A reminder of the big pictureInvestors are understandably frustrated with Largo's various missteps. But a reminder of the larger investment thesis ...
- LGO's enterprise value is under $500MM USD
- The technical report resulted in a $2B after tax NPV (using V at $8- the current price)
- The technical report does not contemplate value associated with the energy storage side of the business (it was not in the scope of the report). The company has indicated that the value of selling through the energy storage market greatly exceeds the value of selling to steel producers.
- LCE provides a superior product for long duration battery storage and all the macro trends are strongly aligned with this strategy including US initiatives and more recently Europe's need to move to alternative energy as a result of the Russia/Ukraine war. The recent MOU with Ansaldo Green Tech is a very strong sign.
- LPV makes this technology very cost effective for prospective customers. You either believe LGO has the wherewithall to be successful with this initiative or you don't. Despite the leadership turnover all my due diligence suggests they are nearing the finish line in their eloctrolyte production and stack manufacturing.
- LPV will likely be approved in the next two weeks whereupon they will immediately begin purchasing $30MM CDN of V on the spot market. In addition, their ATM will generate more cash which will then be spent on V. Despite economic headwinds the mere creation and subsequent actions of LPV should lift V prices.
- The ilmenite concentration plant is proceeding on schedule and ilmenite prices are significantly higher than those used in the technical report
- It is dissapointing the TiO2 chemical processing plant is delayed due to acquisition and permitting issues but a reminder that the IRR on this project is well over 50% (see the technical report- 2028 reflects over $400MM in EBITDA).
So, though these repeated missteps are taxing to us as investors I am confident that the investment thesis remains veery much intact.