All dollar amounts are in
Q2 2020 Highlights
- Production of 2,562 tonnes (5.6 million pounds1) of V2O5, an increase of 2.0% over Q2 2019
- Two consecutive months of V2O5 production above nameplate capacity: 1,052 tonnes in
May 2020 and 1,030 tonnes inJune 2020 - Global V2O5 recovery rate2 of 80.8%; Second quarter of strong global recoveries in 2020
- Solid financial position: Cash at
June 30, 2020 totaled$78.2 million - Record low cash operating costs excluding royalties3 of
$1.89 per lb of V2O5 , 44% decrease over Q2 2019 (after tax credit benefits of$2.2 million ) - Revenues of
$8.4 million (net of the re-measurement of trade receivables / payables of$2.4 million on vanadium sales from contracts with customers of$10.8 million ) - Net loss of
$7.0 million and a loss per share of$0.01 - Company maintains its 2020 sales, cost and production guidance
Other Significant Highlights
- 2019 Sustainability Report released: Including improved performance metrics and new reporting standards
- Nameplate capacity increase by 10%: Planned kiln upgrades and cooler maintenance scheduled for Q4 2020 with a capex of
$1.3 million - 2020 drilling program underway following delays caused by COVID-19
He continued: "On the market front, Chinese V2O5 prices strengthened by approximately 15% to
He concluded: "I am also very encouraged by the support and dedication shown by our entire team during these challenging times while at the same time achieving operational targets. Since
A summary of the operational and financial performance for Q2 2020 is provided in the tables below. Effective
Financial
Three months ended | Six months ended | |||||||
2020 |
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|
| |||||
Revenues | $ | 8,350 | $ | 21,963 | $ | 50,259 | $ | 55,168 |
Operating costs | (9,561) | (24,815) | (35,809) | (46,598) | ||||
Direct mine and mill costs | (2,180) | (16,800) | (19,674) | (31,367) | ||||
Net income (loss) before tax | (5,533) | (15,132) | (1,652) | (14,116) | ||||
Income tax (expense) recovery | - | 102 | - | (732) | ||||
Deferred income expense | (1,479) | (268) | (1,017) | (1,869) | ||||
Net income (loss) | (7,012) | (15,298) | (2,669) | (16,717) | ||||
Basic earnings (loss) per share | (0.01) | (0.03) | (0.00) | (0.03) | ||||
Diluted earnings (loss) per share | (0.01) | (0.03) | (0.00) | (0.03) | ||||
Cash provided (used) before non-cash working capital items | $ | 1,028 | $ | 406 | $ | (294) | $ | 11,697 |
Net cash (used in) provided by operating activities | (63,649) | 22,341 | (64,631) | 88,871 | ||||
Net cash provided by (used in) financing activities | 777 | (5,116) | 27,517 | (73,050) | ||||
Net cash (used in) investing activities | (5,221) | (14,195) | (8,601) | (20,355) | ||||
Net change in cash | (67,079) | 1,868 | (49,284) | (5,865) | ||||
As at | ||||||||
2020 |
| |||||||
Cash | $ | 78,215 | 127,499 | |||||
Working capital5 | 80,756 | 78,380 |
Operational
Maracás Menchen Mine Production | Q2 2020 | Q2 2019 | |
Total Ore Mined (tonnes) | 257,357 | 308,858 | |
Ore Grade Mined - Effective Grade6 (%) | 1.20 | 1.21 | |
Effective Grade of Ore Milled6 (%) | 1.29 | 1.49 | |
Concentrate Produced (tonnes) | 99,059 | 102,320 | |
Grade of Concentrate (%) | 3.20 | 3.30 | |
Contained V2O5 (tonnes) | 3,174 | 3,380 | |
Crushing Recovery (%) | 97.7 | 98.0 | |
Milling Recovery (%) | 94.7 | 97.9 | |
Kiln Recovery (%) | 91.7 | 88.8 | |
Leaching Recovery (%) | 99.1 | 95.7 | |
Chemical Plant Recovery (%) | 96.1 | 97.1 | |
Global Recovery (%)2 | 80.8 | 79.1 | |
V2O5 produced (Flake + Powder) (tonnes) | 2,562 | 2,515 | |
V2O5 produced (equivalent pounds)1 | 5,648,236 | 5,544,619 | |
Cash operating costs3 per pound | $ | ||
Cash operating costs excluding royalties3 per pound | $ | ||
Total cash costs3 | $ | ||
Revenues per pound sold 7 | $ |
Second Quarter 2020 Financial Results
During Q2 2020, the Company recognized revenues of
The Company recorded a net loss of
The Company's trade payables balance at
Operating costs for Q2 2020 were
Cash operating costs excluding royalties3 in Q2 2020 were
Cash (used in) provided by operating activities decreased from cash provided in Q2 2019 of
Second Quarter 2020 Operational Results
Total production from the Maracás
In Q2 2020, 257,357 tonnes of ore were mined with an effective grade6 of 1.20% of V2O5. The Company produced 99,059 tonnes of concentrate with an effective grade6 of 3.20%. The decrease in total ore mined when compared to Q2 2019 is due to operational adjustments to limit the mine site contractor workforce during the COVID-19 pandemic as well as operational restrictions due to the rainy season. The Company used available stocks to feed the crushing plant in order to mitigate the impact on V2O5 production.
The Q2 2020 global recovery2 of 80.8% was higher than both Q2 2019 (79.1%) and the budget, with strong recovery levels seen in both the kiln and leaching areas of the plant.
The Company's planned upgrades to the kiln and improvements in the cooler have been postponed until Q4 2020 as a result of precautionary measures such as limiting mine site personnel and contractors in light of the COVID-19 pandemic. This work is intended to increase the nameplate capacity to 1,100 tonnes of V2O5 per month and is not expected to have a significant impact on the Company's Q4 2020 production.
2020 Vanadium Sales Progress In-Line with Expectations – 2020 Guidance Maintained
The Company completed its first independent shipment of vanadium from
The markets in which the Company operates have also seen impacts in various ways during Q2 2020. COVID-19 had a negative impact on the demand for vanadium from the aerospace industry while on the positive side, the Chinese steel sector, which currently accounts for approximately 50% of the total global vanadium demand, saw a sharp recovery. During Q2 2020, the Chinese V2O5 price increased approximately 15% ending the period at an average V2O5 price per lb of
Vanadium: The Green Metal – 2019 Sustainability Report
The Company announced the release of its 2019 sustainability report on
2020 Drill Program Underway
The Company's 2020 drill program recommenced in late
The Company has planned for 22,500 metres of drilling on the Near Mine Targets in 2020, primarily to upgrade and expand known resources to determine initial mining opportunities. Additional drilling (7,500 metres) has been planned in and around the Campbell pit to test for down dip continuations of known mineralisation. Mineralisation at the Campbell pit remains open at depth based on current drill results and exploration on the South Block will include a soil geochemistry sampling survey and 9,600 metres of drilling on higher priority targets based on geological, geophysical and geochemical data. As of
The Company continues its work on advancing basic engineering studies to further evaluate the economics associated with upgrading the non-magnetic tailings using concentrate flotation to produce titanium ("TiO2") concentrate for the pigment industry. The ilmenite chemical pilot plant was completed in
Conference Call
Conference Call Details:
Date: | |
Time: | |
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North American Toll Free: (888) 390-0546 | |
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Conference ID: | 63772474 |
Replay Number: | Local / International: + 1 (416) 764-8677 |
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Replay Passcode: 772474 # | |
Website: | To view press releases or any addition al financial information, please visit our 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 six 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 six 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 Q2 2020 unaudited condensed interim consolidated financial statements.
Three months ended | Six months ended | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Revenuesi | $ | 8,350 | $ | 21,963 | $ | 50,259 | $ | 55,168 |
V2O5 equivalent sold (000s lb) | 2,244 | 5,467 | 9,233 | 10,097 | ||||
Revenues per pound sold ($/lb) | $ | 3.72 | $ | 4.02 | $ | 5.44 | $ | 5.46 |
i. As per note 21 in the Company's Q2 2020 unaudited condensed interim consolidated financial statements |
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 was 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 | Six months ended | ||||||||
2020 | 2019 | 2020 | 2019 | ||||||
Operating costsi | $ | 9,561 | $ | 24,815 | $ | 35,809 | $ | 46,598 | |
Professional, consulting and management feesii | 435 | 1,195 | 1,270 | 2,147 | |||||
Other general and administrative expenses2 | 528 | 290 | 765 | 491 | |||||
Less: product acquisition costsi | (2,444) | - | (2,444) | - | |||||
Less: inventory write-downiii | (1,176) | - | (1,176) | - | |||||
Less: depreciation and amortization expense1 | (2,034) | (6,688) | (8,481) | (12,161) | |||||
Cash operating costs | 4,870 | 19,612 | 25,743 | 37,075 | |||||
Less: royaltiesi | (1,290) | (1,327) | (3,597) | (3,070) | |||||
Cash operating costs excluding royalties | 3,580 | 18,285 | 22,146 | 34,005 | |||||
Produced V2O5 sold (000s lb)iv | 1,896 | 5,467 | 8,885 | 10,097 | |||||
Cash operating costs per pound ($/lb)iv | $ | 2.57v | $ | 3.59 | $ | 2.90v | $ | 3.67 | |
Cash operating costs excluding royalties per pound ($/lb)iv | $ | 1.89v | $ | 3.34 | $ | 2.49v | $ | 3.37 |
i. | As per note 22 in the Company's Q2 2020 unaudited condensed interim consolidated financial statements |
ii. | As per the Mine properties segment in note 18 in the Company's Q2 2020 unaudited condensed interim consolidated financial statements |
iii. | As per note 7 in the Company's Q2 2020 unaudited condensed interim consolidated financial statements |
iv. | Cash operating costs per pound and cash operating costs excluding royalties per pound for Q2 2019 were previously calculated and presented on a pounds produced basis (V2O5 produced (000s lb) = 5,545; V2O5 sold (000s lb) = 5,467). These measures have been calculated and presented on a pounds sold basis in this MD&A |
v. | The measure for Q2 2020 includes the benefit of tax credits of |
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 was 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 Q2 2020 unaudited condensed interim consolidated financial statements.
Three months ended | Six months ended | |||
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Operating costsi | $ | 9,561 | $ | 35,809 |
Professional, consulting and management feesii | 1,240 | 2,932 | ||
Other general and administrative expensesii | 787 | 1,659 | ||
Less: depreciation and amortization expensei | (2,034) | (8,481) | ||
Less: royaltiesi | (1,290) | (3,597) | ||
$ | 8,264 | $ | 28,322 | |
V2O5 equivalent sold (000s lb) | 2,244 | 9,233 | ||
Total cash costs ($/lb) | $ | 3.68iii | $ | 3.07iii |
i. | As per note 22 in the Company's Q2 2020 unaudited condensed interim consolidated financial statements |
ii. | As per the condensed interim consolidated statement of income (loss) and comprehensive income (loss) |
iii. | The measure for Q2 2020 includes the benefit of tax credits of |
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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 Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery |
5 Defined as current assets less current liabilities per the consolidated statements of financial position |
6 Effective grade represents the percentage of magnetic material mined multiplied by the percentage of V2O5 in the magnetic concentrate |
7 Revenues per pound sold is calculated based on the quantity of V2O5 sold during the stated period. This may or may not differ to the quantity sold |
8 GAAP – Generally Accepted Accounting Principles |
SOURCE
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