Largo Resources Announces Record Quarterly and Full Year 2020 Operational Results and Exceeds 2020 Sales Guidance; Provides 2021 Guidance
Largo Resources Announces Record Quarterly and Full Year 2020
Operational Results and Exceeds 2020 Sales Guidance; Provides 2021
Guidance
All amounts expressed are in U.S. dollars, denominated by “$”
Q4 and FY 2020 Production and Sales Highlights:
Record quarterly V2O5 production of 3,340 tonnes (7.4 million lbs1) in Q4 2020, an
11% increase over Q4 2019
Record annual V2O5 production of 11,825 tonnes (26.1 million lbs1) in 2020, an
increase of 12% over 2019; Within 2020 V2O5 production guidance of 11,750 –
12,250 tonnes
Quarterly global V2O5 recovery4 of 80.6% in Q4 2020, a 4% increase over Q4 2019
Record annual global V2O5 recovery4 of 81.4% in 2020; a 4% increase over 2019
2020 sales guidance exceeded: Total V2O5 equivalent sales of 10,260 tonnes in 2020,
exceeding high-end V2O5 sales guidance by 260 tonnes
Record quarterly sales of 3,751 tonnes of V2O5 equivalent in Q4 2020, a 31%
increase over Q4 2019
2021 Guidance
V2O5 equivalent production of 12,000 – 12,500 tonnes; V2O5 equivalent sales of
12,250 – 12,750 tonnes; Cash operating cost excluding royalties2 of $3.10 – 3.30/lb
V2O5 sold; Total cash costs of $3.50 – 3.70/lb V2O5 sold; Sustaining capital
expenditures6 of $8.0 – 10.0 million; Vanadium trioxide (“V2O3”) processing plant
expenditures of $7.0 – 9.0 million
Planned shutdown in January 2021: Implementation of kiln feed rate improvements
to increase nameplate production capacity to 1,100 tonnes of V2O5 per month; Kiln
and cooler refractory replacements; Planned preventative maintenance program
The Company will strongly focus on the advancement of Largo Clean Energy and
its VCHARGE± battery technology for the fast-growing renewable energy storage
sector
TORONTO--(BUSINESS WIRE)--January 20, 2021--Largo Resources Ltd. ("Largo" or the
"Company") (TSX: LGO) (OTCQX: LGORF) is very pleased to announce that it has achieved
record quarterly and annual 2020 operational results at the Maracás Menchen Mine and has
exceeded its 2020 annual sales guidance by 260 tonnes. Building upon the operational and sales
accomplishments in 2020, management is confident in its ability to deliver on its production,
sales and cost guidance in 2021. The Company is also heavily focused on the strategic
development of Largo Clean Energy in 2021 to provide safe, grid-scale VRFBs to fast-growing
renewable energy storage sector.
Paulo Misk, President and Chief Executive Officer of Largo, stated: “Operations at the Maracás
Menchen Mine had an exceptionally strong finish to the year resulting in new quarterly and
annual production records. I am also delighted to report that the Company has exceeded its
2020 sales guidance by 260 tonnes, with Q4 2020 V2O5 equivalent sales of 3,751 tonnes
representing a new quarterly sales record for the Company. 2020 was transformational and
demanding year for Largo; one in which the Company implemented its new sales and trading
operations, started construction of its V2O3 plant and launched Largo Clean Energy in the midst
of a global pandemic. The entire Largo team would like to take this opportunity to extend our
sympathies to everyone who has been affected by this virus.” He continued: “I remain confident
that the operational and sales processes we instituted in 2020 have set a solid foundation for
continued growth in 2021. We are pleased to report that we expect to increase Largo’s annual
V2O5 production from 11,825 tonnes in 2020 to between 12,000 – 12,500 tonnes of V2O5
equivalent in 2021. We also expect to increase our V2O5 equivalent sales to 12,250 – 12,750
tonnes in 2021, representing an increase of 22% over 2020. Further, we expect to maintain our
low-cost profile in 2021 with cash operating costs excluding royalties2 and total cash costs2
expected to be between $3.10 to $3.30 and $3.50 to 3.70 per pound V2O5 sold, respectively.
Lastly, we continue to advance the Company’s robust project pipeline with the goal of
significantly increasing shareholder value at Largo. We plan to release an updated technical
report in late Q1 2021 to upgrade and expand known resources, and incorporate the V2O3 plant
and titanium dioxide (“TiO2”) pigment projects.”
He concluded: “In the first weeks of 2021, vanadium prices have increased in all main markets
on the back of solid demand, low inventories and renewed optimism in the overall metals and
industrial complex. We also believe that growing interest from the battery sector will continue to
drive future vanadium demand growth in 2021 and beyond. With the addition of Largo Clean
Energy in December 2020, we are working to develop our clean energy storage business in 2021
to provide safe and sustainable vanadium redox flow battery (“VRFB”) systems to the fast-
growing renewable energy market. Global energy storage deployment is expected to reach 1,095
GW/2,850 GWh3 in 2040 and we believe long-duration VRFBs will play a critical role in
addressing this significant demand. We remain very excited for the year ahead as the Company
continues the necessary work to become a key player in the renewable energy storage industry.”
Contributing to a Lower Carbon Future with the VCHARGE± Battery Technology
In December 2020, the Company launched Largo Clean Energy to provide safe, long-duration
VRFBs for the fast-growing global renewable energy storage market. The Company believes that
the renewable energy storage market has reached an inflection point and grid-scale VRFBs are
expected to be a strategic solution for this growing sector. The VRFB’s strengths lie within its
longevity, lack of degradation in performance over time (even after many thousands of cycles),
non-flammability, deep discharge capability and key sustainability characteristics such as the
ability to re-use the vanadium electrolyte at the end of the battery’s life. These attributes make
the VRFB ideally suited for industrial and commercial microgrids, renewables integration, EV
charging and grid applications. The Company believes that its acquisition of patented VRFB
electrolyte processing technology along with the utilization of industry-leading flow battery
stack design and supply of Largo’s reliable, high purity vanadium sets Largo Clean Energy apart
from other competing battery technologies. The Company’s team of industry experts will
continue the advancement of Largo Clean Energy and its superior VCHARGE± battery
technology to begin capitalizing on new renewable energy storage opportunities around the
world.
A summary of Q4 and FY 2020 production results from the Maracás Menchen Mine is presented
below:
2020 2019
Q4 Full Year Q4 Full Year
Total Ore Mined (tonnes) 338,226 1,087,518 329,792 1,156,016
Ore Grade Mined - Effective Grade (%)5 1.18 1.29 1.36 1.34
Effective Grade of Ore Milled (%)5 1.28 1.34 1.57 1.50
Concentrate Produced (tonnes) 108,609 412,661 100,879 382,501
Grade of Concentrate (%) 3.24 3.28 3.28 3.29
Contained V2O5 (tonnes) 3,515 13,540 3,310 12,580
Crushing Recovery (%) 98.1 98.1 96.6 97.0
Milling Recovery (%) 95.4 96.2 96.0 96.9
Kiln Recovery (%) 91.2 91.0 89.7 89.1
Leaching Recovery (%) 98.5 98.6 96.7 96.8
Chemical Plant Recovery (%) 95.8 96.3 96.1 96.8
Global Recovery (%)4 80.6 81.4 77.3 78.5
V2O5 produced (tonnes) 3,340 11,825 3,011 10,577
V2O5 produced (equivalent pounds1) 7,363,431 26,069,631 6,638,111 23,318,266
The Company achieved a new annual production record in 2020 with total V2O5 production of
11,825 tonnes, representing an increase of 12% over 2019. Total V2O5 production of 3,340
tonnes in Q4 2020 represented a new quarterly production record for the Company, being 11%
higher than Q4 2019 and 8% higher than the previous record of 3,092 tonnes set in Q3 2020.
Operational stability and an increase in the global recovery rate4 drove our production
performance in Q4 and over 2020 as a whole.
The Company achieved a new annual average global V2O5 recovery4 record of 81.4% in 2020
which represents a 4% increase over the 78.5% averaged in 2019. In Q4 2020, global recoveries4
averaged 80.6% which compares favourably to 77.3% averaged in Q4 2019. The increase in
global recoveries4 over 2020 is primarily due to the completion of continuous improvement
projects in the plant focused on improving recoveries. This was highlighted by consecutive
quarter-over-quarter global recovery rate4 increases in 2020, with a new quarterly average global
recovery record4 of 84.2% being achieved in Q3 2020 (80.8% in Q2 2020 and 79.9% in Q1
2020).
The Company mined 1,087,518 tonnes of ore with an effective V2O5 grade5 of 1.29% in 2020
compared to 1,156,016 tonnes with an effective V2O5 grade5 of 1.34% in 2019. In Q4 2020,
338,226 tonnes of ore with an effective V2O5 grade5 of 1.18% were mined compared to 329,792
tonnes with an effective V2O5 grade5 of 1.36% in Q4 2019. The Company also produced 412,661
tonnes of concentrate ore with an average V2O5 grade of 3.28% in 2020 compared to 382,501
tonnes produced in 2019 with a grade of 3.29%. In Q4 2020, 108,609 tonnes of concentrate ore
was produced with an average V2O5 grade of 3.24% compared to 100,879 tonnes produced in Q4
2019 with a grade of 3.28%. The decrease in total ore mined in 2020 when compared to 2019 is
largely due to operational adjustments to limit the mine site contractor workforce during the
COVID-19 pandemic as well as the usage of weathered ore stockpiles in first half of 2020. The
operational performance in 2020 remained in-line with the Company's plans despite the COVID-
19 restrictions put in place.
2021 Production, Cost and CAPEX Guidance
2021 Guidance
V2O5 equivalent production guidance (tonnes) 12,000 – 12,500
V2O5 equivalent sales (tonnes) 12,250 – 12,750
Cash operating cost guidance excluding royalties ($/lb sold)2 $3.10 – 3.30
Total cash costs ($/lb sold)2 $3.50 – 3.70
Sustaining capital expenditures6 $8.0 – 10.0 million
V2O3 processing plant expenditures $7.0 – 9.0 million
The Company began a planned shutdown on January 11, 2021 to replace the kiln and cooler
refractories which will result in approximately 19 days of down time. As a result of this
shutdown, the Company anticipates lower production during the month of January and slightly
higher cash operating costs2 in Q1 2021. The Company will utilize this downtime to perform
feed rate improvements on the kiln which is expected to increase the nameplate production
capacity to 1,100 tonnes of V2O5 per month from 1,000. Following the planned ramp period, the
Company expects to reach the full operational run rate of 1,100 tonnes of V2O5 per month by Q2
2021. The Company will also conduct a preventative maintenance program downstream of the
kiln and cooler during this time.
The Company expects to complete the construction and subsequent ramp up and commissioning
of its V2O3 plant in Q3 2021. Total capital expenditures are expected to be in the range of
approximately $10.0 to 11.0 million, with the remaining $7.0 - 9.0 being incurred in H1 2021.
One of the main applications of V2O3 is vanadium electrolyte, which is required in the
manufacturing of VRFB systems. The Company expects its V2O3 nameplate production capacity
will be 14 tonnes per day (or 420 tonnes per month), an increase of 100% from the 7 tonnes per
day as originally planned.
The Company is continuing to monitor the evolving impacts of the COVID-19 pandemic and
will take all possible actions to help minimize the impact on the Company and its people. The
Company’s 2021 guidance is presented on a “business as usual” basis.
About Largo Resources
Largo Resources is an industry preferred producer and supplier of high-quality vanadium. Largo
can service multiple vanadium market applications through the supply of its unrivaled VPURE™
and VPURE+™ products, which are sourced from one of the world’s highest-grade vanadium
deposits at the Company’s Maracás Menchen Mine located in Brazil. Largo is also focused on
the advancement of renewable energy storage solutions through Largo Clean Energy and its
world-class VCHARGE± vanadium redox flow battery technology. The Company's common
shares are listed on the Toronto Stock Exchange under the symbol "LGO".
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.
Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility
for the adequacy or accuracy of this press release.
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 application 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; 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 SEDAR 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.
Future Oriented Financial Information:
Any financial outlook or future oriented financial information contained in this press release, as
such term is defined by applicable securities laws, has been approved by management of Largo
as of the date hereof and is provided for the purpose of providing information about
management's current expectations and plans relating to the Company's 2021 production
guidance. Readers are cautioned that any such future oriented financial information contained
herein should not be used for purposes other than those for which it is disclosed herein. The
Company and its management believe that the prospective financial information as to the
Company's anticipated 2021 production guidance has been prepared on a reasonable basis,
reflecting management's best estimates and judgments. However, because this information is
highly subjective, it should not be relied on as necessarily indicative of future results.
Non-GAAP Measures
The Company uses certain non-GAAP financial performance measures in its press release and
MD&A, which are described in the following section.
Cash Operating Costs
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. Cash operating costs includes mine site operating costs such
as mining costs, plant and maintenance costs, sustainability costs, mine and plant administration
costs, royalties, general and administrative costs (all for the mine properties segment), but
excludes depreciation and amortization, share-based payments, foreign exchange gains or
losses, commissions, reclamation, capital expenditures and exploration and evaluation costs.
Operating costs not attributable to the mine properties segment are also excluded, including
product acquisition costs and inventory write-downs. These costs are then divided by the pounds
of vanadium sold that were produced by the Maracás Menchen Mine to arrive at the cash
operating costs per pound. Prior to 2020, these costs were divided by the pounds of production
from the Maracás Menchen Mine, rather than pounds sold. These measures, along with
revenues, are 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. These cash operating costs
measures do not have any standardized meaning prescribed by IFRS and differ from measures
determined in accordance with IFRS. 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. These measures are not necessarily indicative
of net earnings or cash flow from operating activities as determined under IFRS.
Total Cash Costs
The Company’s press release refers to total cash costs, 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 Company is performing at
producing and selling vanadium products compared to plan and prior periods, and also to
assess its overall effectiveness and efficiency. Total cash costs are a non-GAAP performance
measure that includes all operating costs, sales and distribution costs and the Company’s total
professional, consulting and management fees and other general and administrative expenses.
Total cash costs exclude royalties, depreciation and amortization, share-based payments, foreign
exchange gains or losses, commissions, reclamation costs, exploration and evaluation costs and
capital expenditures. These costs are then divided by the total pounds of vanadium sold by the
Company to arrive at total cash costs. This measure differs from cash operating costs per pound
in that it includes all operating costs, sales and distribution costs, professional, consulting and
management fees and other general and administrative expenses, rather than just those from the
Mine properties segment, and is calculated on total V2O5 equivalent pounds sold rather than
pounds sold that were produced by the Maracás Menchen Mine. The Company believes this will
be a more accurate reflection of its all-in unit costs. This total cash costs 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.
1 Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
2 The cash operating costs per pound produced and cash operating costs excluding royalties per
pound produced reported are on a non-GAAP basis. Refer to the “Non-GAAP Measures”
section of this press release.
3 BloombergNEF
4 Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching
recovery and chemical plant recovery.
5 Effective grade represents the percentage of magnetic material mined multiplied by the
percentage of V2O5 in the magnetic concentrate.
6 Includes capitalized waste stripping costs.