Largo Resources Advances its Strategic Focus on Vanadium-Based Energy Storage Systems and Announces Solid Second Quarter 2021 Financial Results with Net Income of $8.4 million
Largo Resources Advances its Strategic Focus on Vanadium-Based Energy
Storage Systems and Announces Solid Second Quarter 2021 Financial Results
with Net Income of $8.4 million
All amounts expressed are in U.S. dollars, denominated by “$”.
Q2 2021 Highlights
• At the Company’s investor-oriented virtual ‘Battery Day’ held on June 9, 2021, the
Company discussed its transformational strategic shift to the production of
vanadium based electrical energy storage systems. The Company believes that
moving to vertically integrate its financially strong vanadium operations with its
superior vanadium redox flow battery (“VRFB”) technology will present a higher
value market opportunity for the Company’s vanadium products in the future and
will also create a unique competitive advantage for Largo in the rapidly growing
long duration energy storage market
• Aligned with its commitment to the energy storage sector, Ian Robertson has been
appointed as Co-Chair of the Board of the Company and as interim President of
Largo Clean Energy Corp. (“LCE”)
• LCE entered into its first VCHARGE± VRFB sales contract with Enel Green Power
España (“EGPE”) and received notice to proceed on July 26, 2021
• The Company reported net income of $8.4 million vs. a net loss of $7.0 million in Q2
2020
• The Company recognized revenues of $54.3 million, 546% higher than Q2 2020
• Cash provided before working capital items of $16.2 million vs. 1.0 million in Q2
2020
• The Company exited Q2 2021 with a cash balance of $80.7 million
• The Company will host a webcast and conference call for its Q2 2021 results on
Wednesday, August 11th at 10:00 a.m. ET
Other Significant Highlights
• Total V2O5 equivalent sales of 3,027 tonnes, a 197% increase over Q2 2020
• Revenues per lb sold2 of $8.14, a 119% increase over Q2 2020
• Cash operating costs excluding royalties1 of $3.39 per lb of V2O5 vs. $1.89 per lb in
Q2 2020
• Production of 3,070 tonnes (6.8 million lbs3) of V2O5, a 20% increase over Q2 2020
and 55% above Q1 2021
• Vanadium demand in all of the Company’s key markets remained strong in Q2
2021: Average European V2O5 price per lb of $8.19, representing a 16% increase
over Q1 2021 and 33% above Q2 2020
• Commissioning of vanadium trioxide (“V2O3”) processing plant initiated
• 2021 production, sales, cash operating costs excluding royalties1 and capital
expenditure guidance maintained
TORONTO--(BUSINESS WIRE)--August 10, 2021--Largo Resources Ltd. ("Largo" or the
"Company") (TSX: LGO) (NASDAQ: LGO) today announces its second quarter 2021
financial results highlighted by revenues of $54.3 million and net income of $8.4 million.
Strategic Updates
During the second quarter, the Company hosted an investor-oriented virtual ‘Battery Day’ during
which the Company discussed its transformational strategic shift to the production of vanadium
based electrical energy storage systems. The Company believes that moving to vertically
integrate its financially strong vanadium operations with its superior long duration energy
storage technology will present a higher value market opportunity for the Company’s vanadium
products in the future and will also create a unique competitive advantage for Largo in the
rapidly growing long duration energy storage market.
Aligned with its belief in the opportunities expected to arise in the transition to VRFB
production, the Company announced the appointment of Mr. Ian Robertson as Co-Chair of the
Board of Directors of the Company and as Interim President of LCE. During the quarter, the
Company continued to augment its strategic, commercial, technical and manufacturing teams
including the appointment of Mr. Salvatore Minopoli as VP of LCE Operations.
During the quarter, LCE secured a facility in Massachusetts, U.S. for its global headquarters,
including its product development and stack manufacturing centre, which is sufficiently sized to
support a manufacturing capacity of energy systems representing up to 1.4 gigawatt hours of
storage per year. The team moved into the office facility in May 2021 and building modifications
are underway for the installation and commissioning of the stack manufacturing capacity and test
equipment required to support the business plan.
On July 20, 2021, the Company announced that LCE had entered into its first VCHARGE±
VRFB sales contract with EGPE and has now received notice to proceed for this installation.
Under the contract, LCE is obligated to deliver a five hour, 6.1 MWh VCHARGE± system for a
project in Spain with expected commissioning in Q4 2022.
With respect to continued VRFB deployments, LCE is focused on obtaining the required
regulatory certification to support expected 2022 project sales, with certifications on track to be
received by the end of Q4 2021. In addition, the Company is progressing with establishing the
supply chain and resources required to deliver on the anticipated project deployment timelines
and cost targets.
Ian Robertson, Co-Chair of Largo, stated: “During our Battery Day we confirmed our belief that
vertically integrating our highly efficient vanadium production capacity with our superior
vanadium based energy storage technology will present a more financially and societally
valuable proposition for the Company. I am pleased with the recently announced milestone
energy storage system sales contract with a world-class partner and remain confident that it
represents validation of the transformational opportunity to generate substantial long-term value
for the Company. Looking ahead, we see the planned change in our name to “Largo Inc.” as
evidence of the Company’s confidence in the significant opportunity that exists for Largo to
profitably participate in the growing long duration energy storage market. We expect to proceed
with the Company’s name change and extensive rebrand in late Q3 2021.”
Paulo Misk, President and Chief Executive Officer for Largo, stated: “Continued momentum
across all key markets resulted in increased vanadium demand and strong revenue growth for
the Company in Q2 2021. This has led to a substantial increase in revenues per lb2 sold of 119%
over Q2 2020 and contributed to healthy cash flow generation, building upon our solid cash
position. Following the additional debt funding obtained in Q2 2021 of $15 million, the
Company exited the quarter with a cash balance of $80.7 million. We will continue to capitalize
on the strong demand in the vanadium markets we serve with the goal of improving profit
margins going forward.”
Operational and Financial Updates
A summary of the Company’s operational and financial performance for the second quarter 2021
is provided below:
Financial
Three months ended Six months ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Revenues $ 54,292 $ 8,350 $ 94,093 $ 50,259
Operating costs (34,966 ) (9,561 ) (63,138 ) (35,809 )
Direct
mine and
production
costs (19,599 ) (2,180 ) (35,143 ) (19,674 )
Net income
(loss) before
tax 14,180 (5,533 ) 18,627 (1,652 )
Income tax
expense (2,138 ) — (2,459 ) —
Deferred
income tax
expense (3,597 ) (1,479 ) (3,579 ) (1,017 )
Net income
(loss) 8,445 (7,012 ) 12,589 (2,669 )
Basic earnings
(loss) per share $ 0.13 $ (0.12 ) $ 0.20 $ (0.05 )
Diluted
earnings (loss)
per share $ 0.13 $ (0.12 ) $ 0.20 $ (0.05 )
Cash provided
(used) before
non-cash
working capital
items $ 16,215 $ 1,028 $ 28,946 $ (294 )
Net cash
provided by
(used in)
operating
activities 19,127 (63,649 ) 20,838 (64,631 )
Net cash
provided by
(used in)
financing
activities 15,442 777 (6,978 ) 27,517
Net cash used
in investing
activities (5,194 ) (5,221 ) (14,269 ) (8,601 )
Net change in
cash 31,976 (67,079 ) 1,524 (49,284 )
As at
June 30,
2021
December 31,
2020
Cash $ 80,669 $ 79,145
Working
capital7 112,419 92,950
Maracás Menchen Mine Production and Sales
Q2 2021 Q2 2020
Total Ore Mined (tonnes) 340,734 257,357
Ore Grade Mined - Effective
Grade4 (%) 1.15
1.20
Effective Grade of Ore Milled4
(%) 1.20
1.29
Concentrate Produced (tonnes) 98,372 99,059
Grade of Concentrate (%) 3.23 3.20
Contained V2O5 (tonnes) 3,180 3,174
Crushing Recovery (%) 98.0 97.7
Milling Recovery (%) 97.5 94.7
Kiln Recovery (%) 89.7 91.7
Leaching Recovery (%) 97.9 99.1
Chemical Plant Recovery (%) 95.2 96.1
Global Recovery5 (%) 79.9 80.8
V2O5 produced (Flake + Powder)
(tonnes) 3,070 2,562
V2O5 produced (equivalent
pounds)3 6,768,184 5,648,237
V2O5 equivalent sold (tonnes) 3,027 1,018
Cash operating costs excluding
royalties1 $/lb 3.39 1.89
Revenues per pound2 $/lb 8.14 3.72
Q2 2021 Financial Results
The Company recorded net income of $8.4 million and basic earnings per share of $0.13 in Q2
2021, compared with a net loss of $7.0 million in Q2 2020.
During Q2 2021, the Company recognized revenues of $54.3 million from sales of 3,027 tonnes
of V2O5 equivalent (Q1 2020 - 1,018 tonnes). This represents a 546% increase in revenues over
Q2 2020 ($8.4 million). Revenues per pound sold2 were $8.14 in Q2 2021 compared to $3.72 per
pound sold in Q2 2020, representing an increase of 119%.
Operating costs of $35.0 million in Q2 2021 (Q2 2020 - $9.6 million) include direct mine and
production costs of $19.6 million (Q2 2020 - $2.2 million), conversion costs of $2.4 million (Q1
2020 - $nil), product acquisition costs of $3.7 million (Q1 2020 - $2.4 million), royalties of $2.4
million (Q2 2020 - $1.3 million), distribution costs of $1.3 million (Q1 2020 - $0.3 million) and
depreciation and amortization of $5.6 million (Q2 2020 - $2.0 million). The increase in direct
mine and production costs is primarily attributable to the increase in sales of V2O5 equivalent
sold in Q2 2021. Operating costs in Q2 2021 were partially offset by a margin on iron ore sales
of $0.1 million (Q2 2020 - $nil). Further, conversion costs relate to the costs incurred in
converting quantities of V2O5 into ferrovanadium for delivery to customers and distribution costs
relate to the costs incurred in delivering products to customers. In Q2 2020, the Company only
sold V2O5 and had only just begun shipping products to its customers.
Cash operating costs excluding royalties1 were $3.39 per lb in Q2 2021, compared with $1.89 for
Q2 2020. The increase seen in Q2 2021 compared with Q2 2020 is largely due to a decrease in
the global recovery5, with 79.9% achieved in Q2 2021, compared with 80.8% achieved in Q2
2020, and the impact of higher costs arising from the planned shutdown in Q1 2021.
Professional, consulting and management fees were $4.4 million in Q2 2021, compared with
$1.2 million in Q2 2020. The increase is primarily attributable to costs incurred in Q2 2021 in
connection with LCE that was not operational in Q2 2020. In addition, the Company’s Corporate
segment incurred increased legal and regulatory costs in Q2 2021 in relation to the Nasdaq
listing process and U.S. regulatory requirements.
The foreign exchange gain in Q2 2021 increased from Q2 2020 by 184% to $3.1 million. This is
primarily attributable to a weakening of the U.S. dollar against the Brazilian real by
approximately 12% since March 31, 2021 on U.S. dollar denominated cash and liabilities in
Brazil and a strengthening of the Canadian dollar against the U.S. dollar by approximately 2%
since March 31, 2021 on Canadian dollar denominated assets.
Cash provided by operating activities of $19.1 million in Q2 2021 is an increase from cash used
in operating activities of $63.6 million in Q2 2020. This is primarily due to an increase in cash
provided before working capital items of $15.2 million and a net increase in working capital
items of $67.6 million. The net movement in working capital items is largely driven by increases
in amounts receivable and inventory balances in Q2 2021 and a payment to the Company's
former off-take partner in Q2 2020 in partial settlement of trade payables.
Q2 2021 Operational Results
Total production from the Maracás Menchen Mine was 3,070 tonnes of V2O5, representing an
increase of 20% over Q2 2020 and a 55% increase over Q1 2021. This increase is attributable to
the kiln upgrades and cooler improvements implemented in January 2021, as well as the impact
of preventative maintenance in the chemical plant in Q2 2020. V2O5 production in April 2021
was 1,092 tonnes, with 1,075 tonnes produced in May and 903 tonnes produced in June. The
lower production in June was due to a reduction in the total material mined that occurred during
the transition between mining contractors that was completed by the end of Q2 2021. Subsequent
to Q2 2021, production in July was 1,068 tonnes of V2O5.
The global recovery5 achieved in Q2 2021 was 79.9%, 1% lower than the 80.8% achieved in Q2
2020 and 3% higher than the 77.4% achieved in Q1 2021. The global recovery in April was
78.8%, with 78.5% achieved in May and 82.0% achieved in June. The Company expects the
global recovery5 to stabilize at the levels seen in 2020 upon the completion of the commissioning
and ramp up period for the kiln improvements implemented in Q1 2021.
In Q2 2021, 340,734 tonnes of ore were mined with an effective grade4 of 1.15% of V2O5. The
ore mined in Q2 2021 was 32% higher than in Q2 2020. The Company produced 98,372 tonnes
of concentrate with an effective grade4 of 3.23%.
Webcast and Conference Call
The Company will host a webcast and conference call on Wednesday, August 11th at 10:00 a.m.
ET, to discuss its second quarter 2021 results.
Webcast and Conference Call Details:
Date: Wednesday, August 11th
Time: 10:00 a.m. ET
Webcast
Link:
https://produceredition.webcasts.com/starthere.jsp?ei=1482645&tp_key=feb73f6499
Dial-in
Number:
Local / International: +1 (416) 764-8688
North American Toll Free: (888) 390-0546
Brazil Toll Free: 08007621359
Conference
ID:
60891546
Replay
Number:
Local / International: + 1 (416) 764-8677
North American Toll Free: (888) 390-0541
Replay Passcode: 891546 #
Website: To view press releases or any additional financial information, please visit the Investor Relations
section of the Largo Resources website at:
www.largoresources.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, 2021 and 2020 and its management's discussion and analysis (“MD&A”) for the
three and six months ended June 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.
About Largo Resources
Largo is a Canadian domiciled company that has historically been solely committed to the
production and supply of high-quality vanadium products. The Company recently announced its
belief that the development and sale of vanadium based 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. Consequently, the Company is in the process of vertically integrating
its highly efficient vanadium production operations with its vanadium-based energy storage
technology to create a unique competitive advantage in the rapidly growing long duration energy
storage market. 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.
For more information on Largo and VPURE™, please visit www.largoresources.com and
www.largoVPURE.com.
For additional information on Largo Clean Energy, please visit www.largocleanenergy.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 extent of
capital and operating expenditures; the iron ore price environment; the timing and cost related
to the build out of the ilmenite plant; eventual production from the ilmenite plant; the ability to
sell ilmenite on a profitable basis and the extent and overall impact of the COVID-19 pandemic
in Brazil and globally. 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 and sell 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, and the adoption of VFRB 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 Resources Ltd.
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.