[Ferro-Alloys.com] Largo Reports Third Quarter 2023 Financial Results; Announces First Commercial Shipment of Ilmenite as By-Product of its Vanadium Operations in Brazil

Largo Inc. ("Largo" or the "Company") (TSX: LGO) (NASDAQ: LGO) today announces its third quarter 2023 financial results.

Q3 2023 and Other Highlights

• Revenues of $44.0 million vs. revenues of $54.3 million in Q3 2022; Decline driven by lower vanadium prices and lower vanadium sales volumes; Revenues per lb sold³ of V₂O₅ equivalent of $8.34 vs. $8.80 in Q3 2022
• Operating costs of $42.5 million vs. $45.6 million in Q3 2022; Cash operating costs excluding royalties¹ per pound sold of $5.44 vs. 4.86 per lb sold in Q3 2022
• Net loss of $11.9 million vs. net loss of $2.6 million in Q3 2022; Basic loss per share of $0.19 vs. basic loss per share of $0.04 in Q3 2022
• Cash used before working capital items of $4.4 million vs. cash provided before working capital items of $4.3 million in Q3 2022
• Cash balance of $39.5 million, net working capital surplus of $91.0 million and debt of $65.0 million exiting Q3 2023
• V₂O₅ equivalent sales of 2,385 tonnes (inclusive of 256 tonnes of purchased material) vs. 2,796 tonnes (inclusive of 351 tonnes of purchased material) sold in Q3 2022
• Production of 2,163 tonnes (4.8 million lbs¹) of V₂O₅ vs. 2.906 tonnes in Q3 2022
• Largo Clean Energy’s (“LCE”) 6 megawatt-hour (“MWh”) vanadium redox flow battery (“VRFB”) deployment for Enel Green Power España (“EGPE”) was validated to operate on test conditions according to EGPE specifications and LCE test procedures in October
• The Company successfully commissioned and is in the process of ramping up production of its new ilmenite concentrate plant with initial production of 350 tonnes in August and 700 tonnes in September; The first commercial shipment of ilmenite is in progress and should contribute to the Company’s revenues in Q4 2023 as a by-product of its vanadium operations
• Q3 2023 results conference call: Thursday, November 9th at 1:00 p.m. ET

Vanadium Market Update²

• The average benchmark price per lb of V₂O₅ in Europe was $8.03, a 2.5% decrease from the average of $8.23 seen in Q3 2022
• Vanadium spot demand was soft in Q3 2023, primarily due to adverse conditions in the Chinese and European steel industries. However, strong demand growth from the aerospace and energy storage sectors continued

Daniel Tellechea, Director and Interim CEO of Largo commented: "Q3 2023 was a challenging quarter for Largo, primarily due to the tragic accident that occurred at the Company's chemical plant in July as well as technical delays in commissioning our new crushing plant. The accident at the chemical plant resulted in a capacity bottleneck in the evaporator section of the plant, which resulted in lower overall production rates of vanadium in July and August. In early September, our operating team recommissioned the evaporator circuit, which is now operating at its original capacity. A delay in ramp up of the new magnetic separation crushing plant also temporarily impacted vanadium production in Q3 2023. The new crushing plant was designed to offset the impact of lower mined vanadium grades, as per the Company’s mine plan. The operating team is in the process of resolving these issues, and we are pleased to report that the crushing plant exceeded 1,000 tonnes of contained V₂O₅ in October, despite additional crushing plant improvements scheduled to be implemented in November and December.”

He continued: “It is our priority to continue to optimize our operations, reduce costs, and achieve production and sales targets safely. In light of this, we maintain our guidance for 2023. Additionally, further measures are being implemented to improve the organization's performance, including optimizing operational efficiencies through the implementation of the new crushing system, concentrating on increasing production of high purity vanadium, restructuring equipment maintenance processes to further reduce costs, and ramping up ilmenite production starting in the fourth quarter of 2023 to diversify revenues. We are beginning to see a notable reduction in key consumable costs, such as sodium carbonate, as well as ongoing overhead cost reductions through a reduction of the number of contractors at the mine through efficiency improvement programs and further reductions in the headcount at LCE. The Company considers these ongoing initiatives to be a vitally important measures to counter the current decrease in vanadium prices.”

He concluded: “During this past year, we have also made several significant investments that are necessary for the sustainability of our operations in a lower vanadium price environment. Among these investments are an increased waste rock pre-stripping and aggressive infill drilling program to optimize production in the years to come. Our team has successfully built and commissioned an ilmenite plant to diversify future revenues as a by-product of the vanadium mine, built a new magnetic separation crushing plant for the purpose of mining lower-grade material without reducing production levels, and delivered the Company’s first vanadium battery to EGPE, our European energy storage customer. A substantial investment has been made in LCE, which is not yet generating significant revenues, but continues to consume cash. With our current strategic review process in place, Largo expects to optimize the value proposition of LCE and participate in one of the most significant macrotrends, the clean energy transition with vanadium as a critical material. With these investments, we believe that Largo is on the path to a brighter future.”

Financial and Operating Results – Highlights

Q3 2023 Notes

• The decrease in operating costs in Q3 2023 is largely attributable to lower overall sales in the period, which includes a reduction in the sale of purchased products and lower royalties due to lower sales.
• V₂O₅ equivalent production of 2,163 tonnes in Q3 2023 decreased from 2,639 tonnes produced in Q2 2023. Production in July 2023 was 644 tonnes, with 775 tonnes produced in August and 744 tonnes produced in September, for a total of 2,163 tonnes of V₂O₅ equivalent produced. July and August production were negatively impacted as a result of the chemical plant operating at limited capacity due to the accident in the evaporation section of the plant in July 2023. In addition, September production was negatively impacted by low availability of the crushing circuit, combined with the planned lower vanadium grade of ore mined. V₂O₅ production in October continued to improve with 866 tonnes produced.
• The Company is actively working to achieve higher levels of operational stability to better manage its costs which have increased due in part to lower grades of ore mined as compared with prior quarters. The lower grade of ore mined in Q3 2023 was according to plan, representing a 27% decrease year-over-year. The Company is actively working towards increasing the availability of its new crushing system to offset lowers grades of ore mined and reach production of 1,000 tonnes of V₂O₅ per month in future months.
• Total mined (dry basis) of 6.4 million tonnes increased by 53% and total ore mined of 447,165 tonnes was 27% higher than Q3 2022, respectively. Increased mining rates and higher mining costs impacted the Company’s financial performance in Q3 2023.
• As part of its ongoing mitigation efforts, the Company is focused on reducing its fixed cost structure through contract renegotiations and an optimization of key operational areas, including mining, maintenance, equipment rental and consumables.
• The commissioning and ramp up of the ilmenite plant commenced in Q3 2023 with production of 350 tonnes in August and 700 tonnes in September. The Company expects the ramp up to conclude in Q2 2024 with revenue expectations in Q4 2023.
• Exploration and evaluation costs of $2.3 million increased by $1.8 million from Q3 2022. This was driven by infill drilling and geological model work at the Maracás Menchen Mine and diamond drilling at Campo Alegre de Lourdes to support the maintenance of the Company's mineral rights. During Q3 2023, the Company completed approximately 9,100 metres of diamond drilling in the near mine deep drilling and exploration program. In the nine months ended September 30, 2023, approximately 19,100 metres of diamond drillholes have been completed in Campo Alegre de Lourdes and Maracas targets. A re-assay program began in Q2 2023 to perform chemical analysis on previously interpreted results. The focus of this program is to increase measured and indicated resources. Approximately 5,000 samples were prepared and sent to the external laboratory for analysis in Q3 2023.

About Largo

Largo is a globally recognized vanadium company known for its high-quality VPURE™ and VPURE+™ products, sourced from its Maracás Menchen Mine in Brazil. The Company is currently focused on implementing an ilmenite concentrate plant and is undertaking a strategic evaluation of its U.S.-based clean energy business, including its advanced VCHARGE vanadium battery technology to maximize the value of the organization. Largo's strategic business plan centers on maintaining its position as a leading vanadium supplier with a growth strategy to support a low-carbon future.

• [Editor:tianyawei]