[Ferro-Alloys.com] Largo Reports 2021 Net Income of $22.6 Million and Strong Financial Position; Focused on “Two-Pillar” Strategy as a Leading Vanadium Supplier Benefiting from Strong Vanadium Fundamentals with an Emerging Clean Energy Division

All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated.

Full Year 2021 Highlights

• Revenues of $198.3 million, a 65% increase over 2020; Revenues per pound sold¹ of $7.89, a 49% increase over 2020
• Net income of $22.6 million vs. net income of $6.8 million in 2020; Basic earnings per share of $0.35 vs. $0.12 per share in 2020
• Cash balance of $83.8 million exiting 2021 and a net working capital surplus of $118.3 million
• Annual V₂O₅ production 10,319 tonnes (22.7 million lbs)³ vs. 11,825 tonnes (26.0 million lbs)³ in 2020
• Annual operating costs of $133.0 million vs. $88.4 million in 2020, and cash operating costs excluding royalties per pound¹ of V₂O₅ equivalent sold of $3.37 vs. $2.56 in 2020; 5% above 2021 annual guidance for cash operating costs excluding royalties per pound¹
• Total V₂O₅ equivalent sales of 11,393 tonnes, an 11% increase over 2020
• Issued 3^rd annual Sustainability Report covering the Company’s new performance targets and disclosures and vanadium’s role in the global green economy; The Company continued to improve its overall Environmental, Social and Governance (“ESG”) strategy now reflected in improved ratings and scores
• Largo Clean Energy (“LCE”) entered into its first battery sales contract with Enel Green Power España. LCE will deliver a 5-hour 6.1 MWh VCHARGE System and it received a notice to proceed on July 30, 2021
• Additional units of sustainably produced vanadium secured through offtake agreement with Gladieux Metals Recycling ("GMR"): In November 2021, the Company's subsidiary, Largo Resources USA Inc., signed a 10-year exclusive off-take agreement with GMR for the purchase of all standard and high purity grade vanadium products from GMR's recycling facility located in Freeport, Texas
• The Company completed the construction and ramp up of its vanadium trioxide (“V₂O₃”) plant on budget in Q4 2021 and provided samples to prospective clients for product specification analysis. The Company began the process of shipping V₂O₃ to customers in Q1 2022

Q4 2021 Highlights

• Revenues of $50.3 million, 19% above Q4 2020; Revenues per pound sold^i,ii of $7.88, a 54% increase over Q4 2020
• Net income of $0.8 million vs. net income of $6.9 million in Q4 2020; Basic earnings per share of $0.01 vs. $0.12 per share in Q4 2020
• Operating costs of $37.7 million vs. $31.6 million in Q4 2020, and cash operating costs excluding royalties per pound¹ of V₂O₅ equivalent sold of $3.68 vs. $2.56 in Q4 2020

Vanadium Market Update³

• The average benchmark price per kg of ferrovanadium in Europe is up approximately 90% and, in the U.S., up approximately 100% since the start of 2022; The average benchmark price per pound of V₂O₅ in Europe was $12.25 as of March 11, 2022, up approximately 40% since the start of 2022
• Demand remains strong in all the Company’s key markets and the Company expects additional pressure on overall vanadium supply as a result of ongoing global logistical challenges and geopolitical tensions
• The average benchmark price per pound of V₂O₅ in Europe was $8.30 in Q4 2021, a 57% increase from the average of $5.29 seen in Q4 2020; The average benchmark price for 2021 was $8.24, a 44% increase from the average of $5.71 for 2020
• The average benchmark price per kg of ferrovanadium in Europe was $32.29 in Q4 2020, a 33% increase from the average of $24.36 seen in Q4 2020; The average benchmark price for 2021 was $34.31, a 37% increase from the average of $24.99 for 2020

Largo Inc. today released financial and operating results for the three and twelve months ended December 31, 2021. The Company reported annual vanadium pentoxide (“V2O5”) equivalent sales of 11,393 tonnes at a cash operating cost excluding royalties per pound1 of $3.37. 2021 revenues increased 65% to $198.3 million compared to 2020 mainly due to a strengthening of vanadium prices and an increase in annual sales.

Paulo Misk, President and CEO of Largo, stated: “The Company generated net income of $22.6 million in 2021 versus $6.8 million last year, aided by a 44% in the average European V2O5 price and a 37% increase ferrovanadium benchmark price3. The improvement in vanadium prices allowed Largo to end the year on a positive note despite some operational challenges experienced during the year, particularly in Q4 2021 with abnormally high rainfall at our vanadium production operations in Brazil.”

He continued: “2021 was an important year for Largo as we continued to focus our efforts on maximizing value for the Company with our “two-pillar” strategy, which presents a very compelling value proposition for our shareholders. Firstly, investors should expect to benefit from the rising profitability of our established vanadium supplier business as we enter what we believe to be a bull market for vanadium. Secondly and over time, investors are expected to benefit from the incremental earnings from the manufacture and sale of our vanadium-based energy storage systems in the context of a remarkable growth projection for long-duration storage needs over the next five years. In support of this, our recently filed technical report outlines a significant growth and optimization plan for our Maracás Menchen Mine, supported by enhanced cash flows from the expected expansion of vanadium production and sale of titanium dioxide pigment. We also remain optimistic that the ongoing work to advance Largo Physical Vanadium Corp. could provide potential advantages for Largo and its energy storage business.”

He concluded: “Largo remains a key global player in the vanadium sector through the production and supply of some of the world’s highest quality vanadium. Looking ahead, the Company expects a structural vanadium supply deficit to persist as new economy use-cases emerge and vanadium redox flow batteries begin to play a bigger role in addressing the need for long duration energy storage. The Company plans to continue capitalizing on current trends in the vanadium market which should support the successful execution of its growth plans over the coming years.”

Maracás Menchen Mine Operational and Sales Results

Annual 2021 Financial Highlights

• During 2021, the Company recognized revenues of $198.3 million from sales of 11,393 tonnes of V₂O₅ equivalent (2020 – 10,260 tonnes). This represents a 65% increase in revenues over 2020 ($120.0 million) mainly due to higher vanadium prices and sales in 2021.
• Operating costs of $133.0 million in 2021 (2020 – $88.4 million) include direct mine and production costs of $75.1 million (2020 – $48.9 million). The increase in direct mine and production costs is primarily attributable to an increase in sales, the impact of a lower global recoveries, the impact of abnormally elevated levels of rainfall experienced in Q4 2021, which negatively impacted the operational performance and increased costs for critical consumables, including heavy fuel oil (“HFO”) and diesel.
• Cash operating costs excluding royalties per pound¹ were $3.37 in 2021, compared with $2.56 in 2020. The increase seen in 2021 compared with 2020 is largely due to the reasons as noted above.
• The Company recorded net income of $22.6 million in 2021, representing an 232% increase over net income of $6.8 million in 2020, primarily due to a 65% increase in revenues.
• Professional, consulting and management fees were $17.9 million in 2021, compared with $8.3 million in 2020. The increase is primarily attributable to costs incurred during the year in connection with Largo Clean Energy (“LCE”). In addition, the Company’s corporate segment continued to incur increased insurance, legal, regulatory and compliance costs in Q4 2021 as a result of the Nasdaq listing earlier in 2021, U.S. regulatory requirements and ongoing strategic initiatives.
• Technology start-up costs relate to activities at LCE focused on supporting the future deployments of its VCHARGE vanadium redox flow battery system (Q4 2021 – $2.4 million and 2021 – $3.1 million) and costs related to initial activities for the Company’s titanium project (Q4 2021 and 2021 – $0.7 million).
• Other general and administrative expenses were $6.4 million in 2021, compared with $3.3 million in 2020. The increase is primarily attributable to costs incurred in connection with LCE that was not fully operational in 2020. This contributed to the increases seen in travel, occupancy, information technology, depreciation and amortization and office costs. 

Additional Corporate Updates

• Creation of Largo Physical Vanadium Corp.: On February 3, 2022, the Company announced the creation of Largo Physical Vanadium Corp. and a proposed qualifying transaction pursuant to the policies of the TSX Venture Exchange with Column Capital Corp., a capital pool company, the terms of which are set out in a non-binding letter of intent dated February 1, 2022. Upon completion of the proposed qualifying transaction and subject to receipt of applicable regulatory approvals, among other things, it is anticipated that the resulting issuer will be named Largo Physical Vanadium Corp. and will become a publicly-listed physical vanadium holding company that will purchase and hold physical vanadium, among other things, for use in the Company's VCHARGE batteries.
• Growth and Optimization of the Maracás Menchen Mine Presented in Updated Technical Report Reflects Increased Value of Largo’s Vanadium-Titanium Plans: On November 3, 2021, the Company announced the results of an updated mining plan for its Maracás Menchen Mine to provide enhanced access to the vanadium needed for the Company to continue to execute on its energy storage transition strategy. The updated technical report highlights a $2.0 billion after-tax NPV7 and $4.2 billion after-tax life of mine cash flow from the expected increase in V₂O₅ production and future production and sale of titanium dioxide pigment. An independent technical report has been prepared and filed in respect of the Company’s Maracás Menchen Mine in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101").
• ESG Progress in 2021: The Company continues to improve its overall ESG performance and public disclosures, as described in Largo’s 2020 Sustainability Report issued in August 2021. This is reflected in improved ratings and scores received in 2021 such as MSCI (improved from BBB to A) and EcoVadis (improved from 44/100 to 60/100 – top 83% percentile of mining respondents). Largo began its journey towards net zero by identifying the main sources of greenhouse gas (“GHG”) emissions and reporting on Scope 1 and Scope 2 in its 2020 Sustainability Report. The Company continues to explore opportunities for the reduction of its Scope 1 and 2 GHG emissions reductions and is reviewing the use of carbon offsets to reduce its Scope 3 emissions, in particular maritime transportation.
• Ilmenite Concentration Plant and Titanium Dioxide Pigment Project Progress in 2022: In Q1 2022, the Company purchased approximately 90% of the required equipment for its ilmenite concentration plant project, including flotation, desliming, filtration and thickening area equipment. The Company expects to begin construction in mid-March 2022 and begin producing ilmenite concentrate in early 2023.
• Additional Units of Sustainably Produced Vanadium Secured through Offtake Agreement with GMR: The Company believes that its offtake agreement supports the expected growth plans and is aligned with Largo’s continued focus on sustainability and integrated ESG principles.
• Heavy Rainfall Impacts Operations in Maracás: The production of 2,003 tonnes of V₂O₅ in Q4 2021 was 40% lower than the 3,340 tonnes of V₂O₅ produced in Q4 2020. Lower quarterly production was due to the abnormally elevated levels of rainfall in November and December 2021. An effective water diversion channel system has been implemented to mitigate the impacts of future rains. The Q4 2021 global recovery of 76.0% was lower than the 80.6% seen in Q4 2020 as a result of the instability of the production processes. This is a consequence of the heavy rains which restricted the availability of ore in the mine to feed the plant. In Q4 2021, 277,783 tonnes of ore were mined with an effective grade of 1.00% of V₂O₅. Ore mined in Q4 2021 was 18% lower than in Q4 2020. The Company produced 86,129 tonnes of concentrate with an effective grade of 3.13%.
• Q1 2022 Production and Sales Impacts: Subsequent to Q4 2021, the Company scheduled a six-day shutdown of the processing plant in January 2022 in order to perform maintenance on the plant cooler engine system and power substations. Following this shutdown, production in January 2022 and February 2022 was 702 and 731 tonnes of V₂O₅ equivalent, respectively. February production was impacted by a nonplanned corrective maintenance shutdown (5 days) to repair a support the cooler support bearing. Subsequent to Q4 2021, sales in January 2022 and February 2022 were 954 and 571 tonnes of V₂O₅ equivalent, respectively. Lower sales in February 2022 was due to a combination of shipment delays and a decrease in spot sales as the Company took actions to increase its available inventory levels.

• [Editor:tianyawei]