Largo Highlights Continued Progress in Cost Reduction Initiatives at its Vanadium Operation in Brazil
All amounts expressed are in
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Largo Highlights Continued Progress in Cost Reduction Initiatives at its Vanadium Operation in
During the fourth quarter of 2023 and the first and second quarter of 2024, the Company’s cash operating costs excluding royalties per pound1 were impacted by certain non-recurring items, mainly the impact of write-downs of the Company’s produced vanadium finished product inventories due to the declining price environment. These write-downs do not fully represent the Company's ongoing operational efficiency or the success of its cost reduction initiatives, especially when presented on a cost per pound basis. When these adjustments are excluded, the underlying unit costs more accurately demonstrate Largo’s sustained focus on optimizing its cost structure.
The table below provides a detailed breakdown of the Company’s cash operating costs per pound sold1:
|
2023 |
2024 |
||||
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
|
Cash operating costs excluding royalties per pound1 ($/lb)i |
5.15 |
5.18 |
5.44 |
5.44 |
6.12 |
5.97 |
Write-down of produced vanadium products ($)i |
- |
- |
- |
2,215,000 |
4,526,000 |
6,688,000 |
Produced V2O5 sold (lbs)i |
5,741,000 |
5,000,000 |
4,693,000 |
5,437,000 |
5,753,000 |
3,776,000 |
Adjusted cash operating costs excluding royalties per pound1 ($/lb) |
5.15 |
5.18 |
5.44 |
5.04 |
5.33 |
4.20 |
i. |
|
As per the Company’s management’s discussion and analysis for the stated period. |
About Largo
Largo is a globally recognized vanadium company known for its high-quality VPURETM and VPURE+TM products, sourced from its Maracás
Largo’s common shares trade on the
Cautionary Statement Regarding Forward-looking Information:
This press release contains “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and
The following are some of the assumptions upon which forward-looking information is based: that general business and economic conditions will not change in a material adverse manner; demand for, and stable or improving price of V2O5 and other vanadium products, ilmenite and titanium dioxide pigment; receipt of regulatory and governmental approvals, permits and renewals in a timely manner; that the Company will not experience any material accident, labour dispute or failure of plant or equipment or other material disruption in the Company’s operations at the Maracás
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 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.sedarplus.ca and available on 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&A which also apply.
Trademarks are owned by
Non-GAAP2 Measures
The Company uses certain non-GAAP measures in this press release, which are described in the following section. Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under IFRS, the Company's GAAP, and might not be comparable to similar financial measures disclosed by other issuers. 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.
Cash Operating Costs Per Pound
The Company’s press release refers to cash operating costs per pound and cash operating costs excluding royalties per pound, which are non-GAAP ratios based on cash operating costs and cash operating costs excluding royalties, which are non-GAAP financial measures, 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
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.
Cash operating costs excluding royalties is calculated as cash operating costs less royalties.
Cash operating costs per pound and cash operating costs excluding royalties per pound are obtained by dividing cash operating costs and cash operating costs excluding royalties, respectively, by the pounds of vanadium equivalent sold that were produced by the Maracás
Cash operating costs, cash operating costs excluding royalties, cash operating costs per pound and cash operating costs excluding royalties per pound, along with revenues, are considered to be key indicators of the Company’s ability to generate operating earnings and cash flow from its Maracás
The following table provides a reconciliation of cash operating costs and cash operating costs excluding royalties, cash operating costs per pound and cash operating costs excluding royalties per pound for the Maracás
|
Three months ended |
Six months ended |
||||||||||
|
|
|
|
|
||||||||
Operating costsii |
$ |
36,379 |
|
$ |
43,029 |
|
$ |
86,086 |
|
$ |
88,960 |
|
Professional, consulting and management feesiii |
|
476 |
|
|
624 |
|
|
938 |
|
|
1,468 |
|
Other general and administrative expensesiv |
|
306 |
|
|
315 |
|
|
585 |
|
|
624 |
|
Less: ilmenite costsii |
|
(1,042 |
) |
|
— |
|
|
(1,089 |
) |
|
— |
|
Less: iron ore costsii |
|
(402 |
) |
|
(220 |
) |
|
(402 |
) |
|
(493 |
) |
Less: conversion costsii |
|
(2,018 |
) |
|
(2,220 |
) |
|
(4,041 |
) |
|
(4,138 |
) |
Less: product acquisition costsii |
|
(1,310 |
) |
|
(3,753 |
) |
|
(3,360 |
) |
|
(7,931 |
) |
Less: distribution costsii |
|
(1,724 |
) |
|
(2,525 |
) |
|
(3,542 |
) |
|
(3,972 |
) |
Less: inventory write-downv |
|
(912 |
) |
|
(683 |
) |
|
(466 |
) |
|
(683 |
) |
Less: depreciation and amortization expenseii |
|
(5,396 |
) |
|
(6,202 |
) |
|
(13,473 |
) |
|
(13,453 |
) |
Cash operating costs |
|
24,357 |
|
|
28,365 |
|
|
61,236 |
|
|
60,382 |
|
Less: royaltiesii |
|
(1,814 |
) |
|
(2,450 |
) |
|
(3,487 |
) |
|
(4,895 |
) |
Cash operating costs excluding royalties |
|
22,543 |
|
|
25,915 |
|
|
57,749 |
|
|
55,487 |
|
Produced V2O5 sold (000s lb) |
|
3,776 |
|
|
5,000 |
|
|
9,529 |
|
|
10,741 |
|
Cash operating costs per pound ($/lb) |
$ |
6.45 |
|
$ |
5.67 |
|
$ |
6.43 |
|
$ |
5.62 |
|
Cash operating costs excluding royalties per pound ($/lb) |
$ |
5.97 |
|
$ |
5.18 |
|
$ |
6.06 |
|
$ |
5.17 |
|
Cash operating costs excluding royalties |
|
22,543 |
|
|
25,915 |
|
|
57,749 |
|
|
55,487 |
|
Less: Write-down of produced vanadium productsvi |
|
6,688 |
|
|
- |
|
|
11,214 |
|
|
- |
|
Adjusted cash operating costs excluding royalties per pound ($/lb) |
$ |
4.20 |
|
$ |
5.18 |
|
$ |
4.88 |
|
$ |
5.17 |
|
ii. |
|
As per note 20 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements. |
iii. |
|
As per the Mine properties segment in note 16 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements. |
iv. |
|
As per the Mine properties segment in note 16 less the increase in legal provisions of |
v. |
|
As per note 5 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements for ilmenite finished products and warehouse supplies and including a write-down of vanadium purchased products of |
vi. |
|
As per note 5 of the Company’s Q2 2024 unaudited condensed interim consolidated financial statements for the write-down of vanadium finished products less the write-down for vanadium purchased products of |
1
The cash operating costs excluding royalties and adjusted cash operating costs excluding royalties are reported on a non-GAAP basis. Refer to the “Non-GAAP Measures” section of this press release.
2
GAAP – Generally Accepted Accounting Principles.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240819418606/en/
Investor Relations
Senior Manager, External Relations
+1.416.861.9778
aguthrie@largoinc.com
Source: