Largo Inc T.LGO

Winning From Higher Vanadium Prices

[zutfie]

Winning From Higher Vanadium Prices, Largo Resources Expands Into The Clean Energy Storage (VRFB Production) Market

US energy storage installations grew a massive 182% QoQ in Q4 2020. BloombergNEF forecasts a 122x increase in global energy storage from 2018 to 2040. WoodMac forecasts global energy storage capacity to grow at a CAGR of 31% through 2030. One of the more exciting areas of energy storage is vanadium redox flow batteries (VRFB) as they are able to hold a longer duration of energy storage for aggressive cycling as well as lasting longer (>20 years or > 10,000 cycles) and are ideally suited for large scale utility style energy storage typically combined with a wind or solar farm.

 

As the vanadium price continues to recover (Europe Vanadium Pentoxide (V2O5) now at US$9.70) the vanadium miners are starting to do very well again. One key area for the vanadium miners to gain a greater share of the profits is by moving into value-add products such as making energy storage products such as vanadium redox flow batteries (VRFB).

 

Today’s company is doing just that.

 

Largo Resources Ltd. (TSX: LGO | NASDAQ: LGO) (“Largo”) is best known for its successful very low cost vanadium producing Maracs Menchen mine in Brazil. The Maracs Menchen mine has industry leading grades of 1.17% vanadium pentoxide (V2O5). Production in Q2, 2021 achieved 3,070 tonnes of V2O5. At that run rate, Largo is on track to hit its 2021 guidance of 12-12,500 tonnes pa in 2021. Costs are guided at US$3.30–3.50/lb V2O5 and are also on track.

 

Largo has recently begun commissioning of the Company’s vanadium trioxide (V2O3) processing plant and production is expected by the end of Q3, 2021. V2O3 is an important high purity material required in the manufacturing of master alloys, chemical products and electrolyte used in VRFB.

 

Largo Clean Energy (“LCE”)

 

Largo Clean Energy plans to become a leading supplier of safe, durable, long-duration grid-scale vanadium redox flow batteries (VRFB) for the fast growing global energy storage market.

 

On July 20, 2021, the Company announced that LCE entered into its first VCHARGE± VRFB system sales contract with Enel Green Power Espaa (EGPE). Under the contract, LCE is obligated to deliver a 5 hour 6.1 MWh VCHARGE± system for a project in Spain with expected commissioning in Q4 2022, subject to receipt of notice to proceed from EGPE within the next 180 days. Note that the notice to proceed has now been issued.

 

Largo’s updated report on their Clean Energy division states:

 

“During Q2 2021, Largo Clean Energy Corp. (“LCE”) remained focused on obtaining certification of its VCHARGE± VRFB system under UL1973 and UL9540 requirements to support expected 2022 project deployments. In addition, building modifications of its product development and stack manufacturing center are expected to commence shortly which will enable the installation and commissioning of stack manufacturing capacity and test equipment. The Company continues the hiring of additional personnel to support the achievement of its set targets and timelines.”

 

Regarding the Enel contract and Largo Clean Energy business, Paulo Misk, President and Chief Executive Officer of Largo, stated: “We are excited to have been selected by Enel Green Power Espaa as the preferred energy storage solution partner on this project. Integrating Largo’s leading high purity vanadium production with the disruptive capabilities of our VCHARGE± system, including superior performance, long life, optimal cost structure and proven durability, should position Largo as an emerging leader in the VRFB industry……The world is in need of clean and safe long-duration energy storage and we believe our VCHARGE± system can be a significant part of this solution going forward. We look forward to the successful deployment of this system.”

 

Closing remarks

 

Largo Resources continues to fire on all cylinders. V2O5 production and cost guidance are on track in 2021 which should lead to a very profitable year boosted by rising V2O5 prices in 2021.

 

Furthermore, Largo’s expansion into clean energy storage (VRFB production) is already starting to potentially deliver results with a large contract to supply Enel Green Power in Spain with Largo’s VCHARGE± VRFB system. As time goes by this will potentially add a second value-add revenue for Largo, assuming the initial success with Enel continues. Largo did also state that “advanced discussions with additional energy storage customers ongoing”.

 

argo Resources trades on a market cap of C$1.3 billion and the future looks very bright indeed, especially if VRFBs become increasingly more popular. It looks likely VRFBs will be needed in order to meet the BNEF forecast 122x increase in global energy storage demand from 2018 to 2040 and the global move towards renewable energy and zero emissions targets. Don’t miss this one.

 

www.ferroalloynet.com

[kha341]

Try this link https://investorintel.com/markets/technology-metals/technology-metals-intel/winning-from-higher-vanadium-prices-largo-resources-expands-into-the-clean-energy-storage-vrfb-production-market/

[st_esteban]

It would be interesting to know Largo's strategy in relation to leasing the Vanadium electrolite vs selling V itself.... When V prices are low leasing looks very good for both Largo and the utilities companies (might look better from a Largo's point of view).  Largo is able to lease V at an equivalent higher price.   This secures Largo steady  revenue for the future. 

[kha341]

If V prices were high they would make VRFB uneconomic thus very unlikely that Largo could be selling its batteries into the market. Leasing is a more affordable financial solution when V prices are high. You should read the following 2 articles: 1) Are lower vanadium prices triggering a wave of giant new VRFB developments? https://stockhead.com.au/resources/are-lower-vanadium-prices

[jcw604]

This is with assumption that lithium price stays constant, but the fact is that they probably appreciate together because of the printing of money.

[st_esteban]

thank you Kha and Dr. for your replies I agree that if Largo leases a significant portion of its V at a reasonable price this will provide the company with a steady and significant source of income. This also builds wealth since Largo still owns the V.  Also, this will serve as a hedge for inflation. If prices are high it makes VRFB uneconomic but there is also a point where the leasing

[ninja123]

while i still have a massive problem with thei rmanagement style and lack of communication .. long term leases will get a significant mkt multiple uplift .. it will also allow the balance sheet to leverge up for expansion of the current footprint to increase output.  these guys piss me off .. but, i am MAXXXXXX long going into earnings - i have the largest position on that i have had since q4

[kha341]

Simply put: If V prices were high, VRFB would not be viable. In a situation where V prices are high (above US$12/lb) it would be very difficult for the VRFB market to survive without the leasing option. Leasing is the only viable financial solution against high V prices. So I disagree with your statement "When V prices are high, Largo might be better off selling into the market” vs leasing.

[st_esteban]

too high for leasing to be economic Leasing is not an option if the charges for leasing keep increasing. If you lease something and your cost is manageable  for the duration of the lease then you don't care  about the cost.  But if you are considering leasing then the price is oneof the biggest factors you will consider. if you need a car (Vanadium in our case),you have 3

[kha341]

How does your argument above support the following statements of yours? "When V prices are low leasing looks very good for both Largo and the utilities companies (might look better from a Largo's point of view)....When V prices are high, Largo might be better off selling into the market to make a profit right away"

[kha341]

Charges for leasing keep increasing? Not sure what you are talking about.  Even when you lease a car the periodic payments don’t increase during the duration of the leasing contract, do they? Clients can lease vanadium / electrolyte / battery from Largo/LCE in exchange for periodic payments thereby reducing upfront costs. Largo/LCE’s leasing arrangements are long term.

[st_esteban]

You are reading too much into it and missing the message.  Please read carefully my posts.

[kha341]

With all due respect I don't agree with the following message in your original post.  Do you stand behind it or not? "When V prices are low leasing looks very good for both Largo and the utilities companies (might look better from a Largo's point of view)....When V prices are high, Largo might be better off selling into the market to make a profit right away"

[st_esteban]

Yes. There are two sides to leasing, Largo's and the leasing company. When prices are high   Largo's side: - is able to make a large profit by selling directly to the market - is willing to lease V electrolite as long as the price(see the 3 components that go into price in previous post) it will receive is comparable to the price is able to receive directly fromthe market

[kha341]

In our dreams.  If V prices are high VRFB would not be viable economically and could not compete with lithium-ion batteries therefore the chances of LCE being able to sell its products would be extremely slim to say the least. That’s the reason behind the introduction of the leasing option. 1) "At last year’s +$US30/lb prices for V2O5, it didn’t matter how good VRFB was. It just

[st_esteban]

Why "in our dreams"? I am not talking about LCE being able to generate new leases...my point is that the number of new leases will go down when V prices are too high BUT the 'standard' Largo is able to sell V directly to the market...if this is not possible then why would the prices will be high? Largo as a company will make tons of money from direct selling to the market

[kha341]

So you are talking about Largo mining operations selling V products directly to the traditional steel market when V prices are high. Now I understand. It goes without saying that a high V price certainly makes Largo’s mining operations very profitable (e.g 2018 results). It goes without saying that our mining operations continue selling into the traditional V market for the LoM. It also goes

[kha341]

Alternative solution? 1) "At last year’s +$US30/lb prices for V2O5, it didn’t matter how good VRFB was. It just couldn’t compete with lithium-ion on price" 2)" Vanadium batteries are not viable at V2O5 prices over $US10/lb “in any form”, says David Gillam of consultancy Mastermines, but prices below this should spark the battery sector into action" 3) "...When prices

[st_esteban]

#9 is a summary of my point "lease vanadium, or secure its supply at “reasonable” prices" Remember this statement refers to new deals.  In the case of companies selling VRFB they need to recover the cost of V. Even for Largo if it wants to sell its VRFB it needs to get back the market price for V.  Therefore, when V priceis too high no companywillbe able to sell. In the case