compared with Q3 2021 is largely
due to the reasons noted above for operating costs. Further, produced V2O5 equivalent
sold decreased as compared with Q3 2021.
• The Company recorded a net loss of $2.6 million in Q3 2022, compared with a net
income of $9.1 million in Q3 2021. This movement was primarily due to lower sales and
an increase in operating costs, professional, consulting and management fees and other
general and administrative expenses.
• Professional, consulting and management fees were $7.2 million in Q3 2022, compared
with $4.9 million in Q3 2021. The increase is primarily attributable to costs incurred in
Q3 2022 in connection with LCE which was not fully operational in Q3 2021 and
transaction and listing related costs incurred by LPV in Q3 2022 in connection with the
completion of its qualifying transaction.
• Other general and administrative expenses were $4.1 million in Q3 2022, compared with
$1.0 million in Q3 2021, which is primarily attributable to a further increase in legal
provisions in the Mine properties segment of $2.0 million, as well as costs incurred in Q3
2022 by LCE.
• Technology start-up costs were $0.3 million in Q3 2022 (Q3 2021 - $nil) and include a
recovery of $0.8 million during the quarter. The expense recovery for LCE in Q3 2022 is
due to the reclassification of some costs incurred in prior periods to inventory.
Technology start-up costs relate to activities at LCE focussed on the ramp up of
operations for the deployment of its VCHARGE VRFB system (nine months ended
September 30, 2022 - $3.8 million) and initial activities for the titanium project in Brazil
(Q3 2022 and the nine months ended September 30, 2022 - $0.8 million).
• Cash provided by financing activities in Q3 2022 increased by $17.6 million over Q3
2021. The movement is primarily due to the classification of $15.5 million out of
restricted cash following the completion of LPV qualifying transaction and the sale of
non-controlling interest of $7.5 million (Q3 2021 - $nil), partially offset by share
repurchases of $5.8 million (Q3 2021 - $nil).
• Cash used in investing activities of $17.7 million in Q3 2022 is an increase of $11.5
million from the $6.1 million seen in Q3 2021. Expenditures in 2022 primarily relate to
the ilmenite project, costs associated with a software implementation and cash outflows
for purchased product vanadium assets.
• In October 2022, the Company secured an additional debt facility of $20.0 million with a
bank in Brazil. The facility is for three years, with equal principal repayments due after
18, 24, 30 and 36 months. In addition to a fee of 0.7%, accrued interest at a rate of 8.33%
p.a. is to be paid every six months.
Additional Highlights
• Production: V2O5 equivalent production in July 2022 was 811 tonnes, with 1,140 tonnes
produced in August and 955 tonnes produced in September, for a total of 2,906 tonnes
produced in Q3 2022. Production in July was impacted by the refractory refurbishment in
the kiln and cooler, with September impacted by lower quantities of ore mined as the
Company transitioned to a new mining contractor. The global recovery6 achieved in Q3
2022 was 80.7%, a 3.6% decrease from the 83.7% achieved in Q3 2021 and 1.3% lower
than the 81.8% achieved in Q2 2022. The global recovery6 in July 2022 was 80.1%, with
81.3% achieved in August and 80.8% achieved in September. Subsequent to Q3 2022,
production in October 2022 was 804 tonnes of V2O5. Production in October was
primarily impacted by effects of the mining contractor transition and corrective
maintenance at the leaching and deammoniator areas.
• Sales: In Q3 2022, the Company sold 2,796 tonnes of V2O5 equivalent (Q3 2021 – 2,685
tonnes), including 351 tonnes of purchased products (Q3 2021 – 135 tonnes). Produced
V2O5 equivalent sold decreased, with 5.4 million lbs sold in Q3 2022, as compared with
5.6 million lbs sold in Q3 2021. The Company delivered both standard grade and high
purity V2O5, as well as V2O3 and FeV to customers globally. Lower Q3 2022 sales is
largely attributable to weaker spot demand during the period as well as ongoing shipment
delays. Subsequent to Q3 2022, sales in October 2022 were 1,056 tonnes of V2O5
equivalent, including 74 tonnes of purchased material.
• Largo Clean Energy: During Q3 2022, LCE made progress on the delivery of the Enel
Green Power España (“EGPE”) contract, which remains a key focus. All high-power
battery stacks have been manufactured and the Company has proceeded with factory
acceptance testing. The required battery stack containers are fully assembled, and final
validation and factory acceptance testing remains ongoing. Additionally, the required
electrolyte storage containers are progressing through the final painting, lining and
integration process. A majority of the required alternating current ("AC") components
have been manufactured and factory-accepted, and shipment to the deployment site has
begun. The battery deployment site is under construction and LCE expects to begin
equipment installation in November 2022. LCE continues to experience a number of
shipping and logistical delays related to certain components for its EGPE VRFB
deployment. However, management of LCE are monitoring the situation closely and now
expect the completion of the commissioning of the EGPE VRFB to be pushed into Q2
2023.
• Largo Physical Vanadium: In Q3 2022, the Company announced the completion of the
qualifying transaction for LPV with Column Capital Corp. ("CPC"). As part of the
transaction, the Company contributed approximately 200 tonnes of V2O5 equivalent and
C$20.0 million of the C$30.2 million that LPV raised in a financing that closed in April
2022. LPV will acquire and store vanadium units in commercial forms as well as in
electrolyte solutions for VRFB applications. On September 27, 2022, the Company
announced that LPV shares had commenced trading on the TSX Venture Exchange under
the ticker symbol "VAND". For more information on LPV, please visit
www.lpvanadium.com.
Q3 2022 Webcast and Conference Call Information
The Company will host a webcast and conference call on Thursday, November 10th at 1:00 p.m.
ET, to discuss its third quarter 2022 results and progress.
Webcast and Conference Call Details:
Date: Thursday, November 10, 2022
Time: 1:00 p.m. ET
Webcast Registration Link: https://app.webinar.net/DGd5pl8pBk6
Dial-in Number: Local: +1 (647) 794-4605
North American Toll Free: +1 (888) 204 -4368
Conference ID: 3815502
Replay Number:
Local / International: + 1 (416) 764 -8677
North American Toll Free: +1 (888) 390 -0541
Replay Passcode: 214434 #
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/investors/overview
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, 2022 and 2021 and its management's discussion and analysis (“MD&A”)
for the three and nine months ended September 30, 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 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 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
and cost related to the build-out of the ilmenite plant and the titanium project; 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, 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 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 production resources to build and deploy our
VCHARGE batteries, 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 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.
Q3 2022 Net Income Reconciliation
Q3 2022
Total V2O5 equivalent sold 000s lbs 6,164 A
Tonnesi 2,796
Produced V2O5 equivalent sold 000s lbs 5,390 B
Tonnesi 2,445
Revenues per pound sold $/lb $ 8.80 C
Cash operating costs per pound $/lb $ 5.33 D
i. Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
Q3 2022
Revenues
$ 54,258
A x C
2,796 tonnes of V2O5 equivalent sold (Q3
2021 - 2,685 tonnes), with revenues per
pound sold of $8.80 (Q3 2021 - $9.10)
Cash operating costs
(28,716 )
B x D
Global recovery of 80.7% (Q3 2021 - 83.7%),
impact of shutdowns and cost and
consumption increases for critical
consumables, including HFO, ammonium
sulfate and sodium carbonate
Other operating costs
Conversion costs
(costs incurred in converting V 2O5
to FeV that are recognized on the
sale of FeV) (1,655 )
Note 19
394 tonnes of produced FeV sold
Product acquisition costs
(costs incurred in purchasing
products from 3rd parties that are
recognized on the sale of those
products) (7,248 )
Note 19
351 tonnes of V2O5 equivalent of purchased
products sold, compared with 135 tonnes in
Q3 2021 with a cost of $2,479
Distribution costs (2,581 ) Note 19
Depreciation (5,111 ) Note 19
Inventory write-down
(1,655 )
Note 19
Attributable to purchased FeV and V 2O5
inventory
Increase in legal provisions (2,050 )
See "other general and administrative
expenses" section on page 6
Iron ore costs (200 ) Note 19
(20,500 )
Commercial & Corporate costs
Professional, consulting and management fees (2,056 ) Note 15 (Sales & trading plus Corporate)
In line with Q3 2021 Other general and administrative expenses (494 )
Share-based payments (131 )
(2,681 )
Largo Clean Energy
(3,254 )
Note 15 (excluding finance costs and
foreign exchange)
2022 guidance between $15,000 and
$18,000. $14,667 in the nine months ended
September 30, 2022
Largo Physical Vanadium (1,146 )
Note 15 (excluding finance costs and
foreign exchange)
Titanium project (487 ) Note 15 - "other"
Foreign exchange gain 967
Finance costs (296 )