Largo Inc. Q1 FY2023 earnings call

• Daniel Tellechea discussed improving operating efficiencies at Maracás Menchen Mine, produced 2,111 tons of V2O5, sold 2,849 tons exceeding Q1 guide, but heavy rainfall delayed infield drilling and adjusted 2023 guidance. Cost reduction initiatives include reducing sodium carbonate usage, upgrading crushing process, and analyzing site productivity. - Ernest Cleave highlighted revenue increase, operating cost rise, cash costs in line with guidance but extended higher end, G&A expenses up, share base payments down, finance costs up, and cash/debt position. - Paul Vollant mentioned exceeding Q1 sales targets, adjusted annual sales forecast, vanadium price trends, and bullish outlook on medium-term fundamentals due to energy storage demand.

In Q1 2023, Largo's revenues increased to $57.4 million from $42.7 million in Q1 2022 due to higher quantity sold and improved pricing. Operating costs surged by ~60% primarily from increased mining production costs, contractor and equipment rental costs, and higher consumable costs like sodium carbonate. Cash operating costs excluding royalties were $5.15 per pound sold in Q1 2023 vs $3.97 in Q1 2022, with the higher end of cash cost guidance extended to $5.65 per pound sold. Revenue contribution is mainly from vanadium sales, with high purity material representing ~half of Q1 production.

• Adjusted 2023 production, sales, and cost guidance due to heavy rainfall delaying infield drilling. - Extended cash cost guidance range to $5.65 per pound sold. - Anticipated trial shipments of ilmenite in Q4, with nameplate capacity at Maracás expected in Q3.

• Impact of heavy rainfall causing operational disruptions and delaying infield drilling. - Cost increases in critical consumables like sodium carbonate and ammonium sulfate. - Volatility in vanadium prices, particularly affected by steel sector demand in China.

Q: Your guidance for production was adjusted, can you quantify the decline and factors?

A: Widening guidance reflects delayed infield drilling due to rainfall, but mining contractor moved 3.6 million tons in Q1. Cash cost guidance extended due to rising chemical prices.

Q: Cash flow needed for ilmenite plant?

A: Final CapEx for ilmenite plant is done, but ~$10 million more cash needed over next 4-5 months.

Q: When will ilmenite shipments start and reach full capacity?

A: Trial shipments anticipated in Q4, nameplate capacity at Maracás expected in Q3, ilmenite peak run rate approaching in Q4 or early next year.

Q: Tax expense and deferred income tax?

A: Deferred income tax is timing adjustments, not a one-for-one with pre-tax income, pretty conventional.