Largo Resources Announces Second Quarter 2020 Results Highlighted by Continued Low-cost Operations; Overall Sales and Trading Performance In-Line with Expectations
Production of 2,562 tonnes (5.6 million pounds1) of V2O5, an increase of 2.0% over Q2 2019
Two consecutive months of V2O5 production above nameplate capacity: 1,052 tonnes in May 2020 and 1,030 tonnes in June 2020
Global V2O5 recovery rate2of 80.8%; Second quarter of strong global recoveries in 2020
Solid financial position: Cash at June 30, 2020 totaled $78.2 million
Record low cash operating costs excluding royalties3of $1.89 per lb of V2O5 ,44% decrease over Q2 2019 (aftertax credit benefits of $2.2 million)
Revenues of $8.4 million (net of the re-measurement of trade receivables / payables of $2.4 million on vanadium sales from contracts with customers of $10.8 million)
Net loss of $7.0 million and a loss per share of $0.01
Company maintains its 2020 sales, cost and production guidance
Other Significant Highlights
2019 Sustainability Report released: Including improved performance metrics and new reporting standards
Nameplate capacity increase by 10%: Planned kiln upgrades and cooler maintenance scheduled for Q4 2020 with a capex of $1.3 million
2020 drilling program underway following delays caused by COVID-19
TORONTO, Aug. 13, 2020 /CNW/ – Largo Resources Ltd. (“Largo” or the “Company“) (TSX: LGO) (OTCQX: LGORF) today announces its second quarter 2020 financial and operating results with revenues of $8.4 million from vanadium pentoxide (“V2O5“) equivalent sales of 1,018 tonnes. Production from the Maracás Menchen Mine in Q2 2020 was 2,562 tonnes (5.6 million lbs1) of V2O5 produced at an average global recovery rate4 of 80.8%.
Paulo Misk, President and Chief Executive Officer for Largo, stated: “The Company’s balance sheet and financial position remains solid exiting Q2 2020. Operations performed well during the quarter following our preventative maintenance program and the Company’s cash balance at the end of Q2 2020 was$78.2 million. Although profitability was impacted by lower recognized sales during the quarter, the Company’s working capital investment was necessary to fill our sales pipeline and build strategic global V2O5 stockpiles in order to fulfil customer demand going forward. Also, despite some minor delays caused by the COVID-19 pandemic, our sales and trading performance remains in-line with expectations. We continue to maintain the Company’s 2020 sales guidance of 9,500 to 10,000 tonnes of V2O5 as we realize the economic benefits associated with our commercial independence. Largo has demonstrated substantially lower unit costs versus Q2 2019, despite the fact that such costs now include sales and distribution costs (while under the previous off-take agreement, the Company’s sales and marketing commissions were netted off against revenue).”
$6.95 per lb during Q2 2020 as a result of increased steel sector demand. We continue to receive inquires for our products from end users and remain very optimistic about expected future demand growth as a result of recently announced stimulus programs, globally. Additionally, despite experiencing a period of low demand within the aerospace industry, we continue to prioritize increasing our high purity vanadium customer portfolio, particularly following the completion of our vanadium trioxide plant next year. Our focus remains on capturing these high value sales when demand returns to normalized levels as well as additional sales opportunities in new jurisdictions as the preferred producer and supplier of high purity vanadium.”
March 2020, our team has supported local seamstress businesses who have produced over 230,000 protective masks which have aided in the fight against the spread of COVID-19 in Maracás. Going forward, we continue to prioritize the health and safety of our workforce and extend our support to our local communities as we proactively manage the circumstances related to the global COVID-19 pandemic.”
May 1, 2020, the Company’s Canadian and Irish entities have changed their functional currency to the U.S. dollar and the Company has changed its presentation currency from Canadian dollar to the U.S. dollar. Prior period comparative information is restated in U.S. dollars to reflect the change in presentation currency.
Three months ended
Six months ended
June 30,
2020
June 30, 2019
June 30, 2020
June 30, 2019
Revenues
$
8,350
$
21,963
$
50,259
$
55,168
Operating costs
(9,561)
(24,815)
(35,809)
(46,598)
Direct mine and mill costs
(2,180)
(16,800)
(19,674)
(31,367)
Net income (loss) before tax
(5,533)
(15,132)
(1,652)
(14,116)
Income tax (expense) recovery
–
102
–
(732)
Deferred income expense
(1,479)
(268)
(1,017)
(1,869)
Net income (loss)
(7,012)
(15,298)
(2,669)
(16,717)
Basic earnings (loss) per share
(0.01)
(0.03)
(0.00)
(0.03)
Diluted earnings (loss) per share
(0.01)
(0.03)
(0.00)
(0.03)
Cash provided (used) before non-cash working capital items
$
1,028
$
406
$
(294)
$
11,697
Net cash (used in) provided by operating activities
(63,649)
22,341
(64,631)
88,871
Net cash provided by (used in) financing activities
777
(5,116)
27,517
(73,050)
Net cash (used in) investing activities
(5,221)
(14,195)
(8,601)
(20,355)
Net change in cash
(67,079)
1,868
(49,284)
(5,865)
As at
June 30,
2020
December 31, 2019
Cash
$
78,215
127,499
Working capital5
80,756
78,380
Maracás Menchen Mine Production
Q2 2020
Q2 2019
Total Ore Mined (tonnes)
257,357
308,858
Ore Grade Mined – Effective Grade6 (%)
1.20
1.21
Effective Grade of Ore Milled6 (%)
1.29
1.49
Concentrate Produced (tonnes)
99,059
102,320
Grade of Concentrate (%)
3.20
3.30
Contained V2O5 (tonnes)
3,174
3,380
Crushing Recovery (%)
97.7
98.0
Milling Recovery (%)
94.7
97.9
Kiln Recovery (%)
91.7
88.8
Leaching Recovery (%)
99.1
95.7
Chemical Plant Recovery (%)
96.1
97.1
Global Recovery (%)2
80.8
79.1
V2O5 produced (Flake + Powder) (tonnes)
2,562
2,515
V2O5 produced (equivalent pounds)1
5,648,236
5,544,619
Cash operating costs3 per pound
$
$2.57
$3.59
Cash operating costs excluding royalties3 per pound
$
$1.89
$3.34
Total cash costs3
$
$3.68
Revenues per pound sold 7
$
$3.72
$4.02
$8.4 million ($22.0 million in Q2 2019) from sales of 1,018 tonnes of V2O5 equivalent. The low volume of sales in May and June was expected and is attributable to the Company’s sales now typically being recognized at the time of delivery, which can take a few months from the time of shipment from Brazil. The Company’s total sales of VPURE+™ products in the six months ended June 30, 2020 are 600 tonnes.
$7.0 million in Q2 2020 following the recognition of a deferred income tax expense of $1.5 million. This compares to net loss of $15.3 million in Q2 2019 and is primarily due to a decrease in operating and finance costs but was partially offset by a decrease in revenues and interest income, and an increase in the foreign exchange loss during the quarter.
June 30, 2020 with its former off-take partner was $2.4 million. The decrease is primarily attributable to the payment made of approximately $57.4 million during Q2 2020 and the balance at June 30, 2020 is attributable to the re-measurement of trade receivables / payables for V2O5 sold in the period to April 30, 2020. The Company anticipates that the final re-measurement of trade receivables / payables resulting from its recently terminated offtake agreement will negatively impact future periods by an aggregate of approximately $0.3 million.
$9.6 million compared to $24.8 million in Q2 2019 and include direct mine and mill costs of $2.2 million ($16.8 million in Q2 2019), royalties of $1.3 million, product acquisition costs of $2.4 million, distribution costs of $0.3 million, inventory write-down of $1.3 million and depreciation and amortization of $2.0 million. The decrease in direct mine and mill costs is primarily attributable to the decrease in V2O5 equivalent sold in Q2 2020.
$1.89 per lb sold compared to $3.34 in Q2 2019. The measure for Q2 2020 includes the benefit of tax credits of $2.2 million, without which the cash operating costs excluding royalties3 per lb would be $3.04. The decrease seen in Q2 2020 compared with Q2 2019 is largely due to the decreased sales as noted previously. For Q2 2020, total cash costs3 were $3.68 (the measure for Q2 2020 includes the benefit of tax credits of $2.2 million, without which the total cash costs3 would be $4.66). Total cash costs3 exclude royalties and include the Company’s total professional, consulting and management fees and other general and administrative expenses.
$22.3 million to cash used in Q2 2020 of $63.6 million. This is primarily due to the change in accounts payable of $51.4 million in Q2 2020 when a payment was made to reduce the Company’s trade payables balance with its former off-take partner. A further factor is the change in inventory of $15.9 million in Q2 2020 as a consequence of the increased time for the Company to deliver its products and recognize sales as well as the building of strategic stock levels.
April 2020 was 480 tonnes with 1,052 tonnes produced in May 2020 and 1,030 tonnes in June 2020.
Brazil on May 14, 2020 to an end-user in the U.S. Since then, the Company has delivered both standard grade and high purity V2O5 as well as ferrovanadium (“FeV”) to customers in Brazil, North America, Europe and Asia. The Company’s logistics operations have experienced some cancelations and delays related to COVID-19, both inside and outside of Brazil. The Company has, so far, been able to fulfil all of its commercial commitments with on-time deliveries thanks to careful planning and responsiveness. Largo maintains its 2020 sales, cost and production guidance and will continue to monitor the rapidly developing impacts of the COVID-19 pandemic, taking all possible actions to help minimize the impact on the Company and its people. However, these actions could significantly change the guidance and forecasts presented and Largo will, if and when necessary, update its guidance accordingly.
$6.95. Additionally, the average price per lb of V2O5 in Europe decreased by 5%, ending the period with an average price of approximately $5.30, compared with approximately $5.58 at March 31, 2020. The average price per lb of V2O5 for Q2 2020 was approximately $6.14, compared with approximately $8.59 for Q2 2019. Largo is now selling products with pricing based on several different V2O5 and FeV benchmarks and the Company’s revenues will be driven by the movements in these prices.
www.largoresources.com/responsibility-page.” data-reactid=”63″>The Company announced the release of its 2019 sustainability report on July 20, 2020, highlighted by improved performance metrics and new reporting standards. This report is guided in part by SASB, the Sustainability Accounting Standards Board. The Company’s new approach to sustainability reporting sets a new standard for open and transparent communication and Largo expects to continually improve its disclosures in the years to come. The report is available for download within the Responsibility section of the Company’s website at www.largoresources.com/responsibility-page.
June 2020 following delays caused by the COVID-19 pandemic. All drilling personnel have followed the prescribed COVID-19 quarantine procedures before beginning work on site and Largo does not anticipate any further disruptions to the overall plan going forward. Additional drill equipment and crews were mobilised in July and August 2020 to increase the production of total metres drilled in order to maintain the planned drilling timeframes at the various targets.
August 11, 2020, the Company had completed 3,725 metres of drilling in 17 holes at the Novo Amparo Norte deposit and will shortly begin drilling at the Gulçari A Norte deposit.
October 2019 and was proven successful with ilmenite product being produced shortly after. The Company constructed an additional chemical pilot plant to further upgrade its ilmenite product to TiO2 pigment in April 2020. Test work to further understand and evaluate the Company’s TiO2 chemical pilot plant product is ongoing.
Friday, August 14, 2020, at 2:00 p.m. ET, to discuss both operational and financial results for the second quarter of 2020.
Date:
Friday, August 14, 2020
Time:
2:00 p.m. ET
Dial-in Number:
Local / International: +1 (416) 764-8688
North American Toll Free: (888) 390-0546
Brazil Toll Free: 08007621359
Conference ID:
63772474
Replay Number:
Local / International: + 1 (416) 764-8677
North American Toll Free: (888) 390-0541
Replay Passcode: 772474 #
Website:
To view press releases or any addition al financial information, please visit our 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.
www.largoresources.com and on SEDAR.” data-reactid=”75″>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, 2020 and 2019 and its management’s discussion and analysis for the three and six months ended June 30, 2020, which are available on our website at www.largoresources.com and on SEDAR.
www.largoresources.com and www.largoVPURE.com.” data-reactid=”77″>Largo Resources is an industry preferred producer and supplier of vanadium for the global steel and high purity markets. Largo’s VPURE™ and VPURE+™ products are sourced from one of the world’s highest-grade vanadium deposits at the Maracás Menchen Mine located in Brazil. The Company’s common shares are principally 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.
Brazil and globally. 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 the Largo 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.
June 30, 2020, which are described in the following section.
Per Pound
Three months ended
Six months ended
June 30,
2020
June 30,
2019
June 30,
2020
June 30,
2019
Revenuesi
$
8,350
$
21,963
$
50,259
$
55,168
V2O5 equivalent sold (000s lb)
2,244
5,467
9,233
10,097
Revenues per pound sold ($/lb)
$
3.72
$
4.02
$
5.44
$
5.46
i. As per note 21 in the Company’s Q2 2020 unaudited condensed interim consolidated financial statements
Three months ended
Six months ended
June 30,
2020
June 30,
2019
June 30,
2020
June 30,
2019
Operating costsi
$
9,561
$
24,815
$
35,809
$
46,598
Professional, consulting and management feesii
435
1,195
1,270
2,147
Other general and administrative expenses2
528
290
765
491
Less: product acquisition costsi
(2,444)
–
(2,444)
–
Less: inventory write-downiii
(1,176)
–
(1,176)
–
Less: depreciation and amortization expense1
(2,034)
(6,688)
(8,481)
(12,161)
Cash operating costs
4,870
19,612
25,743
37,075
Less: royaltiesi
(1,290)
(1,327)
(3,597)
(3,070)
Cash operating costs excluding royalties
3,580
18,285
22,146
34,005
Produced V2O5 sold (000s lb)iv
1,896
5,467
8,885
10,097
Cash operating costs per pound ($/lb)iv
$
2.57v
$
3.59
$
2.90v
$
3.67
Cash operating costs excluding royalties per pound ($/lb)iv
$
1.89v
$
3.34
$
2.49v
$
3.37
i.
As per note 22 in the Company’s Q2 2020 unaudited condensed interim consolidated financial statements
ii.
As per the Mine properties segment in note 18 in the Company’s Q2 2020 unaudited condensed interim consolidated financial statements
iii.
As per note 7 in the Company’s Q2 2020 unaudited condensed interim consolidated financial statements
iv.
Cash operating costs per pound and cash operating costs excluding royalties per pound for Q2 2019 were previously calculated and presented on a pounds produced basis (V2O5 produced (000s lb) = 5,545; V2O5 sold (000s lb) = 5,467). These measures have been calculated and presented on a pounds sold basis in this MD&A
v.
The measure for Q2 2020 includes the benefit of tax credits of $2,187, without which the cash operating costs per pound would be $3.72 and $3.14 for the three and six month periods ended June 30, 2020, respectively, and the cash operating costs excluding royalties per pound would be $3.04 and $2.74 for the three and six month periods ended June 30, 2020, respectively
Three months ended
Six months ended
June 30, 2020
June 30, 2020
Operating costsi
$
9,561
$
35,809
Professional, consulting and management feesii
1,240
2,932
Other general and administrative expensesii
787
1,659
Less: depreciation and amortization expensei
(2,034)
(8,481)
Less: royaltiesi
(1,290)
(3,597)
$
8,264
$
28,322
V2O5 equivalent sold (000s lb)
2,244
9,233
Total cash costs ($/lb)
$
3.68iii
$
3.07iii
i.
As per note 22 in the Company’s Q2 2020 unaudited condensed interim consolidated financial statements
ii.
As per the condensed interim consolidated statement of income (loss) and comprehensive income (loss)
iii.
The measure for Q2 2020 includes the benefit of tax credits of $2,187, without which the total cash costs would be $4.66 and $3.30 for the three and six month periods ended June 30, 2020, respectively
_________________________________________
1Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs
2Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery
3The cash operating costs per pound sold, cash operating costs excluding royalties per pound sold and total cash costs reported are on a non-GAAP basis. Refer to the “Non-GAAP Measures” section of this press release
4Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery
5Defined as current assets less current liabilities per the consolidated statements of financial position
6Effective grade represents the percentage of magnetic material mined multiplied by the percentage of V2O5 in the magnetic concentrate
7 Revenues per pound sold is calculated based on the quantity of V2O5 sold during the stated period. This may or may not differ to the quantity sold
8GAAP – Generally Accepted Accounting Principles
The Maracás Menchen Mine – Largo Resources (CNW Group/Largo Resources Ltd.)
Largo Resources Ltd. (CNW Group/Largo Resources Ltd.)
