My take Even as a one trick pony the value of Largo stock should be way higher than it is right now. There should be a positive correlation between the company’s share prices and the spot prices of its main product which is V2O5. The last time the sp were in the low C$13 range (C$1.30 pre-consolidation) was on Dec 24 2020 in a period when Euro V205 prices were below US$6/lb. Actually the Q4-20 MDA stated that: “During Q4 2020, the average price per lb of V2O5 in Europe increased by 1%, ending the period with an average price of approximately $5.40”. On Feb 1 2021, when the Euro V2O5 prices moved up to US$6.2 - 6.5/lb the sp closed at C$18.8 (C$1.88 pre-consolidation). Currently the prices of Euro V2O5 are in the US$8/lb and today's closing price = C$13.13? The lowest closing price year-to-date? Largo’s market cap has dropped 38% of its value or ~C$515 million from Aug 10 2021 (closing sp = C$21.08) to Sept 29 2021 (closing sp = C$13.13)? The fact that the North American markets have not been doing well in the last few days can not explain the collapse of Largo's value, can it?
In simple math, a stock that declines 40% must rise 67% to return to the original price. And here we are talking about the stock of Largo, a mining company with an extremely enviable situation among its peers, including:
A negative net-debt (ony US$15,000 in short term debt)
A cash machine (Cash on hand = US$81 million as at June 30 2021)
Current Assets = US$152 million = 3.8 x Current Liabilities (US$ 40 million)
The highest grade V2O5
A high profit margin thanked to the lowest production costs
Q3 results in line to beat analyst consensus expectations
Projects in progress to add new revenue streams (Ilmenite, V2O3)
Largo Clean Energy (vertically integrated VRFB business to provide clean energy storage systems).
I’m shocked greatly by the fast & furious collapse of our stock value. I have no idea what is happening but my gut tells me that manipulators / short sellers / anonymous are taking advantage of the current global market crisis to mess with LGO and make it artificially weaker than its true value. As anything artificial it has to be temporary and we will eventually get out of the bargain basement...unless the prices of V2O5 will also collapse.