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 lbs 3 ) 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
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.
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.
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”.
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