Glencore deal - Simple math Clipper2 wrote: .
Sure, the contract helped Largo obtain the loan for the mine, but they certainly paid for it, and Largo managemnet were still sucking up to them right up to the end of the contract.
Thank goodness that's all over with.
Largo is the lowest cost producer in the world. The math is simple. When you sell your products at a price above the Cost of Goods Sold (COGS) you should have a positive gross margin. When your products are sold at a price higher than your total costs (COGS + all other costs) your EBITDA (Earnings Before Interest, Taxes, Depreciation / Amortization) must be in the black. And if the sales prices are high enough to cover the ITDA then your bottom line should also be in the black.
So let’s have a look at the results of 2019, as follows:
Let’s assume an extremely generous number of US$1.50/lb to represent the “other costs”.
Q1
Cash Operating Costs = US$3.79/lb
Other Costs = US$1.50/lb
Total Costs = US$5.29/lb
Average Price of V2O5 = US$16.37 or US$15.6/lb after G discount
Average Sales Price exceeded Total Costs by US$10.31/lb
Q2
Cash Operating Costs = US$3.54/lb
Other Costs = US$1.50/lb
Total Costs = US$5.04/lb
Average Price of V2O5 = US$8.58 or US$8.2/lb after G discount
Average Sales Price exceeded Total Costs by US$3.16/lb
Q3
Cash Operating Costs = US$3.02/lb
Other Costs = US$1.50/lb
Total Costs = US$4.52/lb
Average Price of V2O5 = US$7.16 or US$6.8/lb after G discount
Average Sales Price exceeded Total Costs by US$2.28/lb
Q4
Cash Operating Costs = US$2.70/lb
Other Costs = US$1.50/lb
Total Costs = US$4.2/lb
Average Price of V2O5 = US$5.37 or US$5.1/lb after G discount
Average Sales Price exceeded Total Costs by US$0.90/lb
So on an annual average the Sales Price exceeded the Total Costs by US$4.16/lb in 2019 and yet we closed the year with a Net Loss of (C$36M) and an EBITDA of merely ~C$28M out of 22,399,000lbs of V2O5 sold for the year. .
Simple math. Our EBITDA should have been averaging around US$94M (= US$4.19/lbs x 22,399,000lbs) and we should have a Net Income of around US$30M. (around C$40M) instead of a Net Loss of ($C36M) in 2019. But unfortunately the G re-measurement changed all of that. How so? Nobody knows until now Hidden behind the contractual confidentiality / non disclosure agreement there was something that didn’t smell right to me in the G deal.