Except as otherwise set out herein, all amounts expressed are in thousands of
Q3 2020 Highlights
- Solid financial position: Cash at
September 30, 2020 totaled$74.9 million - Revenues of
$27.5 million , an increase of 14% over Q3 2019 - Revenues per pound sold7 of
$5.37 , a 34% increase over Q3 2019 - Net income of
$2.6 million vs. a net loss of$6.0 million in Q3 2019 - Total sales exceeded production levels in August and
September 2020 for the first time since commercial independence, highlighting successful implementation of the Company's strategy - Cash provided (used) before working capital items of
$4.8 million vs. cash used in Q3 2019 of$3.8 million - Record production of 3,092 tonnes (6.8 million pounds1) of V2O5, an increase of 5.0% over Q3 2019
- Record global V2O5 recovery rate2 of 84.2% in Q3 2020, an increase of 8.0% over Q3 2019
- Continued low-cost operations: Cash operating costs excluding royalties3 of
$3.14 per lb of V2O5, compared with$3.02 per lb in Q3 2019; Total cash costs3 were$3.69 per lb in Q3 2020
Other Significant Highlights
- 2020 cash cost guidance reduced: Cash operating cost excluding royalties3 guidance lowered to
$2.60 –$2.80 / lb V2O5 from$3.05 –$3.25 / lb; Total cash cost3 guidance lowered to$3.20 to$3.40 / lb V2O5 from 3.45 –$3.65 / lb - Postponing cost-efficient nameplate capacity increase to Q1 2021: Planned kiln upgrades and cooler maintenance that will increase Largo's production capacity by 10% with a CAPEX of only
$1.3 million are postponed to Q1 2021 due to COVID-19 restrictions - Focus on safe business continuity: On track to meet lower end of 2020 production guidance with strong production results expected in Q4 2020; 2020 sales guidance maintained
- 2020 drilling program update: Drilling was ramped up in Q3 2020 with 14,007 metres (80 holes) completed
A summary of the Company's operational and financial performance in Q3 2020 is provided in the tables below.
Effective
Financial
Three months ended | Nine months ended | ||||||||||||||||||||||
2020 |
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Revenues | $ | 27,474 | $ | 24,131 | $ | 77,733 | $ | 79,299 | |||||||||||||||
Operating costs | (20,977) | (23,673) | (56,786) | (70,271) | |||||||||||||||||||
Direct mine and production costs | (11,354) | (16,691) | (31,028) | (48,058) | |||||||||||||||||||
Net income (loss) before tax | 3,352 | (6,852) | 1,700 | (20,968) | |||||||||||||||||||
Income tax (expense) recovery | (421) | 724 | (421) | (8) | |||||||||||||||||||
Deferred income expense | (382) | 179 | (1,399) | (1,690) | |||||||||||||||||||
Net income (loss) | 2,549 | (5,949) | (120) | (22,666) | |||||||||||||||||||
Basic earnings (loss) per share | 0.00 | (0.01) | (0.00) | (0.04) | |||||||||||||||||||
Diluted earnings (loss) per share | 0.00 | (0.01) | (0.00) | (0.04) | |||||||||||||||||||
Cash provided (used) before non-cash working capital items | $ | 4,820 | $ | (3,809) | $ | 4,526 |
$ | 7,888 | |||||||||||||||
Net cash (used in) provided by operating activities | 382 | 6,376 | (64,249) | 95,247 | |||||||||||||||||||
Net cash provided by (used in) financing activities | 126 | (21,510) | 27,643 | (94,560) | |||||||||||||||||||
Net cash (used in) investing activities | (4,435) | (11,896) | (13,036) | (32,251) | |||||||||||||||||||
Net change in cash | (3,320) | (28,749) | (52,604) | (34,614) | |||||||||||||||||||
As at | |||||||||||||||||||||||
2020 |
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Cash | $ | 74,895 | 127,499 | ||||||||||||||||||||
Debt | 24,788 | - | |||||||||||||||||||||
Working capital4 | 84,671 | 78,380 | |||||||||||||||||||||
Operational
Maracás Menchen Mine Production | Q3 2020 | Q3 2019 | |
Total Ore Mined (tonnes) | 287,969 | 267,257 | |
Ore Grade Mined - Effective Grade5 (%) | 1.28 | 1.52 | |
Effective Grade of Ore Milled5 (%) | 1.26 | 1.44 | |
Concentrate Produced (tonnes) | 104,921 | 92,629 | |
Grade of Concentrate (%) | 3.32 | 3.26 | |
Contained V2O5 (tonnes) | 3,487 | 3,016 | |
Crushing Recovery (%) | 98.1 | 96.5 | |
Milling Recovery (%) | 96.5 | 97.0 | |
Kiln Recovery (%) | 92.5 | 88.8 | |
Leaching Recovery (%) | 99.7 | 97.2 | |
Chemical Plant Recovery (%) | 96.4 | 96.7 | |
Global Recovery (%)2 | 84.2 | 78.1 | |
V2O5 produced (Flake + Powder) (tonnes) | 3,092 | 2,952 | |
V2O5 produced (equivalent pounds)1 | 6,816,685 | 6,508,038 | |
Cash operating costs per pound3 | $ | ||
Cash operating costs excluding royalties3 per pound | $ | ||
Total cash costs3 | $ | ||
Revenues per pound sold 7 | $ |
Third Quarter 2020 Financial Performance
In Q3 2020, the Company recognized revenues of
The Company recorded net income of
Operating costs for Q3 2020 were
Cash operating costs excluding royalties3 in Q3 2020 were
In Q3 2020, cash provided before working capital items was
The Company's trade payables balance at
Third Quarter 2020 Operational Performance
Q3 2020 production of 3,092 tonnes of V2O5 was a new quarterly production record for the Company, being 5% higher than Q3 2019 and 3% higher than the previous record of 3,011 tonnes in Q4 2019. V2O5 production in
The global recovery2 record of 84.2% achieved in Q3 2020 was 8% higher than the 78.1% achieved in Q3 2019 and 4% higher than the 80.8% achieved in Q2 2020. This is primarily due to the completion of continuous improvement projects in the plant that focused on recovery levels. This was highlighted by the performance of the kiln and leaching areas in Q3 2020, with record quarterly recovery levels of 92.5% and 99.7%, respectively, being achieved. The global recovery2 in
In Q3 2020, 287,969 tonnes of ore were mined with an effective grade5 of 1.28% of V2O5. The ore mined in Q3 2020 was 8% higher than in Q3 2019 and 12% higher than in Q2 2020, which was impacted by the COVID-19 restrictions put in place as well as operational restrictions due to the rainy season. The Company produced 104,921 tonnes of concentrate with an effective grade5 of 3.32%. The operational performance in Q3 2020 has remained in-line with the Company's plans despite the COVID-19 restrictions put in place.
The Company's planned upgrades to the kiln and improvements in the cooler to increase nameplate capacity to 1,100 tonnes of V2O5 per month are now scheduled for Q1 2021 as a result of precautionary measures taken by the Company in light of the COVID-19 pandemic.
Successful Sales Strategy Implementation – Strong Sales Results in August and
The Company progresses its sales strategy for 2020 is in line with expectations, highlighted by V2O5 equivalent sales of 1,062 tonnes in
For Q3 2020, the average price per lb of V2O5 in
Exploration Drilling Program Ramped Up in Q3 2020
After delays experienced in early 2020 due to the COVID-19 pandemic, exploration drilling was ramped up and 14,007 metres of drilling (80 holes) was completed in Q3 2020. Drilling focused on definition drilling at Novo Amparo Norte, Gulcari A Norte and additional drilling at the
The Company does not anticipate any further disruptions to the overall 2020 exploration plan. The São José and
Conference Call
Conference Call Details:
Date: | |
Time: | |
Dial-in Number: | Local / International: +1 (416) 764-8688 |
North American Toll Free: (888) 390-0546 | |
Brazil Toll Free: 08007621359 | |
Conference ID: | 63665793 |
Replay Number: | Local / International: + 1 (416) 764-8677 |
North American Toll Free: (888) 390-0541 | |
Replay Passcode: 537676 # | |
Website: | To view press releases or any additional financial information, please visit the Investor Relations section of the |
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 interim consolidated financial statements for the three and nine months ended
About
Neither the
Forward Looking Information
This press release contains forward-looking information under Canadian securities legislation, some of which may be considered "financial outlook" for the purposes of application Canadian securities legislation ("forward-looking statements"). Forward–looking information in this press release includes, but is not limited to, statements with respect to the timing and amount of estimated future production and sales; costs of future activities and operations; the extent of capital and operating expenditures; and the extent and overall impact of the COVID-19 pandemic in
Trademarks are owned by
Non-GAAP8 Measures
The Company uses certain non-GAAP financial performance measures in its press release and Management's Discussion and Analysis for the three and nine months ended
Revenues Per Pound
The Company's press release refers to revenues per pound sold, a non-GAAP performance measure that is used to provide investors with information about a key measure used by management to monitor performance of the Company.
This measure, along with cash operating costs and total cash costs, is considered to be one of the key indicators of the Company's ability to generate operating earnings and cash flow from its Maracás
The following table provides a reconciliation of this measure per pound sold to revenues as per the Q3 2020 unaudited condensed interim consolidated financial statements.
Three months ended | Nine months ended | ||||||||||||
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Revenuesi | $ | 27,474 | $ | 24,131 | $ | 77,733 | $ | 79,299 | |||||
V2O5 equivalent sold (000s lb) | 5,115 | 5,997 | 14,348 | 16,094 | |||||||||
Revenues per pound sold ($/lb) | $ | 5.37 | $ | 4.02 | $ | 5.42 | $ | 4.93 | |||||
i. | As per note 21 in the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended |
Cash Operating Costs Per Pound
The Company's press release refers to cash operating costs per pound, 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
Cash operating costs includes mine site operating costs such as mining costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalties, distribution costs and sales, general and administrative costs (all for the mine properties segment), but excludes depreciation and amortization, share-based payments, foreign exchange gains or losses, commissions, reclamation, capital expenditures and exploration and evaluation costs. Operating costs not attributable to the mine properties segment are also excluded, including product acquisition costs and inventory write-downs. These costs are then divided by the pounds of vanadium sold that were produced by the Maracás
These measures, along with revenues, are considered to be one of the key indicators of the Company's ability to generate operating earnings and cash flow from its Maracás
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 table.
The following table provides a reconciliation of cash operating costs per pound for the Maracás
Three months ended | Nine months ended | |||||||||
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Operating costsi | $ | 20,977 | $ | 23,673 | $ | 56,786 | $ | 70,271 | ||
Professional, consulting and management feesii | 853 | 1,321 | 2,123 | 3,468 | ||||||
Other general and administrative expensesii | 390 | 111 | 1,155 | 602 | ||||||
Less: product acquisition costsi | (3,877) | - | (7,180) | - | ||||||
Less: inventory write-downiii | - | - | (317) | - | ||||||
Less: depreciation and amortization expensei | (3,264) | (5,601) | (11,745) | (17,762) | ||||||
Cash operating costs | 15,079 | 19,504 | 40,822 | 56,579 | ||||||
Less: royaltiesi | (1,552) | (1,381) | (5,149) | (4,451) | ||||||
Cash operating costs excluding royalties | 13,527 | 18,123 | 35,673 | 52,128 | ||||||
Produced V2O5 sold (000s lb) iv | 4,310 | 5,997 | 13,195 | 16,094 | ||||||
Cash operating costs per pound ($/lb)iv | $ | 3.50 | $ | 3.25 | $ | 3.09 | $ | 3.52 | ||
Cash operating costs excluding royalties per pound ($/lb) iv | $ | 3.14 | $ | 3.02 | $ | 2.70 | $ | 3.24 | ||
i. | As per note 22 in the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended |
ii. | As per the Mine properties segment in note 18 in the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended |
iii. | As per note 7 in the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended |
iv. | Cash operating costs per pound and cash operating costs excluding royalties per pound for Q3 2019 were previously calculated and presented on a pounds produced basis (V2O5 produced (000s lb) = 6,508; V2O5 sold (000s lb) = 5,997). These measures have been calculated and presented on a pounds sold basis in this MD&A. |
Total Cash Costs
The Company's press release refers to total cash costs, 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 Company is performing at producing and selling vanadium products compared to plan and prior periods, and also to assess its overall effectiveness and efficiency.
Total cash costs are a non-GAAP performance measure that includes all operating costs, sales and distribution costs and the Company's total professional, consulting and management fees and other general and administrative expenses. Total cash costs exclude royalties, depreciation and amortization, share-based payments, foreign exchange gains or losses, commissions, reclamation costs, exploration and evaluation costs and capital expenditures. These costs are then divided by the total pounds of vanadium sold by the Company to arrive at total cash costs.
This measure differs from cash operating costs per pound in that it includes all operating costs, sales and distribution costs, professional, consulting and management fees and other general and administrative expenses, rather than just those from the Mine properties segment, and is calculated on total V2O5 equivalent pounds sold rather than pounds sold that were produced by the Maracás
This total cash costs measure does not have any standardized meaning prescribed by IFRS and differs from measures determined in accordance with IFRS. This measure is 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. This measure is not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.
The following table provides a reconciliation of total cash costs to operating costs as per the Q3 2020 unaudited condensed interim consolidated financial statements.
Three months ended | Nine months ended | |||
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Operating costsi | $ | 20,977 | $ | 56,786 |
Professional, consulting and management feesii | 2,094 | 5,026 | ||
Other general and administrative expensesii | 643 | 2,302 | ||
Less: depreciation and amortization expensei | (3,264) | (11,745) | ||
Less: royalties1 | (1,552) | (5,149) | ||
$ | 18,898 | $ | 47,220 | |
V2O5 equivalent sold (000s lb) | 5,115 | 14,348 | ||
Total cash costs ($/lb) | $ | 3.69 | $ | 3.29 |
i. | As per note 22 in the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended |
ii. | As per the condensed interim consolidated statement of income (loss) and comprehensive income (loss) in in the Company's unaudited condensed interim consolidated financial statements for the three and nine months ended |
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1 | Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs. |
2 | Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery. |
3 | The cash operating costs per pound sold, cash operating costs excluding royalties per pound sold and total cash costs reported are on a non-GAAP basis. Refer to the "Non-GAAP Measures" section of this press release. |
4 | Defined as current assets less current liabilities per the consolidated statements of financial position. |
5 | Effective grade represents the percentage of magnetic material mined multiplied by the percentage of V2O5 in the magnetic concentrate. |
6 | The cash operating costs per pound and cash operating costs per pound excluding royalties in Q3 2019 are per pounds produced and are on a non-GAAP basis. Refer to the "Non-GAAP Measures" section of the Company's management discussion and analysis for the three and nine months ended |
7 | Revenues per pound sold is calculated based on the quantity of V2O5 sold during the stated period. Refer to the "Non-GAAP Measures" section of this press release. |
8 | GAAP – Generally Accepted Accounting Principles. |
SOURCE
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