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Largo’s net loss widens to $32m, but incoming ilmenite output shows promise

22nd March 2024

By: Marleny Arnoldi

Deputy Editor Online

     

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Canada-headquartered vanadium miner Largo says its financial results continued to be adversely affected by lower vanadium prices in the year ended December 31, particularly a 22% year-on-year decrease in the European vanadium pentoxide price in the last quarter of the year.

The company sold 10 396 t of vanadium pentoxide, from its Maracás Menchen mine, in Brazil, in the year under review.

This compares with sales of 11 091 t in 2022.

Production for the year, at 9 681 t of vanadium pentoxide, was in line with the company’s revised production guidance of between 9 000 t and 11 000 t, but was less than the 10 436 t of vanadium pentoxide produced in 2022.         

Adjustable earnings before interest, taxes, depreciation and amortisation amounted to $12.1-million in the year, compared with $41.6-million in the prior year.

Largo ultimately posted a net loss of $32.4-million in the year, which included $10.3-million in non-recurring items and a 13% decrease in revenues, coupled with a 3% increase in operating costs and 506% increase in finance costs. This compares with a net loss of $2.2-million posted in the prior year.

The company explains that its direct mine and production costs had increased in the year under review owing to an increase in total ore mined, the cost impacts of low ore availability experienced earlier in the year and plant shutdowns for corrective maintenance.

A basic loss per share of $0.51 in the reporting year compares with a basic loss per share of $0.03 reported for the prior year.

Operating costs were higher in 2023 at $174-mllion, compared with just under $170-million in 2022, with the operating costs per pound of product sold amounting to $5.30 in the reporting year, against a cost of $4.57/lb in the prior year.

The average benchmark price per pound of vanadium pentoxide in Europe was $6.46 in the fourth quarter, compared with a price of $8.25/lb in the fourth quarter of 2022.

On a yearly basis, the average benchmark price per pound of vanadium pentoxide in Europe was $6.53 in 2023, which is 23% lower than the average $9.44/lb price realised in 2022.

In March this year, the average benchmark price per pound of vanadium pentoxide in Europe was $6.05.

Largo explains that vanadium spot demand was soft towards the end of the year owing to adverse conditions in the Chinese and European steel industries; however, strong demand from the aerospace sector continued.

Despite the widened earnings loss posted, Largo made notable achievements in the period, including construction and commissioning of a new ilmenite concentration plant, which continues to ramp up. This diversifies the company’s revenue stream from the vanadium operations.

The plant already produced 8 970 t of ilmenite concentrate in the fourth quarter of the year, and 7 100 t of ilmenite concentrate in January and February this year.

The company also continues to enhance operational efficiency at Maracás and undertake exploration in the area.

While vanadium appears to have promising long-term fundamentals, the company remains focused on reducing costs and meeting its production and sales targets to withstand the current low-price cycle.

Largo has $42.7-million in cash and a net working capital surplus of $94.7-million as at December 31, while debt stands at $75-million.

Canada-headquartered vanadium miner Largo says its financial results continued to be adversely affected by lower vanadium prices in the year ended December 31, particularly a 22% year-on-year decrease in the European vanadium pentoxide price in the last quarter of the year.

The company sold 10 396 t of vanadium pentoxide, from its Maracás Menchen mine, in Brazil, in the year under review.

This compares with sales of 11 091 t in 2022.

Production for the year, at 9 681 t of vanadium pentoxide, was in line with the company’s revised production guidance of between 9 000 t and 11 000 t, but was less than the 10 436 t of vanadium pentoxide produced in 2022.         

Adjustable earnings before interest, taxes, depreciation and amortisation amounted to $12.1-million in the year, compared with $41.6-million in the prior year.

Largo ultimately posted a net loss of $32.4-million in the year, which included $10.3-million in non-recurring items and a 13% decrease in revenues, coupled with a 3% increase in operating costs and 506% increase in finance costs. This compares with a net loss of $2.2-million posted in the prior year.

The company explains that its direct mine and production costs had increased in the year under review owing to an increase in total ore mined, the cost impacts of low ore availability experienced earlier in the year and plant shutdowns for corrective maintenance.

A basic loss per share of $0.51 in the reporting year compares with a basic loss per share of $0.03 reported for the prior year.

Operating costs were higher in 2023 at $174-mllion, compared with just under $170-million in 2022, with the operating costs per pound of product sold amounting to $5.30 in the reporting year, against a cost of $4.57/lb in the prior year.

The average benchmark price per pound of vanadium pentoxide in Europe was $6.46 in the fourth quarter, compared with a price of $8.25/lb in the fourth quarter of 2022.

On a yearly basis, the average benchmark price per pound of vanadium pentoxide in Europe was $6.53 in 2023, which is 23% lower than the average $9.44/lb price realised in 2022.

In March this year, the average benchmark price per pound of vanadium pentoxide in Europe was $6.05.

Largo explains that vanadium spot demand was soft towards the end of the year owing to adverse conditions in the Chinese and European steel industries; however, strong demand from the aerospace sector continued.

Despite the widened earnings loss posted, Largo made notable achievements in the period, including construction and commissioning of a new ilmenite concentration plant, which continues to ramp up. This diversifies the company’s revenue stream from the vanadium operations.

The plant already produced 8 970 t of ilmenite concentrate in the fourth quarter of the year, and 7 100 t of ilmenite concentrate in January and February this year.

The company also continues to enhance operational efficiency at Maracás and undertake exploration in the area.

While vanadium appears to have promising long-term fundamentals, the company remains focused on reducing costs and meeting its production and sales targets to withstand the current low-price cycle.

Largo has $42.7-million in cash and a net working capital surplus of $94.7-million as at December 31, while debt stands at $75-million.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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