RE:How about the FeV Conversion Plant Projectkha341 wrote:
Should it be revived?
Q4 Total Revenue = US$50.3M with US$24.5M from the sales of V2O5 and US$25.8M from FeV. So in terms of $ FeV sales were bigger than V2O5’s in Q4. And yet we don’teven have a FeV conversion plant (i.e a plant to make our own FeV from our own V2O5). As it is right now the FeV products that we sell to our customers come from the conversion plant of a local FeV producer. Having our own FeV conversion plant would allow us to have a higher margin. Now that FeV becomes an important part of our oroducts mix
The following “2020 Guidance” was from the Q4-19 MD&A. Since then.the FeV conversion plant has been postponed.
As FeV has become an important part of our product mix, should we put the FeV conversion plant project back on the front burner to improve our margin?
Q2-20 Transcript
Andrew Wong
Hi, thanks for the follow-ups. What's the latest in the ferrovanadium project?
Paulo Misk
Ferrovanadium project -- thank you, Andrew, for your question. Ferrovanadium project, we postponed, supposed to be implemented based in the same time as the V2O3. But considering that the -- it's not as much strategic as V2O3. We give priority to V2O3 and postponed it to conclude by the end of 2021. And it's in line with this reschedule.
Conversion costs
Conversion costs = Costs incurred in converting V2O5 to FeV that are recognized on the sale of FeV (as defined in MD&A). As Largo doesn’t have a conversion plant this represents the payments to a local FeV producer who does the conversion for us.
Conversion costs 2021 = US$9.3M (2020 = U$2M). So for 2021 alone the amount paid to a third party for the conversion of our V2O5 was already way higher (1.6 x) than the capital expenditure required for the construction of an in-house FeV conversion plant (estimated to be US$5M - 7M).