All financial figures are in Canadian dollars unless otherwise stated.
Q1 2019 Highlights
TORONTO, May 14, 2019 /CNW/ - Largo Resources Ltd. ("Largo" or the "Company") (TSX: LGO) (OTCQX: LGORF) announces its first quarter 2019 operational and financial results with 2,099 tonnes of vanadium pentoxide ("vanadium" or "V2O5") produced at an average global V2O5 recovery rate1 of 80% and cash operating costs excluding royalties2 of US$3.41 per pound of V2O5.
Mark Smith, Chief Executive Officer for Largo, stated: "The decline in the price of vanadium and the significant remeasurement of trade receivables under the Company's off-take agreement greatly impacted profitability this quarter. Despite continued pressure on vanadium prices, the operations team successfully completed the kiln refractory replacement ahead of schedule in addition to increasing global recoveries by 5% from the same quarter last year, setting a new quarterly record. Cash operating costs2 for the quarter were 4% lower compared to the same quarter last year and I am very pleased with the team's ability to remain focused on cost discipline at the mine."
"The Company's exploration initiatives are progressing as planned with drilling at the Novo Amparo Norte and Novo Amparo deposits now complete and the commencement of drilling at the São Jose deposit. The Company's work on a new resource estimate for Novo Amparo Norte is now well advanced and we look forward to providing an update to the market towards the end of Q2 2019."
He concluded: "We are committed to implementing a comprehensive capital return program to return cash to our shareholders in the form of dividends and/or the repurchase of shares and/or warrants following the intended repayment of the Company's remaining debt balance of US29.1 million. We intend to communicate the details of the comprehensive capital return program at or before our Annual Meeting of Shareholders in June."
Consolidated Q1 2019 Financial and Operational Results
Three months ended
Direct mine and mill costs
Net income before tax
Income tax expense
Deferred income tax expense
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Cash provided before non-cash working capital items
Net cash provided by operating activities
Net cash (used in) financing activities
Net cash (used in) investing activities
Net change in cash
Maracás Menchen Mine Production
Total Ore Mined (tonnes)
Head Grade of Ore Mined (%)
Ore Grade Mined - Effective Grade (%)6
Effective Grade of Ore Milled (%)
Concentrate Produced (tonnes)
Grade of Concentrate (%)
Contained V2O5 (tonnes)
Crushing Recovery (%)
Milling Recovery (%)
Kiln Recovery (%)
Leaching Recovery (%)
Chemical Plant Recovery (%)
Global Recovery (%)1
V2O5 Produced (Flake + Powder) (tonnes)
V2O5 produced (equivalent pounds)4
Cash operating costs2 per pound produced
Cash operating costs excluding royalties2 per pound produced
First Quarter 2019 Operational Results
Total production from the Maracás Menchen Mine in Q1 2019 was 2,099 tonnes of V2O5, representing a 5% decrease over Q1 2018. Lower production during the quarter was largely due to the completion of the kiln refractory replacement which occurred during the month of March 2019 and resulted in 11 days of production downtime. The kiln was shut down for the refractory replacement from March 12, 2019 until March 31, 2019.
In Q1 2019, 250,109 tonnes of ore with an effective V2O5 grade6 of 1.29% were mined. During the plant shutdown in March 2019, mining, crushing and milling operations continued to increase the concentrate stockpiles necessary for the shutdowns required to tie-in the expansion with the existing plant.
Global V2O5 recovery rates1 averaged 80.0% in Q1 2019 which is an increase of 5% over Q1 2018. This represents a new quarterly record for the Company and contributed to the stable operational performance of the plant during Q1 2019. This higher global recovery rate1 helped reduce the production impact from the kiln refractory replacement shutdown through the production of V2O5 stocks which were processed during this time.
First Quarter 2019 Financial Results
Sales of V2O5 during Q1 2019 were 2,100 tonnes, including 440 tonnes of high purity V2O5. This is an increase in high purity V2O5 sales of 80 tonnes compared with Q4 2018, and an increase of 40 tonnes compared with Q1 2018.
The Company recorded a net loss of $2.2 million in Q1 2019 after the recognition of an income tax expense of $1.1 million and deferred income tax expense of $2.5 million. This compares to net income of $45.8 million in Q1 2018 and is primarily due to a decrease in revenues for the quarter.
The Company recognized revenues of $44.3 million in Q1 2019, compared with $91.1 million in Q1 2018, with production for Q1 2019 of 2,099 tonnes of V2O5 being 115 tonnes lower than the 2,214 tonnes produced in Q1 2018. Vanadium sales from contracts with customers was $101.4 million in Q1 2019, compared with $73.1 million in Q1 2018. This increase is primarily attributable to an increase in the V2O5 price, with the average price per pound of V2O5 of approximately US$16.34 for Q1 2019, compared with approximately US$13.57 for Q1 2018. The overall decrease in revenues is primarily attributable to the remeasurement of trade receivables / payables as a result of the decrease in the V2O5 price from Q4 2018, when the average price was approximately $24.53 (refer to the Company's press release dated April 22, 2019). The valuation of trade receivables at March 31, 2019 resulted in a liability position and has been classified as trade payables.
In addition to the $57.1 million (approximately US$42.9 million) reduction in revenues recorded during Q1 2019 as a result of the remeasurement of trade receivables / payables under the Glencore contract, the Company anticipates recording an additional remeasurement charge of approximately $40.0 million (approximately US$30.0 million) to its revenues over the remainder of fiscal 2019 for sales pertaining to Q1 2019. This assumes a constant V2O5 price per pound of US$8.45 over the remainder of the year (being the average V2O5 price per pound at May 10, 2019).
Operating costs during Q1 2019 of $29.1 million improved when compared to $31.2 million in Q1 2018 and include direct mine and mill costs of $19.5 million, depreciation and amortization of $7.3 million and royalties of $2.3 million. Cash operating costs excluding royalties2 also improved in Q1 2019 to $4.54 (US$3.41) per pound from $4.75 (US$3.76) in Q1 2018, representing a decrease of 4%. The decrease seen in Q1 2019 as compared to Q1 2018 is primarily due to the improved global recovery1 of 80.0% for the quarter largely driven by the global recovery rate1 of 83.1% achieved in January 2019.
Largo Resources' management will host a conference call on Wednesday, May 15, 2019, at 12:00 p.m. EST, to discuss both operational and financial results for the first quarter 2019. In addition, the Company's third-party independent consultant, Mr. Terry Perles, will provide an update on the vanadium market during the call.
Conference Call Details:
Wednesday, May 15, 2019
12:00 p.m. EST
Local / International: +1 (416) 764-8688
North American Toll Free: (888) 390-0546
Brazil Toll Free: 08007621359
Local / International: + 1 (416) 764-8677
North American Toll Free: (888) 390-0541
Replay Passcode: 496092#
To view press releases or any additional financial information, please visit our Investor Relations section of the Largo Resources website at: www.largoresources.com/investors
A playback recording will be available on the Company's website for a period of 60-days following the conference call.
The information provided within this release should be read in conjunction with Largo's unaudited condensed consolidated interim financial statements and management's discussion and analysis for the three months ended March 31, 2019, which are available on our website at www.largoresources.com and on SEDAR.
Technical Disclosure/Qualified Person
Mr. Paul Sarjeant B.Sc. P.Geo., Manager of Geology at Largo Resources is a Qualified Person as defined under National Instrument 43-101 Standards of Disclosure for Mineral Projects and has reviewed the technical information in this press release.
About Largo Resources
Largo is a Toronto-based strategic mineral company focused on the production of vanadium flake, high purity vanadium flake and high purity vanadium powder at the Maracás Menchen Mine located in Bahia State, Brazil. The Company's common shares are principally listed on the Toronto Stock Exchange under the symbol "LGO". For more information on Largo, please visit our website at www.largoresources.com.
Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility for the adequacy or accuracy of this release.
Forward Looking Information
Disclaimer: This press release contains forward‐looking information under Canadian securities legislation. Forward‐looking information includes, but is not limited to, statements with respect to timing for and completion of the Maracás Menchen Mine expansion project and the costs associated therewith; Largo's development potential and timetable of its operating, development and exploration assets; Largo's ability to raise additional funds as may be necessary; the future price of vanadium; the estimation of mineral reserves and mineral resources; conclusions of economic evaluations; the realization of mineral reserve estimates; the timing and amount of estimated future production, development and exploration; costs of future activities; capital and operating expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Generally, forward‐looking statements can be identified by the use of forward‐looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". All information contained in this news release, other than statements of current and historical fact, is forward looking information. Forward‐looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Largo to be materially different from those expressed or implied by such forward looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on SEDAR from time to time. Forward‐looking statements are based on the opinions and estimates of management as of the date such statements are made. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward‐looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward‐looking statements. Largo does not undertake to update any forward‐looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo's annual and interim MD&As.
The Company uses certain non-GAAP financial performance measures in its Management's Discussion and Analysis for the three months ended March 31, 2018, which are described in the following section.
Cash Operating Costs
The Company's press release refers to cash operating costs per pound produced, a non-GAAP performance measure, in order to provide investors with information about a key measure used by management to monitor performance. This information is used to assess how well the Maracás Menchen Mine is performing compared to plan and prior periods, and also to assess its overall effectiveness and efficiency.
Cash operating costs includes mine site operating costs such as mining costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalties and sales, general and administrative costs, but excludes depreciation and amortization, share-based payments, foreign exchange gains or losses, commissions, reclamation, capital expenditures and exploration and evaluation costs. These costs are then divided by the pounds of production from the Maracás Menchen Mine to arrive at the cash operating costs per pound produced.
The measure, along with revenues, is considered to be one of the key indicators of the Company's ability to generate operating earnings and cash flow from its Maracás Menchen Mine. These cash operating costs do not have any standardized meaning prescribed by IFRS and differ from measures determined in accordance with IFRS. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.
In addition, the Company's press release refers to cash operating costs excluding royalties. This is a non-GAAP performance measure and is calculated as cash operating costs less royalties, as disclosed in the following tables.
The following tables provide a reconciliation of cash operating costs per pound produced for the Maracás Menchen Mine to operating costs, excluding depreciation expense as per the Q1 2019 unaudited condensed interim consolidated financial statements.
Three months ended
Professional, consulting and management feesii
Other general and administrative expensesii
Less: depreciation and amortization expensei
Cash operating costs
Cash operating costs excluding royalties
V2O5 flake produced (000s lb)
Cash operating costs per pound produced ($/lb)
Cash operating costs excluding royalties per pound produced ($/lb)
Refer to note 20 in the Company's unaudited condensed interim consolidated financial statements for the three months ended March 31, 2019 and 2018.
Refer to the Mine properties segment in note 16 in the Company's unaudited condensed interim consolidated financial statements for the three months ended March 31, 2019 and 2018.
Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery.
Largo reports non-GAAP measures such as "Cash Operating Costs". Please see information on this non-GAAP measure in the "Non-GAAP Measures" section of this new release.
Defined as current assets less current liabilities per the consolidated statements of financial position.
Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
Refer to Management's Discussion and Analysis for the three months ended March 31, 2018 for exchange rates used.
Effective grade represents the percentage of magnetite in ore mined multiplied by the percentage of V2O5 in the magnetic concentrate.
GAAP – Generally Accepted Accounting Principles.
SOURCE Largo Resources Ltd.
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