Largo Resources Announces Solid First Quarter 2021 Financial Results with Net Income of $4.1 Million; Strategic Developments of Clean Energy Division Continue
Largo Resources Announces Solid First Quarter 2021 Financial Results with
Net Income of $4.1 Million; Strategic Developments of Clean Energy Division
Continue
All amounts expressed are in U.S. dollars, denominated by “$”.
Q1 2021 Highlights
• Net income of $4.1 million and basic earnings per share of $0.07
• Cash operating costs excluding royalties1 of $2.87 per lb V2O5 vs. $2.66 per lb in Q1
2020
• Revenues of $39.8 million, 4% lower than Q1 2020; Revenues per lb sold2 of $6.49,
an 8% increase over Q1 2020
• Cash balance of $48.7 million exiting Q1 2021
• Production of 1,986 tonnes (4.4 million lbs3) of V2O5 vs. 2,831 tonnes in Q1 2020;
Lower production in Q1 2021 was largely due to the planned shutdown related to
the Company’s nameplate capacity increase
• Total V2O5 equivalent sales of 2,783 tonnes, a 12% decrease over Q1 2020 as a result
of lower production during Q1 2021
• Strong vanadium demand in all of the Company’s key geographies in Q1 2021;
Main indexes in Europe and U.S. increased approximately 30% to 50% on the back
of solid demand and low inventory levels
• Q1 2021 results conference call: Thursday, May 13th, 2021 at 11:00 a.m. ET
Largo Clean Energy Strategic Developments
• Secured 1.4 gigawatt hour (“GWh”) nameplate capacity stack manufacturing
facility and product development center: The Company secured a location for its
product development and stack manufacturing center in Massachusetts, U.S. This
location will act as the global headquarters of the Company’s clean energy division
• Electrolyte, electrolyte tank and stack container manufacturing center approved:
The Company approved a location for its electrolyte production and manufacturing
of its containerized VCHARGE± vanadium redox flow battery (“VRFB”) systems in
New Hampshire, U.S.
• Strengthening of the executive team: The Company announced the appointment of
energy executive Salvatore Minopoli as Vice President of Operations of Largo Clean
Energy to focus on the overall commercial deployment of its VCHARGE± system.
Hiring of additional personnel to support the achievement of anticipated timelines
and targets continues
• Secured the advisory services of energy industry experts: The Company entered
into an agreement for the strategic advisory services of Dr. Jeffrey Chamberlain
and Dr. Bart Riley to provide advice to the Company’s board of directors on
accelerating the development of its clean energy division
Other Significant Highlights
• Nasdaq Stock Market LLC (“Nasdaq”) listing: The Company’s common shares
commenced trading on the Nasdaq at the open of market trading on April 19, 2021
under the symbol “LGO”
• Appointment of Ian Robertson to the Company’s Board of Directors: Founder and
former CEO of Algonquin Power & Utilities Corp.
• First iron ore sales contract: The Company finalized a sales contract for 14,000
tonnes of iron ore to a leading steel producer on March 12, 2021. Transport of the
contracted material has been completed, with full delivery and recognition of the
sale in April 2021
• Construction of a new ilmenite concentration plant in 2022: The Company’s Board
approved a $25 million ilmenite concentration plant expected to begin production in
early 2023 with a capacity of approximately 150,000 tonnes per annum to supply
this high demand market
• Working capital financing facility: The Company secured and drew down a $15.0
million working capital financing facility with a bank in Brazil. This facility is due
to be repaid as a lump sum in one year together with accrued interest at a rate of
2.28% per annum
TORONTO--(BUSINESS WIRE)--May 12, 2021--Largo Resources Ltd. ("Largo" or the
"Company") (TSX: LGO) (NASDAQ: LGO) is pleased to announce its first quarter 2021
financial results highlighted by revenues of $39.8 million from sales of 2,783 tonnes of
vanadium pentoxide (“V2O5”) equivalent.
Paulo Misk, President and Chief Executive Officer for Largo, stated: “Largo delivered solid first
quarter 2021 financial results with higher commodity prices contributing to revenues of $39.8
million and an 8% increase in revenues per pound sold. Despite production and sales impacts
related to the shutdown associated with our nameplate capacity increase in Q1 2021, we expect
to reap the benefits of this increase by the end of Q2 2021. Looking ahead, we remain focused on
delivering profitable growth in 2021 supported by a healthy balance sheet and favorable
vanadium market fundamentals. Further, our first iron ore sales contract and approval of the
ilmenite concentration plant are expected to increase and diversify the Company’s revenue
streams.” He continued: “I am pleased to report that the Company finalized the manufacturing
strategy for its clean energy division in Q1 2021 and began to establish the supply chain
required to deliver on its targeted deployment timelines and cost structure going forward. We
continue to view our entrance into the long-duration energy sector as a transformational
opportunity to create significant value for the Company, supported by increasing sector demand
and global carbon reduction targets.” He concluded: “Looking ahead, we also remain fully
committed to protecting the health and safety of our people and continue to maintain the
necessary protocols to help mitigate the spread of COVID-19 at our operations and throughout
our local communities.”
A summary of the Company’s operational and financial performance for the first quarter 2021 is
provided below:
Financial
Three months ended
March
31,
2021
March 31,
2020
Revenues $ 39,801 $ 41,547
Operating costs (28,172) (26,248)
Direct mine and production costs (15,544) (17,494)
Net income before tax 4,447 3,881
Income tax expense (321) -
Deferred income tax recovery 18 462
Net income (loss) 4,144 4,343
Basic earnings (loss) per share 0.07 0.08
Diluted earnings (loss) per share 0.07 0.07
Cash provided before (used in) non -cash working capital
items $ 12,731
$ (1,322)
Net cash provided by (used in) operating activities 1,711 (982)
Net cash provided by (used in) financing activities (22,420) 26,740
Net cash (used in) investing activities (9,075) (3,380)
Net change in cash (30,452) 17,795
As at
March
31,
2021
December 31,
2020
Cash $ 48,693
79,145 16,049
Working capital7 $ 97,641
92,950
Maracás Menchen Mine Production and Sales
Q1 2021 Q1 2020
Total Ore Mined (tonnes) 263,966 203,966
Ore Grade Mined - Effective Grade (%)4 1.22 1.61
Effective Grade of Ore Milled (%) 4 1.26 1.59
Concentrate Produced (tonnes) 100,467 100,072
Grade of Concentrate (%) 3.21 3.36
Contained V2O5 (tonnes) 3,223 3,365
Crushing Recovery (%) 96.8 98.3
Milling Recovery (%) 97.1 98.4
Kiln Recovery (%) 88.9 88.3
Leaching Recovery (%) 97.1 96.6
Chemical Plant Recovery (%) 95.3 96.8
Global Recovery (%)5 77.4 79.9
V2O5 produced (Flake + Powder) (tonnes) 1,986 2,831
V2O5 produced (equivalent pounds)3 4,378,375 6,241,279
V2O5 equivalent sold (tonnes) 2,783 3,170
Cash operating costs excluding royalties 1 $/lb 2.87 2.66
Total cash costs1 $/lb 4.07 2.87
Revenues per pound2 $/lb 6.49 6.00
Q1 2021 Financial Results
The Company recorded net income of $4.1 million and basic earnings per share of $0.07 in Q1
2021, compared with net income of $4.3 million in Q1 2020.
During Q1 2021, the Company recognized revenues of $39.8 million from sales of 2,783 tonnes
of V 2O 5 equivalent (Q1 2020 – 3,170 tonnes). This represents a 4% decrease in revenues over
Q1 2020 ($41.9 million). Revenues per pound sold 2 were $6.49 in Q1 2021 compared to $6.00
per pound sold in Q1 2020, representing an increase of 8%.
Operating costs of $28.2 million in Q1 2021 (Q1 2020 – $26.2 million) include direct mine and
production costs of $15.5 million (Q1 2020 – $17.5 million), conversion costs of $2.2 million
(Q1 2020 – $nil), product acquisition costs of $2.5 million (Q1 2020 – $nil), royalties of $1.5
million (Q1 2020 – $2.3 million), distribution costs of $1.2 million (Q1 2020 – $nil) and
depreciation and amortization of $5.3 million (Q1 2020 – $6.4 million). The decrease in direct
mine and production costs is primarily attributable to the decrease in V2O5 equivalent sold in Q1
2021. 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 Q1 2020, the Company only sold V2O5 and was not
responsible for shipping products to its customer at that time.
Cash operating costs excluding royalties1 were $2.87 per lb in Q1 2021, compared with $2.66 for
Q1 2020. The increase seen in Q1 2021 compared with Q1 2020 is largely due to a decrease in
produced V2O5 equivalent sold. This is a result of the planned shutdown during Q1 2021. Total
cash costs1 exclude royalties and include the Company’s total professional, consulting and
management fees and other general and administrative expenses and is calculated on total
pounds of V2O5 sold. For Q1 2021, total cash costs1 were $4.07.
Professional, consulting and management fees were $3.6 million in Q1 2021, compared with
$1.7 million in Q1 2020. The increase is primarily attributable to costs incurred in Q1 2021 in
connection with Largo Clean Energy and the Company’s sales & trading segment that were not
operational in Q1 2020. In addition, the Company’s corporate segment incurred legal and
regulatory costs in Q1 2021 in relation to the Nasdaq listing process.
The foreign exchange loss in Q1 2021 decreased from Q1 2020 by 79% to $1.8 million. This is
primarily attributable to a strengthening of the U.S. dollar against the Brazilian real by
approximately 10% since December 31, 2020 on U.S. dollar denominated cash and liabilities in
Brazil and a strengthening of the Canadian dollar against the U.S. dollar by approximately 1%
since December 31, 2020 on Canadian dollar denominated assets.
Cash provided by operating activities of $1.7 million in Q1 2021 is an increase from cash used in
operating activities of $1.0 million in Q1 2020. This is primarily due to an increase in cash
provided before working capital items of $14.0 million, partially offset by a net decrease in
working capital items of $11.0 million. The net movement in working capital items is largely
driven by increases in amounts receivable and inventory balances and the increased settlement of
accounts payable and accrued liabilities during Q1 2021.
Q1 2021 Operational Results
Total production from the Maracás Menchen Mine was 1,986 tonnes of V2O5, representing a
decrease of 30% over Q1 2020. This reduction is primarily attributable to the planned shutdown
to implement upgrades to the kiln and improvements in the cooler in January 2021. The
shutdown lasted for 20 days, with a further four months required for the commissioning and
ramp up of the new equipment. Following this, the nameplate production capacity will be
increased by 10% to 1,100 tonnes of V2O5 per month. Subsequent to Q1 2021, production in
April 2021 was 1,092 tonnes of V2O5.
The Company’s Q1 2021 global recovery5 of 77.4% was lower than the 79.9% seen in Q1 2020.
The main impacts were related the shutdown completed in January 2021 and the subsequent
commissioning and ramp up activities in February and March. These activities are expected to be
concluded by the end of Q2 2021, when the global recovery5 is expected to return to the levels
seen in 2020.
In Q1 2021, 263,966 tonnes of ore were mined with an effective grade4 of 1.22% of V2O5. The
ore mined in Q1 2021 was 29% higher than in Q1 2020. The Company produced 100,467 tonnes
of concentrate with an effective grade4 of 3.21%. The operational performance in Q1 2021
remained in-line with the Company’s plans despite the COVID-19 restrictions put in place.
Conference Call
Largo Resources management will host a conference call on Thursday, May 13, at 11:00 a.m.
ET, to discuss the Company’s first quarter 2021 results.
Conference Call Details:
Date: Thursday, May 13, 2021
Time: 11:00 a.m. ET
Dial-in
Number: Local / International: +1 (416) 764 -8688
North American Toll Free: (888) 390 -0546
Brazil Toll Free: 08007621359
Q&A Portal /
Audio Only https://produceredition.webcasts.com/starthere.jsp?ei=1457198&tp_key=89b980227a
Conference
Line:
Q&A Details: The Company requests all questions be submitted through the online portal link provided above.
The ability to submit questions over the phone will not be available during this call.
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.largoresour ces.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 months ended March
31, 2021 and 2020 and its management's discussion and analysis for the three ended March 31,
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 Resources is an industry preferred, vertically integrated vanadium company. It services
multiple vanadium market applications through the supply of its unrivaled VPURE™ and
VPURE+™ products, 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 its world-class VCHARGE± vanadium redox
flow battery technology. The Company's common shares are listed on the Toronto Stock
Exchange and on the Nasdaq Stock Market 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.
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.
The following table provides a reconciliation of this measure per pound sold to revenues as per
the Q1 2021 unaudited condensed interim consolidated financial statements.
Three months ended
March 31,
2021
March 31,
2020
Revenuesi $ 39,801 $ 41,909
V2O5 equivalent sold (000s lb) 6,135 6,989
Revenues per pound sold ($/lb) $ 6.49 $ 6.00
i. As per note 20 of the Company’s Q1 2021 unaudited condensed interim consolidated
financial statements.
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.
Cash operating costs includes mine site operating costs such as mining costs, plant and
maintenance costs, sustainability costs, mine and plant administration costs, royalties and sales,
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 conversion costs,
product acquisition costs, distribution 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. This measure differs to the new total cash costs
non-GAAP measure the Company uses to measure its overall performance (see later in this
section).
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.