Largo Inc. Q3 FY2023 earnings call

• Q3 was a challenging quarter with unforeseen costs, including a traffic accident at the chemical plant causing an evaporator capacity bottleneck and delays in the new crushing plant commissioning. - Mining operations proceeded as planned with mine material 46% higher in Q3 2023 compared to the same period in 2022. - Changed leadership at the Maracás facility and a comprehensive plan is in place to address challenges. - The crushing plant produced over 1,000 tonnes of contained V2O5 in October. - Increased high-purity vanadium production, reduced key consumable costs like sodium carbonate, and implemented head count reductions. - Substantial investments in waste rock pre-stripping, ilmenite plant, magnetic separation crushing plant, vanadium battery delivery, and exploration at Maracás.

For Q3 2023, P205 equivalent production was 2,163 tonnes, a decrease from 2,639 tonnes in Q2 2023 and 2,906 tonnes in Q3 2022. For the 9 months ended September 30, 2023, V2O5 production was 6,913 tonnes versus 8,432 tonnes in the same period of 2022. Revenues in Q3 2023 totaled $44 million, down from $54.3 million in Q3 2022, due to lower vanadium prices and reduced sales volumes. Operating costs in Q3 2023 were $42.5 million, a reduction from $45.6 million in Q2 2022. High-purity vanadium production in the first 9 months of 2023 represented approximately 44% of total production versus 27% in the same period of 2022, and 72% in October.

• For 2024, planning to produce around 1.5 million tonnes of mine material per month, approximately 11,000 tonnes of V2O5 (averaging 900-950 tonnes per month), and stockpiling around 3.6 million tonnes of V2O5. - Ilmenite plant expected to produce an average of 300-500 tonnes per month in Q1 2024, ramping up to 8,000-9,000 tonnes per month by April 2024. - Cost projections for 2024 are still being forecasted.

• Unforeseen operational incidents such as the chemical plant accident and delays in the crushing plant commissioning. - Dependence of vanadium prices on Chinese and European steel demand, with near-term price pressure. - Uncertainty in predicting vanadium price rebounds. - Fluctuations in costs of key consumables like sulfuric acid and reagents for ilmenite recovery.

Q: Talk about early expectations for 2024 in terms of production and cost.

A: For 2024, planning to produce around 1.5 million tonnes of mine material per month, approximately 11,000 tonnes of V2O5 (avg 900-950 tonnes/month), and stockpile around 3.6 million tonnes of V2O5. Cost projections for 2024 are still being forecasted.

Q: Ilmenite plant financial contribution and prices.

A: Ilmenite prices are between $250 to $350 depending on quality, expecting to be around the middle of that range. In Q1 2024, the ilmenite plant is expected to produce an average of 300-500 tonnes per month, ramping to 8,000-9,000 tonnes per month by April 2024.

Q: Vanadium price environment and Clean Energy demand.

A: Prices are under pressure mainly due to low performance in the Chinese and European steel industries, but there is hope from high purity demand in aerospace and battery sectors which may balance the supply-demand in the longer term.

Q: Other input metrics affecting consumable costs.

A: Watching sulfuric acid and reagents for ilmenite recovery; sodium carbonate costs have softened significantly.

Q: Timing of grade improvement and cost reduction adequacy.

A: Grades are expected to continue at current levels in the last quarter of 2023 and be higher in 2024. Cost reductions including contractor changes are in place and are adequate for 2024 projections, with plans to further optimize in future years.