My take on 2023 and concerns over excessive tax adjustments We will see green before the end of this week. Imho there is no reason for the sp to stay below the book value per share. The trust between investors may have been broken but Largo is still a viable company despite Management's poor performance and despite its stupid anti-transparency corporate culture. However I don’t see how the SP can go back up to the C$8 range soon. The rest of 2023 will remain challenging even if Management can successfully deliver the Ilmenite plant and the VRFB installation.
One thing that really worries me is the income tax issues, more specifically the tax adjustments associated with Permanent Differences. You can see those adjustments in the “notes” of the annual financial statements. Due to the Permanent Difference tax adjustments Largo had to pay an excessive amount of income tax expense on relatively a small Net Income before tax in FY 2022 and apparently Q1-23.
The following table shows the Permanent Difference adjustments since 2018:
US$000
| Period | Permanent Difference Adjustments | % Increase (Decrease) over the previous period | Total Income Tax Expense | Net Income before tax | Net Income after tax |
| FY2018 | ($3,632K) | — | ($6,698) | $322,654 | $315,956 |
| FY2019 | ($4,089K) | 12.6% | ($4,953) | ($31,259) | ($36,212) |
| FY2020 | ($3,846K) | (6.0%) | ($962) | $7,723 | $6,761 |
| FY2021 | ($9,722K) | 252.7% | ($9,188) | $31,759 | $22,571 |
| FY2022 | ($15,023) | 154.5% | ($6,265) | $4,039 | ($2,226) |
As a primary producer of Vanadium Largo is a boring “one-pony-show” mining company with supposedly monotonous uneventful permanent differences. It is unusual for a “one-pony-show” mining company like Largo to have its Permanent Difference adjustments skyrocketed 253% to ($9,722K) in 2021 and another 151% to ($15,023K) in 2022. What is the nature of those permanent differences? What were the reasons causing their vertiginous increases in 2021 and 2022? Will we face the same thing in 2023 considering the fact that we had to book ($1,922) in total income tax expense out of a tiny $777K of Net Income before tax in Q1-23?
Just my 2-cts
DYODD