All financial figures are in Canadian dollars unless
otherwise stated.
Q3 2019 Highlights
- Production of 2,952 tonnes (6.5 million
pounds1) of V2O5, a
15% increase over Q3 2018
- Cash operating costs excluding
royalties2 of US$2.81 ($3.71) per
pound of V2O5, a decrease of 8% over Q3
2018
- Revenues of $32.1 million (net
of the re-measurement of trade receivables / payables of
$20.4 million on vanadium sales from
a contract with a customer of $52.5
million)
- Net loss of $8.6 million and a
loss per share of $0.02
- Cash balance of $154.8 million
exiting Q3 2019
- Average annual cash operating costs excluding
royalties2 guidance lowered to US$3.30 to $3.40
per lb V2O5; Annual production guidance
maintained
- Expansion project expected to conclude in November 2019
- Board approval for the construction of a ferrovanadium plant
in Maracás, Brazil
- Q3 2019 operational and financial results conference call:
Thursday, November 14th, 2019 at
10:00 a.m. EST
TORONTO, Nov. 13, 2019 /CNW/ - Largo Resources Ltd.
("Largo" or the "Company") (TSX: LGO)
(OTCQX: LGORF) announces its third quarter 2019 operational
and financial results highlighted by 2,952 tonnes of vanadium
pentoxide ("vanadium" or
"V2O5") produced at a cash operating
cost excluding royalties2 of US$2.81 per pound of
V2O5.
Paulo Misk, President and Chief
Executive Officer for Largo, stated: "Operations at the Maracás
Menchen Mine performed well in the third quarter 2019 following
increased production from the expansion project. Cash operating
costs excluding royalties2 were US$2.81 per pound
V2O5 in Q3 2019 representing a decrease
of 8% over Q3 2018. Although the Company achieved lower operating
and unit costs during the quarter, profitability continued to be
impacted as a result of lower vanadium prices combined with the
Company's re-measurement of trade receivables / payables as a
result of its current off-take agreement and consequently, the
Company recorded a net loss of $8.6
million in Q3 2019. The Board realizes that the share price
does not currently reflect the business value of the Company and is
considering instituting a share repurchase program by way of a
Normal Course Issuer Bid."
He continued: "The Company believes that vanadium prices are
unsustainably low and expects sentiment and prices to improve as
evidenced by the recent price increase for ferrovanadium in
Europe. Despite greater vanadium
consumption in China over the last
two years, the current price environment is largely attributable to
high iron ore prices and a dramatic increase in Chinese
V2O5 slag production earlier in 2019 from
vanadium-titano magnetite (VTM) deposits. The increase in Chinese
vanadium supply, combined with greater than anticipated niobium
substitution put vanadium prices under pressure throughout 2019.
Going forward, we expect vanadium market sentiment to improve
following current shutdowns from high cost stone coal producers, a
decline in V2O5 slag production and a reverse
in niobium substitution on the back of lower vanadium
prices."
"Largo is pleased to report that the Board has approved the
construction of a ferrovanadium conversion plant at the Maracás
Menchen Mine. Ferrovanadium is essential in the production of steel
products, which make up approximately 91% of global vanadium
consumption. The construction of the Company's own ferrovanadium
conversion plant creates downstream advantages as it eliminates the
need to convert Largo's V2O5 using third
party convertors. The Company has begun the basic engineering
studies associated with the construction of the plant and looks
forward to providing an update to the market in the near
future."
"The Company is advancing basic engineering studies to
further evaluate the economics associated with upgrading the
Maracás Menchen Mine's non-magnetic tailings using concentrate
flotation to produce TiO2 concentrate. The Company's non-magnetic
tailings are composed of ilmenite which also contain titanium
dioxide (TiO2). The Company began a pilot plant study in October to
prove flotation performance and anticipates results of the ongoing
study in Q4 2019."
"The Company continues to advance its sales and trading
business with the recently announced appointment Mr. Francesco
D'Alessio as Head of Sales, Americas, who will support the
Company's vanadium sales strategy in the North and South American
markets. The Company has attended multiple conferences and
continues to build the back-office team to support sales and ensure
highest quality of service from May
2020 onwards."
He concluded: "We are also pleased to announce a strategic
partnership with Boston Metal to further advance its Molten Oxide
Electrolysis (MOE) testing using Largo's V2O5
to produce ferrovanadium. Boston Metal's patented metals-production
process is more efficient, less costly and greener with Molten
Oxide Electrolysis."
A summary of the operational and financial performance for Q3
2019 is provided in the tables below:
Financial
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
|
September 30, 2019
|
|
September
30, 2018
|
|
September 30, 2019
|
|
September
30, 2018
|
Revenues
|
|
$
|
32,118
|
$
|
149,458
|
$
|
105,894
|
$
|
343,872
|
Direct mine and mill
costs
|
|
|
(22,213)
|
|
(21,275)
|
|
(64,227)
|
|
(60,705)
|
Operating
costs
|
|
|
(31,506)
|
|
(36,706)
|
|
(93,861)
|
|
(98,109)
|
Net income (loss)
before tax
|
|
|
(9,850)
|
|
91,734
|
|
(28,715)
|
|
191,563
|
Income tax (expense)
recovery
|
|
|
1,022
|
|
(6,930)
|
|
46
|
|
(15,773)
|
Deferred income tax
(expense) recovery
|
|
|
238
|
|
(13,388)
|
|
(2,590)
|
|
32,205
|
Net income
(loss)
|
|
|
(8,590)
|
|
71,416
|
|
(31,259)
|
|
207,995
|
Basic earnings (loss)
per share
|
|
|
(0.02)
|
|
0.14
|
|
(0.06)
|
|
0.40
|
Diluted earnings
(loss) per share
|
|
|
(0.02)
|
|
0.11
|
|
(0.06)
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used)
before non-cash
working capital items
|
|
$
|
(1,736)
|
$
|
120,448
|
$
|
12,123
|
$
|
268,800
|
Net cash provided by
operating activities
|
|
|
11,662
|
|
113,439
|
|
128,837
|
|
207,909
|
Net cash (used in)
financing activities
|
|
|
(28,137)
|
|
(64,164)
|
|
(127,432)
|
|
(112,975)
|
Net cash (used in)
investing activities
|
|
|
(15,743)
|
|
(3,995)
|
|
(42,914)
|
|
(12,791)
|
Net change in
cash
|
|
|
(35,463)
|
|
43,867
|
|
(51,373)
|
|
73,336
|
|
|
|
|
|
|
|
|
|
As
at
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December
31, 2018
|
Cash
|
|
|
|
|
|
$
|
154,815
|
|
206,188
|
Working
capital3
|
|
|
|
|
|
|
91,469
|
|
135,258
|
Trade
payables
|
|
|
|
|
|
|
82,230
|
|
-
|
Operational
|
|
|
|
Maracás Menchen
Mine Production
|
|
Q3
2019
|
Q3 2018
|
|
|
|
|
Total Ore Mined
(tonnes)
|
|
267,257
|
156,664
|
Ore Grade Mined -
Effective Grade4 (%)
|
|
1.52
|
1.42
|
|
|
|
|
Effective Grade of
Ore Milled (%)5
|
|
1.44
|
1.47
|
Concentrate Produced
(tonnes)
|
|
92,629
|
88,075
|
Grade of Concentrate
(%)
|
|
3.26
|
3.48
|
Contained
V2O5 (tonnes)
|
|
3,016
|
3,065
|
|
|
|
|
Crushing Recovery
(%)
|
|
96.5
|
96.7
|
Milling Recovery
(%)
|
|
97.0
|
96.6
|
Kiln Recovery
(%)
|
|
88.8
|
86.8
|
Leaching Recovery
(%)
|
|
97.2
|
97.8
|
Chemical Plant
Recovery (%)
|
|
96.7
|
97.3
|
Global Recovery
(%)3
|
|
78.1
|
77.1
|
|
|
|
|
V2O5 produced (Flake + Powder)
(tonnes)
|
|
2,952
|
2,563
|
V2O5 produced (equivalent
pounds)1
|
|
6,508,038
|
5,650,441
|
Cash operating
costs2 per pound produced
|
CAD$
|
$3.99
|
$5.41
|
US$5
|
$3.02
|
$4.14
|
Cash operating costs
excluding royalties2 per pound produced
|
CAD$
|
$3.71
|
$3.99
|
US$6
|
$2.81
|
$3.05
|
Revenues per pound
sold 6, 8
|
CAD$
|
$5.36
|
$27.12
|
US$6
|
$4.06
|
$20.73
|
Vanadium sales per
pound sold7, 8
|
CAD$
|
$8.76
|
$21.86
|
US$6
|
$6.64
|
$16.71
|
Third Quarter 2019 Financial Results
The Company recorded a net loss of $8.6
million in Q3 2019 compared to net income of $71.4 million in Q3 2018 after the recognition of
an income tax recovery of $1.0
million and a deferred income tax recovery of $0.2 million. This movement was primarily due to
a decrease in revenues during the quarter and was partially offset
by a decrease in operating costs of $5.2
million and a decrease in finance costs of $15.0 million.
Total sales of V2O5 in Q3 2019 were 2,720
tonnes which includes 360 tonnes of high purity
V2O5. The Company's total sales of high
purity V2O5 in the nine months ended
September 30, 2019 are 1,160
tonnes.
Following the $20.4 million
reduction in revenues as a result of the re-measurement of trade
receivables / payables under the Glencore contract, the Company
recognized revenues of $32.1 million
in Q3 2019 compared with revenues of $149.5
million in Q3 2018. Revenues per pound sold7 in
Q3 2019 were $5.36 (US$4.06) compared with $27.12 (US$20.73)
per pound in Q3 2018.
Vanadium sales from a contract with a customer was $52.5 million in Q3 2019, compared with
$120.5 million in Q3 2018. Vanadium
sales per pound sold7 in Q3 2019 was $8.76 (US$6.64)
compared to $21.86 (US$16.71) per pound in Q3 2018. This decrease is
primarily attributable to a decrease in the
V2O5 price, with the average price per lb of
V2O5 of approximately US$7.16 for Q3 2019, compared with approximately
US$19.66 for Q3 2018. The most recent
European Metal Bulletin price range quotation for
V2O5 posted as of November 8, 2019 was in a range of US$4.45 to US$5.00
per lb.
|
Three months
ended
|
Nine months
ended
|
September
30, 2019
|
September
30, 2018
|
September
30, 2019
|
September
30, 2018
|
Vanadium sales from a
contract with a customer
|
$
|
52,528
|
120,506
|
229,717
|
287,729
|
Vanadium sales per
pound sold7 ($/lb)
|
$
|
8.76
|
21.86
|
14.27
|
18.13
|
Vanadium sales per
pound sold7 (US$/lb)
|
$
|
6.64
|
16.71
|
10.73
|
13.99
|
|
|
|
|
|
|
Re-measurement of
trade receivables / payables
|
$
|
(20,410)
|
28,952
|
(123,823)
|
56,143
|
Revenue adjustment
per pound8 ($/lb)
|
$
|
(3.08)
|
5.09
|
(7.40)
|
3.51
|
Revenue adjustment
per pound8 (US$/lb)
|
$
|
(2.33)
|
3.89
|
(5.56)
|
2.71
|
|
|
|
|
|
|
Revenues
|
$
|
32,118
|
149,458
|
105,894
|
343,872
|
Revenues per pound
sold7 ($/lb)
|
$
|
5.36
|
27.12
|
6.58
|
21.67
|
Revenues per pound
sold7 ($US/lb)
|
$
|
4.06
|
20.73
|
4.94
|
16.73
|
As a consequence of the negative revenue adjustment per
pound8 realized in Q3 2019 and in the nine months ended
September 30, 2019, the Company's
trade payables balance at September 30,
2019 was $82.2 million and the
revenue adjustment payable8 was $92.3 million. Assuming
V2O5 prices remain the same as at
September 30, 2019, the Company's
total estimated revenue adjustment payable7 for
V2O5 sold to September 30, 2019 is $89.8 million. At the date of this press release,
the Company's estimated revenue adjustment payable for
V2O5 sold8 to October 31, 2019 is approximately $95.7 million.
Given the overall decline in the market price of
V2O5 since December 31, 2018, the Company anticipates that
it will continue to realize lower revenues, including significant
negative re-measurements of trade receivables / payables, in future
periods until such time as the decline levels off or prices
increase.
The Company has forecast its expected cash balance and the
estimated revenue adjustment payable8 at April 30, 2020 (the end date of the May 14, 2008 off-take agreement with Glencore
International AG) under three different vanadium price scenarios.
Each scenario assumes that the vanadium price shown in the table
below applies from October 31, 2019
to April 30, 2020 and assumes that
the Company sells 100% of its production during this period,
constant foreign exchange rates and cash operating costs per pound
produced2 consistent with results to date. The forecast
balances, which constitute forward-looking information, are shown
in the following table:
|
|
|
|
|
|
|
|
|
US$4.00
|
|
US$4.73
|
|
US$5.50
|
Forecast cash at
April 30, 2020
|
$
|
131,260
|
$
|
138,105
|
$
|
144,717
|
Estimated revenue
adjustment payable8 at April 30, 2020
|
|
103,738
|
|
95,463
|
|
86,616
|
Net
|
$
|
27,522
|
$
|
42,642
|
$
|
58,101
|
In Q3 2019, the Company generated positive cash from operating
activities, with net cash provided by operating activities of
$11.7 million, compared with
$113.4 million in Q3 2018. This
decrease was primarily due to revenues exceeding direct mine and
mill costs and royalties by $8.1
million in Q3 2019, compared with $120.2 million in Q3 2018. This contributed to
cash used before non-cash working capital items of $1.7 million, compared with cash provided before
non-cash working capital items of $120.4
million in Q3 2018.
Cash used in financing activities in Q3 2019 was $28.1 million, compared with $64.2 million in Q3 2018. The movement is
primarily due to a decrease in the repayment of long-term debt from
Q3 2018 of $219.2 million, a decrease
in the debt issue costs, interest, guarantee fees and other
associated fees paid of $17.3
million, a decrease in the change in restricted cash of
$201.2 million and an increase in
interest income of $0.8 million.
Cash used in investing activities in Q3 2019 was $15.7 million representing an increase of
$11.7 million from the $4.0 million seen in Q3 2018. This increase is
primarily due to the expansion project being undertaken by the
Company in 2019.
Operating costs for Q3 2019 were $31.5
million compared to $36.7
million in Q3 2018 and include direct mine and mill costs of
$22.2 million ($21.3 million in Q3 2018), depreciation and
amortization of $7.5 million
($7.4 million in Q3 2018) and
royalties of $1.8 million
($8.0 million in Q3 2018). Lower
operating costs in Q3 2019 compared with Q3 2018 are primarily due
to a decrease in royalties as a result of a decrease in
V2O5 prices during the quarter. The
increase in direct mine and mill costs is primarily attributable to
an increase in production in Q3 2019.
Cash operating costs excluding royalties2 in Q3
2019 were $3.71 (US$2.81) per pound compared to $3.99 (US$3.05) in
Q3 2018, representing a decrease of 8%. The decrease seen in Q3
2019 compared with Q3 2018 is largely due to the Q3 2019 production
of 2,952 tonnes of V2O5 being 389 tonnes
higher than the 2,563 tonnes produced in Q3 2018, as well as an
improvement in the global recovery level.
Interest income in Q3 2019 was $1.3
million representing an increase of $1.0 million from $0.3
million in Q3 2018. This is due to the Company's increased
cash position during the nine months ended September 30, 2019 which has enabled it to
benefit from greater deposit interest rates.
Third Quarter 2019 Operational Results
Total V2O5 production of 2,952 tonnes
during Q3 2019 was 15% higher than Q3 2018 and 72 tonnes (2.5%)
above budget. Production in July 2019
achieved a new monthly record with 1,042 tonnes of
V2O5 produced, which contributed to the total
V2O5 production in the nine months ended
September 30, 2019 of 7,566 tonnes.
Q3 2019 production was 17% higher than in Q2 2019 primarily due to
the commissioning of the new deammoniator as part of the first
phase start-up of the expansion project.
In Q3 2019, 267,257 tonnes of ore were mined with an effective
grade5 of 1.52% of V2O5. The
crushing unit was fed with 329,024 tonnes and an effective
V2O5 grade5 of 1.15%. Lower grades
seen in the crushing feed are primarily due to processing lower
grade weathered ore stockpiles built up during the first years of
the operation. The Company also produced 92,629 tonnes of
concentrate ore with an effective V2O5
grade5 of 3.26% compared to 88,075 tonnes produced in Q3
2018 with a grade of 3.48%.
Global V2O5 recovery rates3
averaged 78.1% in Q3 2019 which compares to 79.1% in Q2 2019 and
77.1% in Q3 2018. Global V2O5 recovery
rates3 were down slightly quarter-over-quarter in 2019
primarily as a result of processing low-grade ore stockpiles fed
and some process variability during the expansion ramp-up
phase.
The expansion project progressed during the quarter with the
start-up of the second deammoniator which contributed to record
production in July and with the start-up of the secondary ball mill
in September 2019. The expansion
project is expected to be completed in November 2019 following the commissioning of the
pre-evaporator and leaching, de-silication and precipitation
tanks.
2019 Annual Average Cash Cost Excluding Royalties Guidance
Lowered
The Company lowered its 2019 annual average cash operating
guidance excluding royalties2 from the range of
US$3.45 - 3.65 to the range of
US$3.30 – $3.40 reflecting cash operating cost2
performance during the first half of 2019 and the expected positive
impact on foreign exchange for the balance of the year.
Additionally, the Company has produced 7,566 tonnes of
V2O5 year-to-date and continues to maintain
its annual production guidance range of 10,000 to 11,000 tonnes of
V2O5 for 2019.
Off-take Agreement Nonrenewal & Appointment of Head of
Sales, Americas
The Company announced on August 20,
2019 that it had formally given notice to Glencore
International AG of the nonrenewal of its off-take agreement dated
May 14, 2008. In accordance with this
notice, the Company's off-take agreement will expire effective
April 30, 2020. On October 21, 2019 the Company also announced the
appointment of Mr. Francesco D'Alessio as Largo's Head of Sales,
Americas who will support the Largo's vanadium sales and trading
business with a particular focus on the North and South American
markets.
Mining Vanadium Responsibly – Inaugural Environmental, Social
and Governance Report
Building on Largo's track record of responsible mining and
strong community relations, the Company released its inaugural
environmental, social and governance report ("ESG") on
August 15, 2019. The Company's first
annual ESG report sets a new standard for open and transparent
reporting of sustainability performance and provides key indicators
and measurements that will be used as benchmarks for future
reporting. Largo's ESG report is a tangible indication of the
Company's commitment to mining vanadium responsibly and ESG reports
will be released annually in the future.
Conference Call
Largo Resources management will host a conference call on
Thursday, November 14, 2019, at
10:00 a.m. EDT, to discuss the
Company's third quarter 2019 operational and financial results.
Conference Call Details:
|
|
Date:
|
Thursday, November
14, 2019
|
Time:
|
10:00 a.m.
EDT
|
|
|
Dial-in
Number:
|
Local /
International: +1 (416) 764-8688
|
|
North American Toll
Free: (888) 390-0546
|
|
Brazil Toll
Free: 08007621359
|
|
|
Conference
ID:
|
59082301
|
|
|
Replay
Number:
|
Local /
International: + 1 (416) 764-8677
|
|
North American Toll
Free: (888) 390-0541
|
|
Replay Passcode:
082301#
|
|
|
Website:
|
To view press
releases or any additional financial information, please visit our
Investor
Relations section of the Largo Resources website
at: www.largoresources.com/investors
|
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 nine months ended
September 30, 2019 and 2018 and its
management's discussion and analysis for the three and nine months
ended September 30, 2019, which are
available on our website at www.largoresources.com and on
SEDAR.
About Largo Resources
Largo is a Toronto-based
strategic mineral company focused on the production of vanadium
flake, high purity vanadium flake and high purity vanadium powder
at the Maracás Menchen Mine located in Bahia State, Brazil. The Company's common shares are
principally listed on the Toronto Stock Exchange under the symbol
"LGO". For more information on Largo, please visit our website at
www.largoresources.com.
Neither the Toronto Stock Exchange (nor its regulatory
service provider) accepts responsibility for the adequacy or
accuracy of this release.
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 timing
for and completion of the Maracás Menchen Mine expansion project
and the costs associated therewith; the timing and amount of
estimated future production; costs of future activities and
operations; and the extent of capital and operating.
Forward-looking statements can be identified by the use of
forward-looking terminology such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved". All
information contained in this news release, other than statements
of current and historical fact, is forward looking information.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Largo to be
materially different from those expressed or implied by such
forward-looking statements, including but not limited to those
risks described in the annual information form of Largo and in its
public documents filed on SEDAR from time to time. Forward-looking
statements are based on the opinions and estimates of management as
of the date such statements are made. Although management of Largo
has attempted to identify important factors that could cause actual
results to differ materially from those contained in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. Largo does not
undertake to update any forward-looking statements, except in
accordance with applicable securities laws. Readers should also
review the risks and uncertainties sections of Largo's annual and
interim MD&As which also apply.
Non-GAAP8 Measures
The Company uses certain non-GAAP financial performance
measures in its Management's Discussion and Analysis for the three
and nine months ended September 30,
2019, which are described in the following section.
Revenues Per
Pound
The Company's MD&A refers to revenues per pound sold,
including vanadium sales per pound sold and revenue adjustment per
pound sold. These are non-GAAP performance measures and are
used to provide investors with information about key measures used
by management to monitor performance of the Maracás Menchen
Mine.
These measures, along with cash operating costs, are
considered to be one of the key indicators of the Company's ability
to generate operating earnings and cash flow from its Maracás
Menchen Mine. These revenues per pound measures do not have any
standardized meaning prescribed by IFRS and differ from measures
determined in accordance with IFRS. These measures are 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. These measures are not necessarily
indicative of net earnings or cash flow from operating activities
as determined under IFRS.
The following tables provide a reconciliation of these
measures per pound sold for the Maracás Menchen Mine to revenues as
per the Q3 2019 unaudited condensed interim consolidated financial
statements.
|
|
|
|
|
Three months
ended
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
Revenuesi
|
|
$
|
32,118
|
$
|
149,458
|
V2O5 sold (000s lb)
|
|
|
5,997
|
|
5,512
|
Revenues per pound
sold ($/lb)
|
|
$
|
5.36
|
$
|
27.12
|
Revenues per pound
sold (US$/lb) ii
|
|
$
|
4.06
|
$
|
20.73
|
|
|
|
|
|
|
Vanadium sales from a
contract with a customer1
|
|
$
|
52,528
|
$
|
120,506
|
V2O5 sold (000s lb)
|
|
|
5,997
|
|
5,512
|
Vanadium sales per
pound sold ($/lb)
|
|
$
|
8.76
|
$
|
21.86
|
Vanadium sales per
pound sold (US$/lb)ii
|
|
$
|
6.64
|
$
|
16.71
|
|
|
|
|
|
|
Re-measurement of
trade receivables / payablesi
|
|
$
|
(20,410)
|
$
|
28,952
|
V2O5 sold subject to
re-measurement (000s lb)
|
|
|
6,636
|
|
5,688
|
Revenue adjustment
per pound ($/lb)
|
|
$
|
(3.08)
|
$
|
5.09
|
Revenue adjustment
per pound (US$/lb) ii
|
|
$
|
(2.33)
|
$
|
3.89
|
i.
|
As per note 20
in the Company's unaudited condensed interim consolidated
financial statements
for the three and nine months ended September 30, 2019 and
2018.
|
ii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.32 and
1.31 for Q3
2019 and Q3 2018, respectively.
|
|
|
|
|
|
Nine months
ended
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
Revenues1
|
|
$
|
105,894
|
$
|
343,872
|
V2O5 sold (000s lb)
|
|
|
16,094
|
|
15,871
|
Revenues per pound
sold ($/lb)
|
|
$
|
6.58
|
$
|
21.67
|
Revenues per pound
sold (US$/lb) ii
|
|
$
|
4.94
|
$
|
16.73
|
|
|
|
|
|
|
Vanadium sales from a
contract with a customeri
|
|
$
|
229,717
|
$
|
287,729
|
V2O5 sold (000s lb)
|
|
|
16,094
|
|
15,871
|
Vanadium sales per
pound sold ($/lb)
|
|
$
|
14.27
|
$
|
18.13
|
Vanadium sales per
pound sold (US$/lb) ii
|
|
$
|
10.73
|
$
|
13.99
|
|
|
|
|
|
|
Re-measurement of
trade receivables / payablesi
|
|
$
|
(123,823)
|
$
|
56,143
|
V2O5 sold subject to
re-measurement (000s lb)
|
|
|
16,733
|
|
16,006
|
Revenue adjustment
per pound ($/lb)
|
|
$
|
(7.40)
|
$
|
3.51
|
Revenue adjustment
per pound (US$/lb) ii
|
|
$
|
(5.56)
|
$
|
2.71
|
i.
|
As per note 20
in the Company's unaudited condensed interim consolidated
financial statements
for the three and nine months ended September 30, 2019 and
2018.
|
ii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.33 and
1.30 for the
nine months ended September 30, 2019 and 2018,
respectively.
|
Cash Operating Costs
The Company's MD&A refers to cash operating costs per
pound produced, 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 Menchen Mine is performing compared to plan and prior
periods, and also to assess its overall effectiveness and
efficiency.
Cash operating costs includes mine site operating costs such
as mining costs, plant and maintenance costs, sustainability costs,
mine and plant administration costs, royalties and sales, general
and administrative costs, but excludes depreciation and
amortization, share-based payments, foreign exchange gains or
losses, commissions, reclamation, capital expenditures and
exploration and evaluation costs. These costs are then
divided by the pounds of production from the Maracás Menchen Mine
to arrive at the cash operating costs per pound produced.
These measures, along with revenues, is considered to be one
of the key indicators of the Company's ability to generate
operating earnings and cash flow from its Maracás Menchen Mine.
These cash operating costs measures do not have any standardized
meaning prescribed by IFRS and differ from measures determined in
accordance with IFRS. These measures are 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. These measures are not necessarily indicative of net
earnings or cash flow from operating activities as determined under
IFRS.
In addition, the Company's MD&A 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 tables.
The following tables provide a reconciliation of cash
operating costs per pound produced for the Maracás Menchen Mine to
operating costs, excluding depreciation expense as per the Q3 2019
unaudited condensed interim consolidated financial
statements.
|
|
|
Three months
ended
|
|
|
September
30, 2019
|
|
September
30, 2018
|
Operating
costsi
|
$
|
31,506
|
$
|
36,706
|
Professional,
consulting and management fees ii
|
|
1,757
|
|
710
|
Other general and
administrative expenses ii
|
|
148
|
|
564
|
Less: depreciation
and amortization expensei
|
|
(7,455)
|
|
(7,402)
|
Cash operating
costs
|
$
|
25,956
|
$
|
30,578
|
Less:
royaltiesi
|
|
(1,838)
|
|
(8,029)
|
Cash operating costs
excluding royalties
|
$
|
24,118
|
$
|
22,549
|
V2O5 produced (000s
lb)
|
|
6,508
|
|
5,650
|
Cash operating costs
per pound produced ($/lb)
|
$
|
3.99
|
$
|
5.41
|
Cash operating costs
per pound produced (US$/lb) iii
|
US$
|
3.02
|
US$
|
4.14
|
Cash operating costs
excluding royalties per pound produced ($/lb)
|
$
|
3.71
|
$
|
3.99
|
|
|
|
|
|
Cash operating costs
excluding royalties per pound produced (US$/lb)
iii
|
US$
|
2.81
|
US$
|
3.05
|
i.
|
As per note 21
in the Company's unaudited condensed interim consolidated
financial statements for the three and nine months ended September
30, 2019 and 2018.
|
ii.
|
As per the Mine
properties segment in note 17 in the Company's unaudited condensed
interim consolidated financial statements for the three and nine
months ended September 30, 2019 and 2018.
|
iii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.32 and
1.31 for Q3 2019 and Q3 2018, respectively.
|
|
|
|
Nine months
ended
|
|
|
September
30, 2019
|
|
September
30, 2018
|
Operating
costs1
|
$
|
93,861
|
$
|
98,109
|
Professional,
consulting and management fees ii
|
|
4,631
|
|
7,068
|
Other general and
administrative expenses ii
|
|
805
|
|
1,411
|
Less: depreciation
and amortization expensei
|
|
(23,689)
|
|
(23,684)
|
Cash operating
costs
|
$
|
75,608
|
$
|
82,904
|
Less:
royaltiesi
|
|
(5,945)
|
|
(13,720)
|
Cash operating costs
excluding royalties
|
$
|
69,663
|
$
|
69,184
|
V2O5 produced (000s
lb)
|
|
16,680
|
|
15,950
|
Cash operating costs
per pound produced ($/lb)
|
$
|
4.53
|
$
|
5.20
|
Cash operating costs
per pound produced (US$/lb)iii
|
US$
|
3.41
|
US$
|
4.01
|
Cash operating costs
excluding royalties per pound produced ($/lb)
|
$
|
4.18
|
$
|
4.34
|
Cash operating costs
excluding royalties per pound produced
(US$/lb)iii
|
US$
|
3.14
|
US$
|
3.35
|
i.
|
As per note 21
in the Company's unaudited condensed interim consolidated
financial statements for the three and nine months ended September
30, 2019 and 2018.
|
ii.
|
As per the Mine
properties segment in note 17 in the Company's unaudited condensed
interim consolidated financial statements for the three and nine
months ended September 30, 2019 and 2018.
|
iii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.33 and
1.30 for the nine months ended September 30, 2019 and 2018,
respectively.
|
Revenue Adjustment Payable
The Company's MD&A refers to revenue adjustment payable,
a non-GAAP performance measure used to provide investors with
information about a key measure used by management as part of its
monitoring of the financial liquidity of the Company.
This measure is considered to be one of the key components
monitored relating to the Company's projected financial liquidity
and capital resources. This revenue adjustment payable 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, financial liquidity or capital resources prepared in
accordance with IFRS. This measure is not necessarily indicative of
cash flow from operating activities or disclosed commitments as
determined and presented under IFRS.
The following table provides a reconciliation of this measure
to trade receivables / payables as per the Q3 2019 unaudited
condensed interim consolidated financial statements. At
December 31, 2018, the Company had a
trade receivable of $55,011, with a
revenue adjustment payable of $nil.
|
|
|
|
|
|
|
September
30, 2019
|
Trade
payablesi
|
|
$
|
82,230
|
Add: amounts to be
received included in trade payables
|
|
|
10,094
|
Revenue adjustment
payable
|
|
$
|
92,324
|
Add: estimated future
re-measurement for V2O5
soldii
|
|
|
(2,483)
|
Estimated revenue
adjustment payable for V2O5 sold at September
30, 2019
|
|
$
|
89,841
|
Revenue adjustment
payable
|
|
$
|
92,324
|
Add: estimated future
re-measurement for V2O5
soldiii
|
|
|
3,370
|
Estimated revenue
adjustment payable for V2O5 sold at the date
of this MD&A
|
|
$
|
95,694
|
I.
|
As per note 10
in the Company's unaudited condensed interim consolidated
financial statements
for the three and nine months ended September 30, 2019 and
2018.
|
II.
|
Estimated based on
the quantity of V2O5 sold in the nine months
ended September 30, 2019 that
is subject to re-measurement. The estimate assumes there is no
change in the price per pound of
V2O5 for the remainder of the duration of the
Company's off-take agreement from that stated as
being the price at September 30, 2019 in the "Liquidity and Capital
Resources" section of this
MD&A and it assumes no receipt or payment of cash in relation
to any amount in this table.
|
III.
|
Estimated based on
the quantity of V2O5 sold in the ten months
ended October 31, 2019 that is
subject to re-measurement. The estimate assumes there is no change
in the price per pound of
V2O5 for the remainder of the duration of the
Company's off-take agreement from that stated as
being the price at the date of this MD&A in the
"Liquidity and Capital Resources" section of this
MD&A and it assumes no receipt or payment of cash in relation
to any amount in this table.
|
__________________________________
1 Conversion of tonnes to pounds, 1 tonne =
2,204.62 pounds or lbs.
2 The cash operating costs per pound
produced and cash operating costs excluding royalties per pound
produced reported are on a non-GAAP basis. Refer to the "Non-GAAP
Measures" section of this press release.
3 Defined as current assets less current
liabilities per the consolidated statements of financial
position.
4 Effective grade represents the percentage
of magnetic material mined multiplied by the percentage of V2O5 in
the magnetic concentrate.
5 Refer to Management's Discussion and
Analysis for the three and nine months ended September 30, 2019 for exchange rates used.
6 Revenues per pound sold and vanadium
sales per pound sold are calculated based on the quantity of
V2O5 sold during the stated period. Revenue
adjustment per pound is calculated based on the quantity of
V2O5 sold that is subject to re-measurement.
This may or may not differ to the quantity sold. Accordingly, these
three measures may not, and are not intended to, sum.
7 The revenue adjustment payable
is on a non-GAAP basis. Refer to the "Non-GAAP Measures" section of
this press release.
8 GAAP
– Generally Accepted Accounting Principles.
SOURCE Largo Resources Ltd.