Largo Reports Third Quarter 2023 Financial Results; Announces First Commercial Shipment of Ilmenite as By-Product of its Vanadium Operations in Brazil and Validation of its 6 MWh Vanadium Redox Flow Battery to Operate on Test Conditions
Largo Reports Third Quarter 2023 Financial
Results; Announces First Commercial
Shipment of Ilmenite as By-Product of its
Vanadium Operations in Brazil and
Validation of its 6 MWh Vanadium Redox
Flow Battery to Operate on Test Conditions
in Spain
All amounts expressed are in U.S. dollars, denominated by “$”
TORONTO--(BUSINESS WIRE)--November 8, 2023--Largo Inc. ("Largo" or the "Company")
(TSX: LGO) (NASDAQ: LGO) today announces its third quarter 2023 financial results.
Q3 2023 and Other Highlights
Revenues of $44.0 million vs. revenues of $54.3 million in Q3 2022; Decline driven
by lower vanadium prices and lower vanadium sales volumes; Revenues per lb sold 3
of V2O5 equivalent of $8.34 vs. $8.80 in Q3 2022
Operating costs of $42.5 million vs. $45.6 million in Q3 2022; Cash operating costs
excluding royalties1 per pound sold of $5.44 vs. 4.86 per lb sold in Q3 2022
Net loss of $11.9 million vs. net loss of $2.6 million in Q3 2022; Basic loss per share
of $0.19 vs. basic loss per share of $0.04 in Q3 2022
Cash used before working capital items of $4.4 million vs. cash provided before
working capital items of $4.3 million in Q3 2022
Cash balance of $39.5 million, net working capital surplus of $91.0 million and debt
of $65.0 million exiting Q3 2023
V2O5 equivalent sales of 2,385 tonnes (inclusive of 256 tonnes of purchased material)
vs. 2,796 tonnes (inclusive of 351 tonnes of purchased material) sold in Q3 2022
Production of 2,163 tonnes (4.8 million lbs1) of V2O5 vs. 2.906 tonnes in Q3 2022
Largo Clean Energy’s (“LCE”) 6 megawatt-hour (“MWh”) vanadium redox flow
battery (“VRFB”) deployment for Enel Green Power España (“EGPE”) was
validated to operate on test conditions according to EGPE specifications and LCE
test procedures in October
The Company successfully commissioned and is in the process of ramping up
production of its new ilmenite concentrate plant with initial production of 350
tonnes in August and 700 tonnes in September; The first commercial shipment of
ilmenite is in progress and should contribute to the Company’s revenues in Q4 2023
as a by-product of its vanadium operations
Q3 2023 results conference call: Thursday, November 9th at 1:00 p.m. ET
Vanadium Market Update2
The average benchmark price per lb of V2O5 in Europe was $8.03, a 2.5% decrease
from the average of $8.23 seen in Q3 2022
Vanadium spot demand was soft in Q3 2023, primarily due to adverse conditions in
the Chinese and European steel industries. However, strong demand growth from
the aerospace and energy storage sectors continued
Daniel Tellechea, Director and Interim CEO of Largo commented: "Q3 2023 was a challenging
quarter for Largo, primarily due to the tragic accident that occurred at the Company's chemical
plant in July as well as technical delays in commissioning our new crushing plant. The accident
at the chemical plant resulted in a capacity bottleneck in the evaporator section of the plant,
which resulted in lower overall production rates of vanadium in July and August. In early
September, our operating team recommissioned the evaporator circuit, which is now operating
at its original capacity. A delay in ramp up of the new magnetic separation crushing plant also
temporarily impacted vanadium production in Q3 2023. The new crushing plant was designed to
offset the impact of lower mined vanadium grades, as per the Company’s mine plan. The
operating team is in the process of resolving these issues, and we are pleased to report that the
crushing plant exceeded 1,000 tonnes of contained V2O5 in October, despite additional crushing
plant improvements scheduled to be implemented in November and December.”
He continued: “It is our priority to continue to optimize our operations, reduce costs, and
achieve production and sales targets safely. In light of this, we maintain our guidance for 2023.
Additionally, further measures are being implemented to improve the organization's
performance, including optimizing operational efficiencies through the implementation of the
new crushing system, concentrating on increasing production of high purity vanadium,
restructuring equipment maintenance processes to further reduce costs, and ramping up ilmenite
production starting in the fourth quarter of 2023 to diversify revenues. We are beginning to see a
notable reduction in key consumable costs, such as sodium carbonate, as well as ongoing
overhead cost reductions through a reduction of the number of contractors at the mine through
efficiency improvement programs and further reductions in the headcount at LCE. The Company
considers these ongoing initiatives to be a vitally important measures to counter the current
decrease in vanadium prices.”
He concluded: “During this past year, we have also made several significant investments that
are necessary for the sustainability of our operations in a lower vanadium price environment.
Among these investments are an increased waste rock pre-stripping and aggressive infill drilling
program to optimize production in the years to come. Our team has successfully built and
commissioned an ilmenite plant to diversify future revenues as a by-product of the vanadium
mine, built a new magnetic separation crushing plant for the purpose of mining lower-grade
material without reducing production levels, and delivered the Company’s first vanadium battery
to EGPE, our European energy storage customer. A substantial investment has been made in
LCE, which is not yet generating significant revenues, but continues to consume cash. With our
current strategic review process in place, Largo expects to optimize the value proposition of
LCE and participate in one of the most significant macrotrends, the clean energy transition with
vanadium as a critical material. With these investments, we believe that Largo is on the path to a
brighter future.”
Financial and Operating Results – Highlights
(thousands of U.S. dollars, except as otherwise
stated)
Three months ended Nine months ended
Sept. 30,
2023
Sept. 30,
2022
Sept. 30,
2023
Sept. 30,
2022
Revenues 43,983 54,258 154,514 181,750
Operating costs (42,580) (45,602) (131,540) (125,264)
Net income (loss) (11,884) (2,601) (19,057) 13,410
Basic earnings (loss) per share (0.19) (0.04) (0.30) 0.21
Cash (used) provided before working capital
items (4,360) 4,328 7,631 35,479
Cash operating costs excl. royalties 3 ($/lb) 5.44 4.86 5.25 4.37
Cash 39,572 62,713 39,572 62,713
Debt 65,000 15,000 65,000 15,000
Total mined – dry basis (tonnes) 6,406,626 4,178,185 11,373,683 7,780,061
Total ore mined (tonnes) 447,165 351,450 1,279,024 1,033,375
Effective grade4 of ore milled (%) 0.94 1.28 1.04 1.32
V2O5 equivalent produced (tonnes) 2,163 2,906 6,913 8,432
Q3 2023 Notes
The decrease in operating costs in Q3 2023 is largely attributable to lower overall sales in
the period, which includes a reduction in the sale of purchased products and lower
royalties due to lower sales.
V2O5 equivalent production of 2,163 tonnes in Q3 2023 decreased from 2,639 tonnes
produced in Q2 2023. Production in July 2023 was 644 tonnes, with 775 tonnes produced
in August and 744 tonnes produced in September, for a total of 2,163 tonnes of V2O5
equivalent produced. July and August production were negatively impacted as a result of
the chemical plant operating at limited capacity due to the accident in the evaporation
section of the plant in July 2023. In addition, September production was negatively
impacted by low availability of the crushing circuit, combined with the planned lower
vanadium grade of ore mined. V2O5 production in October continued to improve with
866 tonnes produced.
The Company is actively working to achieve higher levels of operational stability to
better manage its costs which have increased due in part to lower grades of ore mined as
compared with prior quarters. The lower grade of ore mined in Q3 2023 was according to
plan, representing a 27% decrease year-over-year. The Company is actively working
towards increasing the availability of its new crushing system to offset lowers grades of
ore mined and reach production of 1,000 tonnes of V2O5 per month in future months.
Total mined (dry basis) of 6.4 million tonnes increased by 53% and total ore mined of
447,165 tonnes was 27% higher than Q3 2022, respectively. Increased mining rates and
higher mining costs impacted the Company’s financial performance in Q3 2023.
As part of its ongoing mitigation efforts, the Company is focused on reducing its fixed
cost structure through contract renegotiations and an optimization of key operational
areas, including mining, maintenance, equipment rental and consumables.
The commissioning and ramp up of the ilmenite plant commenced in Q3 2023 with
production of 350 tonnes in August and 700 tonnes in September. The Company expects
the ramp up to conclude in Q2 2024 with revenue expectations in Q4 2023.
Exploration and evaluation costs of $2.3 million increased by $1.8 million from Q3 2022.
This was driven by infill drilling and geological model work at the Maracás Menchen
Mine and diamond drilling at Campo Alegre de Lourdes to support the maintenance of
the Company's mineral rights. During Q3 2023, the Company completed approximately
9,100 metres of diamond drilling in the near mine deep drilling and exploration program.
In the nine months ended September 30, 2023, approximately 19,100 metres of diamond
drillholes have been completed in Campo Alegre de Lourdes and Maracas targets. A re-
assay program began in Q2 2023 to perform chemical analysis on previously interpreted
results. The focus of this program is to increase measured and indicated resources.
Approximately 5,000 samples were prepared and sent to the external laboratory for
analysis in Q3 2023.
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, 2023 and 2022 and its management's discussion and analysis (“MD&A”)
for the three and nine months ended September 30, 2023 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 VPURE™ and
VPURE+™ products, sourced from its Maracás Menchen Mine in Brazil. The Company is
currently focused on implementing an 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, achieving operational
stability and managing unit costs; and the expected completion of the ilmenite plan ramp up in
Q4 2023.
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; 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
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
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-GAAP5 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
This 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 2022 unaudited condensed interim consolidated financial statements.
Three months ended Nine months ended
September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022
Revenues - V2O5 produced1 $ 25,268 $ 30,831 $ 90,352 $ 98,621
V2O5 sold - produced (000s lb) 3,017 3,745 9,898 10,824
V2O5 revenues per pound of V2O5 sold -
produced ($/lb) $ 8.38 $ 8.23 $ 9.13 $ 9.11
Revenues - V2O5 purchased1 $ 2,066 $ 1,655 $ 7,531 $ 3,184
V2O5 sold - purchased (000s lb) 309 207 1,014 339
V2O5 revenues per pound of V2O5 sold -
purchased ($/lb) $ 6.69 $ 8.00 $ 7,43 $ 9.39
Revenues - V2O51 $ 27,334 $ 32,486 $ 97,883 $ 101,805
V2O5 sold (000s lb) 3,326 3,952 10,912 11,163
V2O5 revenues per pound of V2O5 sold
($/lb) $ 8.22 $ 8.22 $ 8.97 $ 9.12
Revenues - V2O3 produced1 $ 3,734 $ 3,798 $ 7,575 $ 3,798
V2O3 sold - produced (000s lb) 308 308 619 308
V2O3 revenues per pound of V2O3 sold -
produced ($/lb) $ 12.12 $ 12.33 $ 12.24 $ 12.33
Revenues - V2O3 purchased1 $ — $ 482 $ 1,155 $ 482
V2O3 sold - purchased (000s lb) — 43 88 43
V2O3 revenues per pound of V2O3 sold -
purchased ($/lb) $ — $ 11.21 $ 13.13 $ 11.21
Revenues - V2O31 $ 3,734 $ 4,280 $ 8,730 $ 4,280
V2O3 sold (000s lb) 308 350 707 350
V2O3 revenues per pound of V2O3 sold
($/lb) $ 12.12 $ 12.23 $ 12.35 $ 12.23
Revenues - FeV produced1 $ 11,750 $ 12,756 $ 46,408 $ 54,667
FeV sold - produced (000s kg) 444 394 1,591 1,576
FeV revenues per kg of FeV sold -
produced ($/kg) $ 26.46 $ 32.38 $ 29.17 $ 34.69
Revenues - FeV purchased1 $ 1,058 $ 4,736 $ 1,386 $ 20,998
FeV sold - purchased (000s kg) 39 159 50 516
FeV revenues per kg of FeV sold -
purchased ($/kg) $ 27.13 $ 29.79 $ 27.72 $ 40.69
Revenues - FeV1 $ 12,808 $ 17,492 $ 47,794 $ 75,665
FeV sold (000s kg) 483 553 1,641 2,092
FeV revenues per kg of FeV sold ($/kg) $ 26.52 $ 31.63 $ 29,12 $ 36.17
Revenues1 $ 43,876 $ 54,258 $ 154,407 $ 181,750
V2O5 equivalent sold (000s lb) 5,259 6,164 17,177 18,340
Revenues per pound sold ($/lb) $ 8.34 $ 8.80 $ 8.99 $ 9.91
1. As per note 18 of the Company’s Q3 2023 unaudited condensed interim consolidated financial statements.