In the Q4-23 CC, Cleave said: “Obviously, at the current prices we're seeing $5.90 on the market, we will not be making cash at those levels”. The key word here is “Cash”. And “not making cash”is a very serious situation that we can not afford to be facing.
Note that In 2023, although Largo incurred a Net Loss before tax, the company still had a positive EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and still was able to generate Cash from its operating activities as illustrated below.
US$
| Period | Average Benchmark Euro V2O5 prices | EBITDA | Net Cash from Operating Activities | Net (Loss) before Tax |
| Q4-23 | $6.46/lb | $1.4M | $5.9M | ($16.4M) |
| FY-23 | $8.33/lb | $12.1M | $21.2 | ($35.0M) |
| As at March 27-2024 | $5.90/lb | | | |
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.