My Take Drhoho,
Imho, Largo is a sinking ship. But there is still light at the end of the tunnel despite management awful performance. We still have hope for a comeback otherwise I would not be here.
Maracas is struggling to survive at the current almost-historical-low V2O5 prices. And there is yet any sign of a Vanadium recovery despite the growth of the VRFB sector. As such there is no way that Largo’s struggling mining operations can bear the heavy burden of LCE. However there is hope.
The company’s quick ratio (a conservative metric which compares Largo’s most liquid assets to its most short term liabilities) is still positive = US$61.5/44.7 = 1.37, indicating that Largo has enough cash to pay its current obligations such as short-term debt.
The debt-to-capital ratio which measures Largo’s financial leverage = 24% indicates a relatively low debt financing vs equity financing.
The debt ratio which shows how much Largo’s assets are funded by borrowing = 20% (i.e total assets = 5 x total debt) is a healthy situation in the capital-intensive mining industry which indicates that there is room for additional debt financing if necessary. However a low debt ratio doesn’t translate into profitability. Largo is swimming in a sea of red ink. The sp = almost half of the company’s book value. Ilmenite is a good addition but this new revenue stream is too small to make any difference prior to 2025.
Personally I see Largo as a 2-year play with 2025 being our comeback year (note: Last year I thought that 2024 would be our comeback year. So sad) The key catalyst is a strong Vanadium recovery. We need to see V2O5 prices to bounce back to in the US$8.00/lb range for us to see the light at the end of the tunnel providing that management can deliver serious cost cutting measures. Btw, I consider the energy storage pillar dead. Like Bushveld dumping CellCube, I hope that Largo can get rid of LCE/LPV even for a song, the sooner the better.
DYODD