My take on the negotiation with Stryten Energy Largo is struggling to stay afloat in a sea of red ink. Therefore it is extremely challenging for the company to keep supporting LCE.
Vanadium represents the biggest cost component of a VRFB (about 30% - 40% of the total costs). However, while vanadium prices are in the historical low range, LCE has been unable to sign a single contract since its first sale 3 years ago. LCE is bleeding cash without being able to book a single dollar of revenue to date.
In short, LCE is a dead weight on a sinking ship. Considering the fact that the "mining pillar"itself is struggling to survive, LCE is a heavy burden that Largo simply can’t carry anymore. So I dare say that closing the deal with Stryten Energy is a matter of life and death for LCE. Largo needs Stryten way more than Stryten needs Largo. Stryten is negotiating from a position of strength. It would not be a surprise to me if Largo bent the knees. Even a fire sale of LCE could be a possibility.
DYODD
March 18 2024 - TORONTO--(BUSINESS WIRE)-- Largo Inc. (TSX: LGO) (NASDAQ: LGO) is pleased to announce the signing of a non-binding letter of intent with Stryten Energy LLC (“Stryten”) to establish a 50:50 joint venture that would combine the Company’s wholly owned subsidiary, Largo Clean Energy Corp. (“LCE”) with Stryten’s vanadium redox flow battery (“VRFB”) business.