Uncertanity The reason that causes LGO to plummet to a new 52-week low recently can be explained with one single word, the word that risk-averse / institutional investors fear the most: “UNCERTAINTY”. Imo, there are 2 levels of “uncertainty”: one is on a macro level like the current global economic crisis which creates extreme stress in the markets and the other is more on a company-related view point. Each has a negative impact on LGO sp.
1) Uncertainty relating to the value creation of Largo’s core Vanadium business:
As illustrated by the poor financial results of last 2 Qs amid high V2O5 prices, a strong V2O5 is not a certain yardstick to predict a good outcome for Largo anymore despite the fact that the company is a one-pony show totally dependent on Vanadium.
Remember the Technical report of Dec 21 2021 which has been promoted by management as the support for the “mining pillar”? Remember the “$2.8 Billion Pre-Tax / $2.0 Billion After-Tax NPV7% and $5.8 Billion Pre-Tax / $4.2 Billion After-Tax Life of Mine Cash Flow”? Well, that same report forecasts a revenue of US$261M (based on a standard V2O5 of US$8.64/lb and High Purity of US$10.14/lb) for 2022. What are the chances for Largo to reach US$261in revenue this year in light of the poor Q1 results (US$42.7M)?
2) Uncertainty relating to LCE
With regard to the “clean energy pillar”, there is a total radio silence about the outcome of LPV which is a prerequisite for the leasing of batteries.
Investors are uncertain about the ability of Largo to deliver its clean energy vision due to its habit of “over promise and underdeliver”. The frustration of Leon Cooperman, one of the company’s largest shareholders, speaks volume:
Leon Cooperman:Yes. Hi. A couple of questions in observation. One, you guys created an expectation level regarding battery sales when you had your Battery Day. And as an observer of the company, I think things have been extremely disappointing. And the question I guess was, Carlos asked, you really were unresponsive. What is your timetable for announcing significant new battery orders? Because we've only had one and that order was like pulling teeth to get it done.
[Indiscernible] happened because you guys created a level of expectation on Battery Day. And I also would take it – you said, we're getting paid to wait. You're getting paid to wait when it’s a dividend in your pocket. We're not getting paid to wait for anything. I think the company is being very promotional in its presentation.
Actions speak louder than words
In order for the sp to embark on the road to recovery, the level of uncertainty must be reduced. Investors need to see predictable outcomes assuming normal market conditions (e.g strong earnings when V2O5 is strong), the more predictable the better. How can management help reduce the level of uncertainty? By focusing on DELIVERY.
The reason that causes LGO to plummet to a new 52-week low recently can be explained in one single word, the word that risk-averse / institutional investors fear the most: “UNCERTAINTY”. Imo, there are 2 levels of “uncertainty”: one is on a macro level like the current global economic crisis which creates extreme stress in the markets and the other is more on a company-related view point. Each has a negative impact on LGO sp.
1) Uncertainty relating to the value creation of Largo’s core Vanadium business:
As illustrated by the poor financial results of last 2 Qs amid high V2O5 prices, a strong V2O5 is not a certain yardstick to predict a good outcome for Largo anymore despite the fact that the company is a one-pony show totally dependent on Vanadium.
Remember the Technical report of Dec 21 2021 which has been promoted by management as the support for the “mining pillar”? Remember the “$2.8 Billion Pre-Tax / $2.0 Billion After-Tax NPV7% and $5.8 Billion Pre-Tax / $4.2 Billion After-Tax Life of Mine Cash Flow”? Well, that same report forecasts a revenue of US$261M (based on a standard V2O5 of US$8.64/lb and High Purity of US$10.14/lb) for 2022. What are the chances for Largo to reach US$261in revenue this year in light of the poor Q1 results (US$42.7M)?
2) Uncertainty relating to LCE
With regard to the “clean energy pillar”, there is a total radio silence about the outcome of LPV which is a prerequisite for the leasing of batteries.
Investors are uncertain about the ability of Largo to deliver its clean energy vision due to its habit of “over promise and underdeliver”. The frustration of Leon Cooperman, one of the company’s largest shareholders, speaks volume:
Leon Cooperman:Yes. Hi. A couple of questions in observation. One, you guys created an expectation level regarding battery sales when you had your Battery Day. And as an observer of the company, I think things have been extremely disappointing. And the question I guess was, Carlos asked, you really were unresponsive. What is your timetable for announcing significant new battery orders? Because we've only had one and that order was like pulling teeth to get it done.
[Indiscernible] happened because you guys created a level of expectation on Battery Day. And I also would take it – you said, we're getting paid to wait. You're getting paid to wait when it’s a dividend in your pocket. We're not getting paid to wait for anything. I think the company is being very promotional in its presentation.
Actions speak louder than words
In order for the sp to embark on the road to recovery, the level of uncertainty must be reduced. Investors need to see predictable outcomes assuming normal market conditions (e.g strong earnings when V2O5 is strong), the more predictable the better. How can management help reduce the level of uncertainty? By focusing on DELIVERY.