Latest Rick Rules' take on Vanadium
June 05 2024:
https://www.youtube.com/watch?v=weU7HkX1JkQ
Watch from 20’54”.
Rick Rules: “I know a lot about Vanadium. Thus far I’ve been dead wrong by the way” ….. “I don’t think you're gonna see a major increase in the vanadium price like you did as an example in the lithium price simply because the northeastern part of the nation of South Africa is a vast vanadium sink, I mean you know where there is lots of it and if the price was high enough we could produce it but certainly companies that are generating free cash at today’s vanadium prices will look very cheap 5 years from now. Remember this South African production will take a decade at least to put in production given the political realities of South Africa, it might take them a year, it might take them 10 years to decide who gets the bribes”
The fact is that Largo doesn’t generate free cash flow at today’s vanadium prices!
So the critical question is: How long can Largo stay afloat in a sea of red ink without a strong Vanadium recovery?
Q4-23 CC
Andrew Wong
Hi, thanks for taking my question. So with prices hovering in the $5 to $6 per pound range, how close are we to marginal cost? And does that provide some downside support to prices at this level? And how does Largo think about the production decisions as those prices are nearing your cost structure? And I just probably was sure I'll look for prices for the rest of this year? Thanks.
Ernest Cleave
Daniel, I'll take the first part.
Daniel Tellechea
Okay.
Ernest Cleave
Andrew, as you know, we've guided on cost, $4.50 to $5.50. Obviously, at the current prices we're seeing $5.90 on the market, we will not be making cash at those levels. But it's very hard for us, to forecast where things go. We want to see and I think as I've mentioned to you before, we want to see a couple of months of production at our full production run rate to actually fully assess cost.
We have an ambition to get to the lower end of our cost guidance. But obviously, given where the price is right now, this is not a cash positive territory for us. So I'll leave it at that and I'll let Paul talk about his expectation on prices.
Paul Vollant
Yes, thanks, Andrew. As you know, we do not give guidance on pricing. The only thing that we can do, is just looking back, we are well below historical average. And we're seeing also primary producer really struggling to turn a profit at these levels. Altogether, primary producer represent about 20% of the global supply. So, we hope at some point, that the prices will allow primary producer to turn a profit.
Otherwise, we'll see other events happening to - adjust. So, yes we're well below historical average. We don't know, when we'll be back to the mean. But yes, we believe in a very low price environment, especially accounting for all the inflation that we had in the past few years.
Andrew Wong
Could you maybe just talk about what marginal cost looks like for the industry right now?
Paul Vollant
No, sorry I cannot do that, Andrew.
Andrew Wong
Can you talk about what marginal cost looks like for the industry?
Paul Vollant
Yes, it's very hard to say, the only let's say producer that are publishing straightforward prices are the primary producer, Largo, Bushveld, the other primary producer in South Africa, is not publishing its pricing directly. And you can see that, people are losing money at these levels. The other type of production, either from steel slag or what we call secondary sources from, oil and gas manufacturing, it's indirect cost, which is very difficult to have clarity on. But yes, we're seeing the oil industry struggling at the moment.