Largo Inc T.LGO

Alternate Symbol(s): LGO

Metals & Mining Industrial Metals & Minerals

Largo Inc. is a Canada-based producer and supplier of vanadium products. The Company’s segments include sales & trading, mine properties, corporate, exploration and evaluation properties (E&E properties), Largo Clean Energy and Largo Physical Vanadium. Its VPURE and VPURE+ products, which are sourced from one of the vanadium deposits at the Company's Maracas Menchen Mine in Brazil. The Company is also focused on the advancement of renewable energy storage solutions through Largo Clean Energy and its vanadium redox flow battery technology (VRFB). The Company is also engaged in the process of implementing a titanium dioxide pigment plant using feedstock sourced from its existing operations, in addition to advancing its United States-based clean energy division with its VCHARGE vanadium batteries. VPURE+ Flakes are used in the production of master alloys, where it provides high strength-to-weight ratios for the titanium alloy and aerospace industries.

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Largo Inc > Q2 Financials

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Comment by kha341on Aug 07, 2021 1:29pm

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Post# 33668486

RE:RE:RE:RE:RE:RE:RE:RE:RE:Q2 Financials

kha341 wrote:

kha341 wrote:

kha341 wrote:

kha341 wrote:
Q2-21 Back-of-the-envelope

Estimated Revenue = 53,387,000

Estimated Total Costs = 53,387,000 x 87.5% = ~46,700,000

Estimated Net Income = 53,387,000 - 46,700,000 = US$6,700,000

or around $8.2M without FX Loss.

Let’s assume Revenue = 53,387,000 and Net Margin = 15%

Q2-21 Back-of-the-envelope

Estimated Revenue = 53,387,000

Estimated Total Costs = 53,387,000 x 85% = ~45,379,000

Estimated Net Income = 53,387,000 - 45,379,000 = 53,387,000 x 15% = US$8M

or around $10M without FX Loss.

Net Profit Margin (or Net Margin)

Q3-20 = 3,352,000 / 27,474,000 = 12.3%

Q4-20 = 6,023,000 / 42,254,000 = 14.3%

Q1-21 = 4,447,000 / 39,801,000 = 11.2%

Reminder

Iron ore sales are not included. in the above guesstimation.

Unfortunately we have no details about the sales of iron ore in Q2. So let’s assume 3 scenarios for Largo’s iron sales booked in Q2

Scenario 1 = 25,000T ; Scenario 2 = 30,000T; Scenario 3 = 40,000T

Largo’s iron ore is of a lower quality than the 62% Fe benchmark, perhaps around 55 - 58% Fe. The prices of the benchmark 62% Fe were somewhere around US$220/T in Q2-21. So for the sake of argument let’s assume that our sales price = US$150/T. Furthermore as the iron ore comes from the huge stockpile that has been sitting around gathering dust there should not be any production cost (COGS) associated with the sales. I expect the biggest cost to be related to Selling. So let’s also assume a profit margin of 85% - 90% (Mid = 87.5%).

Scenario 1:

Iron ore Sales = 25,000T

Iron ore Revenue = US$3.75M (= US$150 x 25,000T)

Iron ore Profit = ~US$3.3M (= US$3.75 x 87.5%)

Scenario 2:

Iron ore Sales = 30,000T

Iron ore Revenue = US$4.5M (= US$150 x 30,000T)

Iron ore Profit = ~US$3.9M (= US$3.75 x 87.5%)

Scenario 3:

Iron ore Sales = 40,000T

Iron ore Revenue = US$6.00M (= US$150 x 40,000T)

Iron ore Profit = ~US$5.25M (= US$6.00M x 87.5%)

So if we added the above iron ore sales scenarios to the back-of-the-envelope guesstimate of the V sales then our total Q2-21 revenue would be higher and the Net Profit Margin would be way higher as well thanks to the high profit margin of iron ore. We might possibly end up with a Net Income in the range of US$13.5M - 15.5M or C$17M - 20M which would be equivalent to an EPS in the range of C$0.26 - 0.31 on a total shares O/S of 64,566,769 vs the analysts consensus estimate below