Largo Resources Announces Strong 2020 Financial Results Following Transformative Year; Focused on Continued Growth in 2021 with Robust Vanadium Market and New Largo Clean Energy Division
Largo Resources Announces Strong 2020 Financial Results Following
Transformative Year; Focused on Continued Growth in 2021 with Robust
Vanadium Market and New Largo Clean Energy Division
All amounts expressed are in U.S. dollars, denominated by “$”.
Q4 2020 Highlights
Cash operating costs excluding royalties2 of $2.56 per lb V2O5, a 2% improvement
over Q4 2019
Revenues of $42.3 million, an increase of 64% over Q4 2019; Revenues per lb sold2
of $5.12, a 25% increase over Q4 2019
Net income of $6.9 million vs. a net loss of $4.3 million in Q4 2019
Record quarterly V2O5 production of 3,340 tonnes (7.4 million lbs1), an 11%
increase over Q4 2019
Record quarterly sales of 3,746 tonnes of V2O5 equivalent, a 31% increase over Q4
2019
Full Year 2020 Highlights
Continued low-cost operations: Annual cash operating costs excluding royalties2 of
$2.56 per lb V2O5, 5% lower than 2020 cost guidance; 16% lower than 2019
Revenues of $120.0 million, a 14% increase over 2019; Revenues per lb sold2 of
$5.31, a 13% increase over 2019; This performance is to be recognized in the context
of an average European Fastmarkets Metal Bulletin (“FMB”) V2O5 price of $5.71
per lb in 2020, compared to $9.34 per lb 2019
Net income of $6.8 million and basic earnings per share9 of $0.12
Strong liquidity position maintained: Cash balance of $79.1 million exiting 2020 and
a net working capital surplus of $93.0 million, despite significantly reducing trade
payables in May 2020 through the cash settlement of trade payables relating to price
adjustments under the Company’s former off-take agreement
Record operational performance: Annual V2O5 production 11,825 tonnes (26.1
million lbs1) in 2020, a 12% increase over 2019; Within 2020 V2O5 production
guidance of 11,750 – 12,250 tonnes
2020 sales guidance exceeded: Total V2O5 equivalent sales of 10,254 tonnes in 2020,
exceeding high-end V2O5 sales guidance by 254 tonnes
Launch of Largo Clean Energy: The Company will focus on the deployment of its
VCHARGE± batteries for the fast-growing renewable energy sector
Strong focus on safe business continuity: Largo continues to prioritize the health
and safety of its workforce and extend support to local communities during the
global COVID-19 pandemic
Environmental, Social, and Governance (“ESG”) improvement program initiated:
Largo conducted an ESG gap analysis in 2020 which has led to several
recommendations. The Company is now working on improvement opportunities to
its overall ESG performance and disclosure
Other Significant Highlights
Debt-free: The Company completed the prepayment of its outstanding credit
facilities in February 2021
Share consolidation complete: The Company completed a consolidation of its issued
and outstanding common shares (“Common Shares”) at a ratio of one (1) post-
consolidation share for every ten (10) pre-consolidation shares on March 4, 2021
and began trading on a post-consolidated basis on March 8, 2021
Nasdaq Stock Market ("Nasdaq") application: The Company has submitted an
initial application to list its Common Shares on Nasdaq with the view of increasing
access to U.S. capital markets and enhancing overall shareholder value
Robust Vanadium Market
European FMB FeV prices are up by more than 34% since the beginning of 2021
European FMB V2O5 prices are up by more than 54% since the beginning of 2021
U.S. CRU FeV prices are up by more than 44% since the beginning of 2021
TORONTO--(BUSINESS WIRE)--March 17, 2021--Largo Resources Ltd. ("Largo" or the
"Company") (TSX: LGO) (OTCQX: LGORD) is pleased to announce its 2020 financial
results highlighted by revenues of $120.0 million on sales of 10,254 tonnes of vanadium
pentoxide (“V2O5”) equivalent. For 2020, the Company achieved a new annual V2O5 production
record of 11,825 tonnes and the lowest annual cash operating costs excluding royalties2 to date of
$2.56 per pound sold of V2O5.
2020 marked a transformative year for the Company as it successfully established and
implemented its internal sales division while navigating challenges presented by the global
COVID-19 pandemic. In 2020, the Company surpassed its annual V2O5 sales guidance by 254
tonnes and outperformed its annual cash cost guidance by 5%. These results continue to
highlight the Company’s strong focus on operational excellence and stringent cost management.
Paulo Misk, President and Chief Executive Officer for Largo, stated: “The Company exited 2020
with strong operational and financial momentum following new quarterly and annual production
records and a new quarterly sales record. I am pleased to report that we achieved the lowest
annual cash operating costs excluding royalties2 to date of $2.56 per lb V2O5 in 2020,
outperforming the Company’s annual cash cost guidance by 5%. The Company ended 2020 with
a cash balance of $79.1 million and following the full repayment of the Company’s outstanding
credit facilities in February 2021, is now debt-free. Our financial position remains strong and
the entire Largo team is focused on the execution and delivery of the Company’s strategic
growth projects with the goal of significantly increasing shareholder value. In Q2 2021, we
expect to release an updated technical report which will be aimed at upgrading mineral
resources to mineral reserves, expanding our minerals resources and will incorporating the
vanadium trioxide (“V2O3”) plant and titanium dioxide (“TiO2”) pigment projects.” He
continued: “Largo Clean Energy remains a particular focus as we work to commercialize our
superior VCHARGE± battery technology to capitalize on long-duration, clean energy storage
opportunities around the world. Additionally, robust vanadium demand and low inventories
continue to support price increases across all our main markets as evidenced by recent FMB
spot market trades recorded as high as $8.65 per lb V2O5.” He concluded: “We remain very
excited about the prospect of a Nasdaq listing as it is a major step forward in expanding our
shareholder base and access to capital markets in the United States.”
A summary of the operational and financial performance for the fourth quarter and full year 2020
is provided below:
Financial
Three months ended Year ended
December
31,
2020
December 31,
2019
December 31,
2020 December 31,
2019
Revenues $ 42,254 $ 25,808 $ 119,987 $ 105,107
Operating costs (31,604) (22,679) (88,390) (92,950)
Direct mine and
production costs (18,547)
(15,098) (48,929)
(63,156)
Net income (loss) before
tax 6,023
(2,526) 7,723
(23,494)
Income tax (expense)
recovery 282
(856) (139)
(864)
Deferred income
expense 576
(922) (823)
(2,612)
Net income (loss) 6,881 (4,304) 6,761 (26,970)
Basic earnings (loss) per
share 0.12
(0.08) 0.12
(0.50)
Diluted earnings (loss)
per share 0.11
(0.08) 0.11
(0.50)
Cash provided (used)
before non-cash
working capital items $ 7,539
$ 13,739 $ 12,065
$
21,627
Net cash (used in)
provided by operating
activities 4,741
9,350 (59,508)
104,597
Net cash provided by
(used in) financing
activities 2,589
9,250 30,232
(85,310)
Net cash (used in)
investing activities (5,070)
(5,697) (18,106)
(37,948)
Net change in cash 4,250 10,725 (48,354) (23,889)
As at
December 31,
2020
December 31,
2019
Cash $ 79,145 127,499
Working capital3 92,950 78,380
Operational
2020 2019
Q1 Q2 Q3 Q4 Full Year Q4 Full Year
Total Ore Mined (tonnes) 203,966 257,357 287,969 338,226 1,087,518 329,792 1,156,016
Ore Grade Mined - Effective
Grade (%)5
1.61 1.20 1.28 1.18 1.29
1.36
1.34
Effective Grade of Ore Milled
(%)5
1.59 1.29 1.26 1.28 1.34
1.57
1.50
Concentrate Produced (tonnes) 100,072 99,059 104,921 108,609 412,661 100,879 382,501
Grade of Concentrate (%) 3.36 3.20 3.32 3.24 3.28 3.28 3.29
Contained V2O5 (tonnes) 3,365 3,174 3,487 3,515 13,540 3,310 12,580
Crushing Recovery (%) 98.3 97.7 98.1 98.1 98.1 96.6 97.0
Milling Recovery (%) 98.4 94.7 96.5 95.4 96.2 96.0 96.9
Kiln Recovery (%) 88.3 91.7 92.5 91.2 91.0 89.7 89.1
Leaching Recovery (%) 96.6 99.1 99.7 98.5 98.6 96.7 96.8
Chemical Plant Recovery (%) 96.8 96.1 96.4 95.8 96.3 96.1 96.8
Global Recovery (%)4 79.9 80.8 84.2 80.6 81.5 77.3 78.5
V2O5 produced (tonnes) 2,831 2,562 3,092 3,340 11,825 3,011 10,577
V2O5 produced (equivalent
pounds1)
6,241,279 5,648,236 6,816,685 7,363,431 26,069,631
6,638,111
23,318,266
2020 Financial Results
The Company recorded net income of $6.8 million in 2020 compared to a net loss of $27.0
million in 2019. This movement was primarily due to an increase in revenues and a decrease in
operating costs, professional, consulting and management fees, share-based payments, and
finance costs.
During 2020, the Company recognized revenues of $120.0 million from sales of 10,254 tonnes
of V2O5 equivalent. This represents an increase of 14% from revenues of $105.1 million in 2019.
Revenues per pound sold2 were $5.31 in 2020 compared to $4.69 per pound sold in 2019,
representing an increase of 13%.
Operating costs of $88.4 million decreased by 5% in 2020 from $93.0 million in 2019. Operating
costs in 2020 include direct mine and production costs of $48.9 million (2019 – $63.2 million),
conversion costs of $2.0 million (2019 – $nil), product acquisition costs of $10.5 million (2019 –
$nil), royalties of $7.1 million (2019 – $5.9 million), distribution costs of $2.3 million (2019 –
$nil), inventory write-down of $0.2 million (2019 – $nil) and depreciation and amortization of
$17.5 million (2019 – $23.8 million).
Cash operating costs excluding royalties2 were $2.56 per lb in 2020, compared with $3.06 for
2019. The decrease seen in 2020 compared with 2019 is largely due to a decrease in direct mine
and production costs, which is primarily attributable to the lower costs recognized in Q2 2020
when the Company was ramping up its sales activities and cost reductions realized as a result of
the expansion completed in 2019. For 2020, total cash costs2 were $3.34 per pound sold.
For 2020, cash used in operating activities was $59.5 million, compared with cash provided by
operating activities of $104.6 million in 2019. This movement is primarily attributable to a
decreased in cash provided before working capital items of $9.6 million and a net decrease in
working capital items of $154.5 million, which is largely driven by movements in amounts
receivable and accounts payable and accrued liabilities. The change in amounts receivable is
primarily due to the increased payment terms with the Company’s customers in 2020 as
compared with 2019.
The Company’s cash position as of December 31, 2020 was $79.1 million. Subsequent to this
date, the Company prepaid in full all of its outstanding credit facilities in Brazil that were
scheduled to mature on March 12 and March 18, 2021, respectively. The Company completed
the prepayment of $24.8 million in aggregate principal amount between the dates of January 29
and February 3, 2021, plus accrued and unpaid interest and all exit fees which were paid at a
lower rate than the scheduled interest payable to the end of the maturity dates.
2020 Operational Results
2020 production of 11,825 tonnes of V2O5 marked a new annual record for the Company and
was within the 2020 guidance of 11,750 to 12,250 tonnes of V2O5. This represents an increase of
12% in annual production over 2019. Q4 2020 production of 3,340 tonnes of V2O5 also set a new
quarterly production record, being 11% higher than Q4 2019 and 8% higher than the previous
record of 3,092 tonnes in Q3 2020.
The Company achieved a new annual average global V2O5 recovery4 record of 81.5% 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.
In Q4 2020, 338,226 tonnes of ore were mined with an effective grade5 of 1.18% of V2O5. The
ore mined in Q4 2020 was 3% higher than in Q4 2019 and 17% higher than in Q3 2020. The
Company produced 108,609 tonnes of concentrate with an effective grade5 of 3.24%. The
contained V2O5 in the concentrate produced was 8% higher in 2020 than in 2019. The
operational performance in Q4 2020 remained in-line with the Company’s plans despite the
COVID-19 restrictions put in place.
Subsequent to 2020, production in January 2021 was 382 tonnes of V2O5, and production in
February 2021 was 769 tonnes of V2O5. The decrease in production levels seen is due to the
planned shutdown to implement upgrades to the kiln and improvements in the cooler. It is
anticipated that these upgrades and improvements will increase the nameplate production
capacity to 1,100 tonnes of V2O5 per month by the end of Q2 2021.
2020 Sales Guidance Exceeded – Successful Completion of 2021 Sales Contract Campaign
For 2020, the Company exceeded its annual sales guidance of 9,500 to 10,000 tonnes of V2O5
equivalent with total sales of 10,254 tonnes of V2O5 equivalent. In Q4 2020, the Company
achieved a record quarterly sales level of 3,746 tonnes of V2O5 equivalent sold. The Company
delivered both standard grade and high purity V2O5 as well as ferrovanadium (“FeV”) to
customers globally. Following the logistics constraints experienced in Q3 2020, delays in
deliveries to customers in Asia eased during Q4 2020. The Company continues to actively
manage any logistics challenges it faces to provide premium products and service to its
customers.
The Company successfully completed its sales contract campaign and has allocated a significant
proportion of its estimated monthly production in 2021 to these contracts. Geographically, these
contracts are well diversified with a well-balanced global footprint. The Company maintains a
strong focus on developing new markets for its high purity products, including chemical
applications and an expected gradual recovery of the aerospace industry beginning in Q2 2021.
With the launch of Largo Clean Energy, the Company also aims to grow its sales into the fast-
growing vanadium redox flow battery (“VRFB”) market.
Contributing to a Lower Carbon Future with Largo Clean Energy and its VCHARGE±
Battery Technology
In December 2020, the Company launched Largo Clean Energy to provide safe, long-duration
VRFBs to the fast-growing global renewable energy storage market. Largo remains focused on
commercializing, producing, and deploying its superior VCHARGE± battery technology to
capitalize on opportunities around the world. The Company is already in active discussions with
end-users to sell and deploy its first VCHARGE± battery and will keep the market updated on its
progress.
The VRFB’s technical and economic advantages are well-known and Largo plans to unlock the
technology’s potential by providing a secure and reliable supply of high purity vanadium from its
world-class Maracás Menchen Mine. Largo’s high purity VPURE+™ products have been
previously tested in the manufacturing of electrolyte for VCHARGE± technology, demonstrating
outstanding results.
ESG Improvement Program
The Company prides itself on a proven history of community relations, stakeholder engagement
and excellent social and environmental stewardship. On July 20, 2020, the Company announced
the release of its 2019 sustainability report highlighted by improved performance metrics and
new reporting standards. Largo’s sustainability reporting is now guided in part by the
Sustainability Accounting Standards Board (SASB) and closely follows Global Reporting
Initiative (GRI) benchmarks.
During 2020, Largo conducted an initial assessment of climate-related risks and opportunities.
The assessment took into consideration the potential impacts on all of the Company’s
stakeholders. By better understanding these issues, the Company can explore the implementation
of necessary mitigations and at the right time, explore new opportunities related to the
enhancement of its overall ESG performance and disclosures. In addition to the climate change
assessment, the Company conducted an ESG gap analysis in November 2020. This has led to
several recommendations and the Company is now working on improvements to its overall ESG
performance and disclosure. The Company expects to release its 2020 ESG report in late Q2
2021.
Vanadium Markets Outlook
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.
European FMB FeV prices are up by more than 34% since the beginning of 2021
European FMB V2O5 prices are up more than 54% since the beginning of 2021
U.S. CRU FeV prices are up by more than 44% since the beginning of 2021
The Company also expects that growing interest from the long-duration battery sector will
continue to drive future vanadium demand growth in 2021 and beyond. Global energy storage
deployment is expected to reach 1,095 GW/2,850 Gigawatt hours (“GWh”)6 in 2040 and Largo
believes that long-duration VRFBs will play a critical role in addressing this significant demand.
It is estimated that long-duration energy storage (4 to 12+ hours) market growth will reach $16
billion worldwide7 by 2025.
Share Consolidation and Nasdaq Application
On March 1, 2021, the Company announced that the consolidation of its Common Shares on the
basis of up to one (1) post-consolidation Common Share for every ten (10) pre-consolidation
Common Shares (the "Consolidation") was approved at the Special Meeting of Shareholders
(the “Meeting”) held on the same date. Subsequently, the Company’s Board of Directors
determined to proceed with a consolidation ratio of one (1) post-consolidation share for every ten
(10) pre-consolidation shares in accordance with the parameters authorized by the Company's
shareholders at the Meeting. The Common Shares were consolidated effective on March 4, 2021
and commenced trading on the Toronto Stock Exchange (the “TSX”) on a post-consolidation
basis at the open of trading on March 8, 2021.
The Company also announced that it has submitted an initial application to list its Common
Shares on the Nasdaq with the view of increasing access to U.S. capital markets and enhancing
overall shareholder value. The listing of the Company's Common Shares on Nasdaq remains
subject to the review and approval of the listing application and the satisfaction of all applicable
listing and regulatory requirements, including the filing of a registration statement with and
declaration of effectiveness by the United States Securities and Exchange Commission.
Conference Call
Largo Resources management will host a conference call on Thursday, March 18, at 3:00 p.m.
ET, to discuss the Company’s annual operational and financial results for 2020.
Conference Call Details:
Date: Thursday, March 18, 2021
Time: 3:00 p.m. ET
Dial-in
Number:
Local / International: +1 (416) 764-8688
North American Toll Free: (888) 390-0546
Brazil Toll Free: 08007621359
Audio Only
Conference
Line
/ Q&A Portal:
https://produceredition.webcasts.com/starthere.jsp?ei=1438431&tp_key=39b19e657c
Q&A Details: The Company requests that all questions be submitted through the online portal link provided above.
The ability to submit questions over the phone is not available during this call.
Conference
ID:
00739969
Replay
Number:
Local / International: + 1 (416) 764-8677
North American Toll Free: (888) 390-0541
Replay Passcode: 739969 #
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/investors
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 annual
consolidated financial statements for the years ended December 31, 2020 and 2019 and its
management's discussion and analysis for the year ended December 31, 2020 which are available
on our website at www.largoresources.com and on SEDAR.
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.