Largo Inc T.LGO

Tax (Expense) and Deferred Tax (Expense) / Recovery

[kha341]

The following tables show that the “Income Tax (Expense)” and “Deferred Income Tax (Expense) / Recovery” booked for Q2-21 and Q3-21 seem to be outliers as they are very high considering the Income Before Tax of the same Q (40.4% and 31.8% respectively). How can any company survive such high rates / % of Income Tax / Deferred Income Tax? These two tax items are key for us to meet or miss the analyst consensus EPS for Q4-21. I would love to see a Tax Recovery (instead Tax Expense) for Q4. DYODD

	Income before tax C$	Tax & Deferred Tax	Percentage
Q1-18	49.5M	(3.7M)	7.4%
Q2-18	50.3M	40.4M Recovery
Q3-18	91.7M	(20.3M)	22.1%
Q4-18	131.2M	(23.1M)	17.6%
Full Year 2018	322.7M	(6.7M)	2%

	Income before tax C$	Tax & Deferred Tax	Percentage
Q1-20	3.9M	0.6M Recovery
Q2-20	(5.5M) Loss	(1.48M)
Q3-20	3.3M	(0.83)	24%
Q4-20	6.0M	0.86M Recovery
Full Year 2020	7.7M	(0.96M)	12.4%

	Income before tax C$	Tax & Deferred Tax	Percentage
Full Year 2018	322.7M	(6.7M)	2%
Full Year 2020	7.7M	(0.96M)	12.4%
Q1-21	4.5M	(0.3M)	6.8%
Q2-21	14.2M	(5.7M)	40.4%
Q3-21	13.5M	(4.3M)	31.8%
Q4-21	???	expense/recovery?	???

[kha341]

Should read US$ The following tables show that the “Income Tax (Expense)” and “Deferred Income Tax (Expense) / Recovery” booked for Q2-21 and Q3-21 seem to be outliers as they are very high considering the Income Before Tax of the same Q (40.4% and 31.8% respectively). How can any company survive such high rates / % of Income Tax / Deferred Income Tax? These two tax items are key for us to meet

[kha341]

Sorry. Expressed in US$ except for 2018 The following tables show that the “Income Tax (Expense)” and “Deferred Income Tax (Expense) / Recovery” booked for Q2-21 and Q3-21 seem to be outliers as they are very high considering the Income Before Tax of the same Q (40.4% and 31.8% respectively). How can any company survive such high rates / % of Income Tax / Deferred Income Tax? These two tax

[screamer99]

Deferred income tax is largely a non-cash figure and is the difference between accounting and tax book values of capital assets (e.g., impacted by depreciation and capital cost tax deductions). There will/should be no recovery in Q4. The deferred tax asset continues to be drawn down and may even turn into a deferred tax liability. Of the two, I'd only be concerned with the income taxes as a

[kha341]

1) In Q2-18 Income Before Tax = C$50.3M and we had an Income Tax Expense of (C$5.2M) and also a Deferred Tax Recovery of C$45.6M resulting in an Income After Tax of C$90.7M.  2) Income Before Tax minus (Income Tax + Deferred Tax) = Income After Tax. And Income After Tax is used to calculate the company’s EPS to be compared with the analyst consensus EPS. Of course Deferred Tax is non-cash

[kha341]

Btw, in Q4-20 we had an Income Tax Recovery of US$0.28M and a Deferred Income Tax Recovery of US$0.58 for a total Recovery of US$0.86M

[screamer99]

I'm not disagreeing with the EPS calc, just pointing out its volatility due to deferred taxes (which is difficult for any analyst to predict). The average V price in Q4-20 was just north of $5, which isn't the case. There will be no tax recovery in Q4-21 and there shouldn't be with a profitable company.

[kha341]

We are talking about 2 different items here: Income Tax Recovery (Expense) and Deferred Income Tax Recovery (Expense). As you know the “Deferred” item has nothing to do with profitability. The year 2018 was the most profitable year for Largo. In Q2-18 alone Largo was making a truck load of earnings (C$50.3M in Income Before Tax) and the company also booked C$45.6M in Deferred Income Tax Recovery

[screamer99]

It is out of the question. We differ in opinion. With prior year losses, the deferred income tax asset (loss carry forwards) were not recognized on the books until there was some certainty into profitable years which only came later and this was the result of the deferred income tax recoveries in later years. The asset is now being drawn down which results in a deferred income tax expense. Add