RE:In the works, Welcome back Dr Hoho. Your post sounds positive as usual.
In Q3-22 Largo suffered a loss of US$0.04 / share while selling 6.2M lbs at a decent average of US$8.80 per pound of V2O5 equivalent sold. The Q3-22 results were well below the analyst consensus. The negative surprise was caused mostly by a truck load of LCE/LPV related one-time expenses. The Q4-22 revenue per pound of V2O5 equivalent sold is expected to be even lower than US$8.80.
Out of the last 7 Qs Largo underperformed the consensus 6 times. That speaks volumes about the uncertainty in the eyes of investors with regard to management capability to execute the company’s vision / plan. And imho, market uncertainty is the main reason why the sp is where it is right now, deep in the bargain basement. Furthermore as the tax selling season is approaching fast I don’t expect any fast recovery any time soon. Although a return back to around C$10 by late Q1-23 is possible.
The company is net-debt-free and Management expects to exit 2022 with ~US$80M in cash, quite a solid position for the “mining pillar”to support the “energy pillar”at least in the short term. Amid strong headwinds, both internal and external, 2023 will tell us more clearly about the potential success / failure of LCE.
The key question is: Can Largo survive without the success of LCE?
Imho, the answer is a definite “Yes”.
Without the burden of supporting LCE, Largo’s “mining pillar”by itself is a cash machine. With the continued increase in energy storage using VRFB, the demand in Vanadium is forecasted to rise considerably. As the biggest primary Vanadium producer with the highest grade / lowest cost in the Western world, what more can Largo ask for?
Furthermore V2O3 / Electrolyte + Ilmenite + Titanium Dioxide (TiO2) = Additional revenue streams with high profit margins.
Having said the above I must add that, IMHO, Largo would never become a multi-billion company without a successful LCE.
Erik Sardain, a principal consultant at Roskill, when talking about Largo and Bushveld diversification into energy storage, said: “They’re taking a gamble, but a gamble in a position of strength.”
I say LCE, although expensive and slow to ramp-up, is a sensible bet that can increase Largo’s shareholder value exponentially. It’s totally worth it in terms of risk vs reward. Now it’s up to Management to deliver on time and on budget.
My 2cts
DYODD