Largo Inc.
Unaudited Condensed Interim Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2023 and 2022
(Expressed in thousands / 000's of U.S. dollars)
Table of Contents
Largo Inc.
Expressed in thousands / 000's of U.S. dollars
Condensed Interim Consolidated Statements of Financial Position
| | | | As at | |
| | | | June 30, | | | December 31, | |
| | Notes | | 2023 | | | 2022 | |
| Assets | | | | | | | |
| Cash | | $ | 63,980 | | $ | 54,471 | |
| Restricted cash | | | 734 | | | 470 | |
| Amounts receivable | 4 | | 23,984 | | | 20,975 | |
| Inventory | 5 | | 63,164 | | | 64,221 | |
| Prepaid expenses | | | 8,466 | | | 14,007 | |
| Total Current Assets | | | 160,328 | | | 154,144 | |
| Other intangible assets | 6 | | 6,749 | | | 7,263 | |
| Mine properties, plant and equipment | 7 | | 199,701 | | | 175,237 | |
| Vanadium assets | | | 24,400 | | | 14,510 | |
| Deferred income tax asset | 13(b) | | 2,141 | | | 4,596 | |
| Total Non-current Assets | | | 232,991 | | | 201,606 | |
| Total Assets | | $ | 393,319 | | $ | 355,750 | |
| Liabilities | | | | | | | |
| Current portion of lease liability | | $ | 590 | �� | $ | 581 | |
| Accounts payable and accrued liabilities | 8 | | 28,539 | | | 26,634 | |
| Deferred revenue | | | 3,138 | | | 1,698 | |
| Debt | 9 | | 18,000 | | | 4,000 | |
| Current portion of provisions | | | 6,914 | | | 6,060 | |
| Total Current Liabilities | | | 57,181 | | | 38,973 | |
| Lease liability | | | 1,205 | | | 1,473 | |
| Non-current accounts payable and accrued liabilities | 8 | | 250 | | | 326 | |
| Long term debt | 9 | | 47,000 | | | 36,000 | |
| Provisions | | | 5,414 | | | 4,424 | |
| Deferred income tax liability | 13(b) | | 713 | | | - | |
| Total Non-current Liabilities | | | 54,582 | | | 42,223 | |
| Total Liabilities | | | 111,763 | | | 81,196 | |
| Equity | | | | | | | |
| Issued capital | 10 | | 412,324 | | | 411,646 | |
| Equity reserves | 11 | | 11,974 | | | 14,138 | |
| Accumulated other comprehensive loss | | | (97,061 | ) | | (112,165 | ) |
| Deficit | | | (54,671 | ) | | (48,227 | ) |
| Equity attributable to owners of the Company | | | 272,566 | | | 265,392 | |
| Non-controlling Interest | | | 8,990 | | | 9,162 | |
| Total Equity | | | 281,556 | | | 274,554 | |
| Total Liabilities and Equity | | $ | 393,319 | | $ | 355,750 | |
| Commitments and contingencies | 7, 16 | | | | | | |
Largo Inc.
Expressed in thousands / 000's of U.S. dollars and shares (except per share information)
Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
| | | | Three Months ended | | | Six Months ended | |
| | | | June 30, | | | June 30, | |
| | Notes | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Revenues | 18 | $ | 53,110 | | $ | 84,804 | | $ | 110,531 | | $ | 127,492 | |
| Expenses | | | | | | | | | | | | | |
| Operating costs | 19 | | (43,029 | ) | | (50,704 | ) | | (88,960 | ) | | (79,662 | ) |
Professional, consulting and management
fees | | | (5,824 | ) | | (6,380 | ) | | (11,363 | ) | | (12,296 | ) |
| Foreign exchange (loss) gain | | | (817 | ) | | 2,410 | | | (400 | ) | | 943 | |
| Other general and administrative expenses | | | (3,333 | ) | | (5,102 | ) | | (6,606 | ) | | (6,757 | ) |
| Share-based payments | 11 | | (413 | ) | | (491 | ) | | 929 | | | (1,301 | ) |
| Finance costs | 19 | | (1,981 | ) | | (314 | ) | | (3,407 | ) | | (491 | ) |
| Interest income | | | 480 | | | 213 | | | 1,192 | | | 397 | |
| Technology start-up costs | | | (1,539 | ) | | (1,847 | ) | | (4,308 | ) | | (4,817 | ) |
| Exploration and evaluation costs | | | (1,301 | ) | | (180 | ) | | (1,540 | ) | | (285 | ) |
| | | | (57,757 | ) | | (62,395 | ) | | (114,463 | ) | | (104,269 | ) |
| Net income (loss) before tax | | $ | (4,647 | ) | $ | 22,409 | | $ | (3,932 | ) | $ | 23,223 | |
| Income tax recovery (expense) | 13(a) | | 295 | | | (7,115 | ) | | (38 | ) | | (7,717 | ) |
| Deferred income tax (expense) recovery | 13(a) | | (1,614 | ) | | 2,671 | | | (3,203 | ) | | 505 | |
| Net income (loss) | | $ | (5,966 | ) | $ | 17,965 | | $ | (7,173 | ) | $ | 16,011 | |
| | | | | | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | | | | | | |
| Items that subsequently will be reclassified to operations: | | | | | | | | | | | | | |
| Unrealized gain (loss) on foreign currency | | | | | | | | | | | | | |
| translation | | | 10,223 | | | (19,319 | ) | | 15,104 | | | 7,293 | |
| Comprehensive income (loss) | | $ | 4,257 | | $ | (1,354 | ) | $ | 7,931 | | $ | 23,304 | |
| Net income (loss) attributable to: | | | | | | | | | | | | | |
| Owners of the Company | | $ | (5,763 | ) | $ | 18,140 | | $ | (7,001 | ) | $ | 16,291 | |
| Non-controlling interests | | $ | (203 | ) | $ | (175 | ) | $ | (172 | ) | $ | (280 | ) |
| | | $ | (5,966 | ) | $ | 17,965 | | $ | (7,173 | ) | $ | 16,011 | |
| Comprehensive income (loss) attributable to: | | | | | | | | | | | | | |
| Owners of the Company | | $ | 4,460 | | $ | (1,176 | ) | $ | 8,103 | | $ | 23,584 | |
| Non-controlling interests | | $ | (203 | ) | $ | (178 | ) | $ | (172 | ) | $ | (280 | ) |
| | | $ | 4,257 | | $ | (1,354 | ) | $ | 7,931 | | $ | 23,304 | |
| Basic earnings (loss) per Common Share | 12 | $ | (0.09 | ) | $ | 0.28 | | $ | (0.11 | ) | $ | 0.25 | |
| Diluted earnings (loss) per Common Share | 12 | $ | (0.09 | ) | $ | 0.28 | | $ | (0.11 | ) | $ | 0.25 | |
| Weighted Average Number of Shares Outstanding (in 000's) | | | | | | | | | | | | | |
| - Basic | 12 | | 64,045 | | | 64,824 | | | 64,025 | | | 64,786 | |
| - Diluted | 12 | | 64,045 | | | 65,133 | | | 64,025 | | | 65,208 | |
Largo Inc.
Expressed in thousands / 000's of U.S. dollars and shares
Condensed Interim Consolidated Statements of Changes in Equity
| | | | | Attributable to owners of the Company | | | | | | | |
| | | | | Issued | | | Equity | | | Accumulated Other | | | | | | Non-controlling | | | Shareholders' | |
| | Shares | | | Capital | | | Reserves | | | Comprehensive Loss | | | Deficit | | | interest | | | Equity | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2021 | 64,727 | | $ | 415,982 | | $ | 17,814 | | $ | (118,772 | ) | $ | (49,327 | ) | $ | - | | $ | 265,697 | |
| Share-based payments | - | | | - | | | 1,301 | | | - | | | - | | | - | | | 1,301 | |
| Exercise of warrants | 10 | | | 124 | | | (34 | ) | | - | | | - | | | - | | | 90 | |
| Exercise of stock options | 18 | | | 162 | | | (68 | ) | | - | | | - | | | - | | | 94 | |
| Exercise of restricted share units | 81 | | | 1,263 | | | (1,263 | ) | | - | | | - | | | - | | | - | |
| Share repurchase | (25 | ) | | (323 | ) | | - | | | - | | | - | | | - | | | (323 | ) |
| Sale of non-controlling interest | - | | | - | | | - | | | - | | | - | | | 250 | | | 250 | |
| Currency translation adjustment | - | | | - | | | - | | | 7,293 | | | - | | | - | | | 7,293 | |
| Net income (loss) for the period | - | | | - | | | - | | | - | | | 16,291 | | | (280 | ) | | 16,011 | |
| Balance at June 30, 2022 | 64,811 | | $ | 417,208 | | $ | 17,750 | | $ | (111,479 | ) | $ | (33,036 | ) | $ | (30 | ) | $ | 290,413 | |
| | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2022 | 64,006 | | $ | 411,646 | | $ | 14,138 | | $ | (112,165 | ) | $ | (48,227 | ) | $ | 9,162 | | $ | 274,554 | |
| Share-based payments | - | | | - | | | (1,408 | ) | | - | | | 479 | | | - | | | (929 | ) |
| Exercise of restricted share units | 44 | | | 678 | | | (678 | ) | | - | | | - | | | - | | | - | |
| Expiry of warrants | - | | | - | | | (78 | ) | | - | | | 78 | | | - | | | - | |
| Currency translation adjustment | - | | | - | | | - | | | 15,104 | | | - | | | - | | | 15,104 | |
| Net loss for the period | - | | | - | | | - | | | - | | | (7,001 | ) | | (172 | ) | | (7,173 | ) |
| Balance at June 30, 2023 | 64,050 | | $ | 412,324 | | $ | 11,974 | | $ | (97,061 | ) | $ | (54,671 | ) | $ | 8,990 | | $ | 281,556 | |
Largo Inc.
Expressed in thousands / 000's of U.S. dollars
Condensed Interim Consolidated Statements of Cash Flows
| | | | Three Months ended | | | Six Months ended | |
| | | | June 30, | | | June 30, | |
| | Notes | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Operating Activities | | | | | | | | | | | | | |
| Net income (loss) for the period | | $ | (5,966 | ) | $ | 17,965 | | $ | (7,173 | ) | $ | 16,011 | |
| Adjustment for Non-cash Items | | | | | | | | | | | | | |
| Depreciation | | | 7,005 | | | 5,972 | | | 15,049 | | | 10,695 | |
| Share-based payments | 11 | | 413 | | | 491 | | | (929 | ) | | 1,301 | |
| Unrealized foreign exchange loss (gain) | | | 245 | | | (2,455 | ) | | 264 | | | (3,044 | ) |
| Finance costs | 19 | | 1,981 | | | 314 | | | 3,407 | | | 491 | |
| Interest income | | | (480 | ) | | (213 | ) | | (1,192 | ) | | (397 | ) |
| Income tax (recovery) expense | 13(a) | | (295 | ) | | 7,115 | | | 38 | | | 7,717 | |
| Deferred income tax expense (recovery) | 13(a) | | 1,614 | | | (2,671 | ) | | 3,203 | | | (505 | ) |
| Income tax paid | | | (676 | ) | | (1,118 | ) | | (676 | ) | | (1,118 | ) |
| Cash Provided Before Working Capital Items | | | 3,841 | | | 25,400 | | | 11,991 | | | 31,151 | |
| Change in amounts receivable | | | 10,507 | | | (10,319 | ) | | (2,016 | ) | | (9,933 | ) |
| Change in inventory | | | (3,868 | ) | | (8,692 | ) | | 2,930 | | | (20,991 | ) |
| Change in prepaid expenses | | | 1,669 | | | (4,758 | ) | | 6,081 | | | (4,012 | ) |
| Changes in accounts payable and accrued | | | | | | | | | | | | | |
| liabilities and provisions | | | 5,036 | | | 5,816 | | | 2,584 | | | 5,582 | |
| Change in deferred revenue | | | 872 | | | (4,545 | ) | | 1,440 | | | (2,945 | ) |
| Net Cash Provided by (Used in) Operating Activities | | | 18,057 | | | 2,902 | | | 23,010 | | | (1,148 | ) |
| Financing Activities | | | | | | | | | | | | | |
| Receipt of debt | 9 | | - | | | 15,000 | | | 25,000 | | | 15,000 | |
| Repayment of debt | 9 | | - | | | (15,000 | ) | | - | | | (15,000 | ) |
| Interest paid | | | (2,092 | ) | | - | | | (2,092 | ) | | - | |
| Interest received | | | 479 | | | 213 | | | 1,191 | | | 397 | |
| Lease payments | | | (143 | ) | | (139 | ) | | (286 | ) | | (278 | ) |
| Change in restricted cash | | | - | | | (15,524 | ) | | (264 | ) | | (15,524 | ) |
| Sale of non-controlling interest | | | - | | | - | | | - | | | 250 | |
| Share repurchase | 10 | | - | | | (323 | ) | | - | | | (323 | ) |
| Issuance of common shares | 11 | | - | | | 94 | | | - | | | 184 | |
| Net Cash (Used in) Provided by Financing Activities | | | (1,756 | ) | | (15,679 | ) | | 23,549 | | | (15,294 | ) |
| Investing Activities | | | | | | | | | | | | | |
| Intangible assets | | | (104 | ) | | (716 | ) | | (194 | ) | | (1,689 | ) |
| Mine properties, plant and equipment | | | (12,654 | ) | | (10,667 | ) | | (27,380 | ) | | (13,962 | ) |
| Vanadium assets | | | (1,525 | ) | | - | | | (10,115 | ) | | - | |
| Net Cash Used in Investing Activities | | | (14,283 | ) | | (11,383 | ) | | (37,689 | ) | | (15,651 | ) |
| Effect of foreign exchange on cash | | | 387 | | | (1,356 | ) | | 639 | | | 1,181 | |
| Net Change in Cash | | | 2,405 | | | (25,516 | ) | | 9,509 | | | (30,912 | ) |
| Cash position - beginning of the period | | | 61,575 | | | 78,394 | | | 54,471 | | | 83,790 | |
| Cash Position - end of the period | | $ | 63,980 | | $ | 52,878 | | $ | 63,980 | | $ | 52,878 | |
1) Nature of operations
Largo Inc. ("the Company") is a producer and supplier of high-quality vanadium products, which are sourced from one of the world's highest-grade vanadium deposits at the Company's Maracás Menchen Mine located in Brazil. The Company is also focused on the advancement of renewable energy storage solutions through Largo Clean Energy and its vanadium redox flow battery technology ("VRFB"), as well as providing investors with exposure to physical vanadium through Largo Physical Vanadium Corp. ("LPV"). In addition to advancing its US- based clean energy storage business, the Company is in the process of implementing an ilmenite concentration plant using feedstock from its existing operations. While the Company's Maracás Menchen Mine has reached commercial production, future changes in market conditions and feasibility estimates could result in the Company's mineral resources not being economically recoverable.
The Company is a corporation governed by the Business Corporations Act (Ontario) and domiciled in Canada whose shares are listed on the Toronto Stock Exchange ("TSX") and on the Nasdaq Stock Market ("Nasdaq"). The head office, principal address and records office of the Company are located at 55 University Avenue, Suite 1105, Toronto, Ontario, Canada M5J 2H7.
2) Statement of compliance
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting.
The unaudited condensed interim consolidated financial statements were approved by the Board of Directors of the Company on August 8, 2023.
3) Basis of preparation, significant accounting policies, and future accounting changes
The basis of presentation, and accounting policies and methods of their application in these unaudited condensed interim consolidated financial statements, including comparatives, are consistent with those used in the Company's audited annual consolidated financial statements for the year ended December 31, 2022 and should be read in conjunction with those statements.
These unaudited condensed interim consolidated financial statements are presented in thousands of U.S. dollars, unless otherwise noted. References to the symbol "C$" or "CAD" mean the Canadian dollar, references to the symbol "EUR" mean the Euro and references to the symbol "R$" or "BRL" mean the Brazilian real, the official currency of Brazil.
a) Critical judgements and estimation uncertainties
The preparation of unaudited condensed interim consolidated financial statements requires the Company's management to make judgments, estimates and assumptions about the carrying amount of its assets and liabilities that are not readily apparent from other sources. These estimates and assumptions are disclosed in note 3(d) of the Company's audited annual consolidated financial statements for the year ended December 31, 2022. There have been no significant changes to the areas of estimation and judgment during the three and six months ended June 30, 2023.
b) Significant accounting policies
These unaudited condensed interim consolidated financial statements, including comparatives, have been prepared following the same accounting policies and methods of computation as the audited annual consolidated financial statements for the year ended December 31, 2022.
Amendments to IAS 1, Presentation of Financial Statements, IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors and IAS 12, Income Taxes, became effective on January 1, 2023 with no impact on the Company's unaudited condensed interim consolidated financial statements.
4) Amounts receivable
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Trade receivables | $ | 20,320 | | $ | 18,285 | |
| Current taxes recoverable - Brazil | | 2,401 | | | 2,156 | |
| Current taxes recoverable - Other | | 1,235 | | | 506 | |
| Other receivables | | 28 | | | 28 | |
| Total | $ | 23,984 | | $ | 20,975 | |
5) Inventory
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Finished products | $ | 44,711 | | $ | 48,546 | |
| Work-in-process | | 558 | | | 998 | |
| Stockpiles | | 1,234 | | | 284 | |
| Warehouse materials | | 16,661 | | | 14,393 | |
| Total | $ | 63,164 | | $ | 64,221 | |
During the three and six months ended June 30, 2023, the Company recognized a net realizable value write- down of $nil and $107 for battery components (three and six months ended June 30, 2022 - $nil and $nil), with the write-down included in technology start-up costs. The value of battery components inventory at June 30, 2023 and December 31, 2022 was $nil. During the three and six months ended June 30, 2023, the Company recognized a net realizable value write-down of $683 and $683 for finished products (three and six months ended June 30, 2022 - $2,285 and $2,285). As inventory is sold, previously recorded net realizable value write- downs are reclassified from inventory write-down to direct mine and production costs or product acquisition costs as appropriate (note 19).
6) Other intangible assets
At June 30, 2023, the remaining estimated useful life of patents held by the Company was 7.5 years (December 31, 2022 - 8 years). At June 30, 2023, the remaining estimated useful life of capitalized software costs was 4.5 years (December 31, 2022 - 5 years).
| | | Intellectual | | | | | | | |
| | | Property | | | Software | | | Total | |
| Cost | | | | | | | | | |
| Balance at December 31, 2021 | $ | 4,366 | | $ | - | | $ | 4,366 | |
| Additions | | - | | | 4,041 | | | 4,041 | |
| Balance at December 31, 2022 | $ | 4,366 | | $ | 4,041 | | $ | 8,407 | |
| Additions | | - | | | 118 | | | 118 | |
| Balance at June 30, 2023 | $ | 4,366 | | $ | 4,159 | | $ | 8,525 | |
| Accumulated Depreciation | | | | | | | | | |
| Balance at December 31, 2021 | $ | 437 | | $ | - | | $ | 437 | |
| Depreciation | | 436 | | | 271 | | | 707 | |
| Balance at December 31, 2022 | $ | 873 | | $ | 271 | | $ | 1,144 | |
| Depreciation | | 218 | | | 414 | | | 632 | |
| Balance at June 30, 2023 | $ | 1,091 | | $ | 685 | | $ | 1,776 | |
| Net Book Value | | | | | | | | | |
| At December 31, 2022 | $ | 3,493 | | $ | 3,770 | | $ | 7,263 | |
| At June 30, 2023 | $ | 3,275 | | $ | 3,474 | | $ | 6,749 | |
7) Mine properties, plant and equipment
At June 30, 2023 and December 31, 2022, the Company's economic interest in the Maracás Menchen Mine totaled 99.94%. The remaining 0.06% economic interest is held by Companhia Baiana de Pesquisa Mineral ("CBPM") owned by the state of Bahia. CBPM retains a 3% net smelter royalty ("NSR") in the Maracás Menchen Mine. The property is also subject to a royalty of 2% on certain operating costs under the Brazilian Mining Act. Under a separate agreement, Anglo Pacific Plc receives a 2% NSR in the Maracás Menchen Mine.
| | | Office and | | | | | | | | | Buildings, | | | | | | | |
| | | Computer | | | | | | Mine | | | Plant and | | | Construction | | | | |
| | | Equipment | | | Vehicles | | | Properties | | | Equipment | | | In Progress | | | Total | |
| Cost | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2021 | $ | 3,968 | | $ | 243 | | $ | 94,477 | | $ | 163,234 | | $ | 5,113 | | $ | 267,035 | |
| Additions | | 2,530 | | | 61 | | | 7,147 | | | 6,788 | | | 27,575 | | | 44,101 | |
| Disposals | | (152 | ) | | - | | | - | | | (4,205 | ) | | - | | | (4,357 | ) |
| Reclassifications | | - | | | - | | | - | | | 3,523 | | | (3,523 | ) | | - | |
| Effects of changes in foreign exchange rates | | 42 | | | 17 | | | 4,831 | | | 10,963 | | | 259 | | | 16,112 | |
| Balance at December 31, 2022 | $ | 6,388 | | $ | 321 | | $ | 106,455 | | $ | 180,303 | | $ | 29,424 | | $ | 322,891 | |
| Additions | | 144 | | | - | | | 12,203 | | | 157 | | | 12,788 | | | 25,292 | |
| Reclassifications | | - | | | - | | | - | | | 14 | | | (14 | ) | | - | |
| Effects of changes in foreign exchange rates | | 56 | | | 26 | | | 7,405 | | | 14,354 | | | 3,227 | | | 25,068 | |
| Balance at June 30, 2023 | $ | 6,588 | | $ | 347 | | $ | 126,063 | | $ | 194,828 | | $ | 45,425 | | $ | 373,251 | |
| | | Office and | | | | | | | | | Buildings, | | | | | | | |
| | | Computer | | | | | | Mine | | | Plant and | | | Construction | | | | |
| | | Equipment | | | Vehicles | | | Properties | | | Equipment | | | In Progress | | | Total | |
| Accumulated Depreciation | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2021 | $ | 508 | | $ | 243 | | $ | 32,450 | | $ | 87,175 | | $ | - | | $ | 120,376 | |
| Depreciation | | 1,198 | | | 5 | | | 4,701 | | | 18,270 | | | - | | | 24,174 | |
| Disposals | | (152 | ) | | - | | | - | | | (4,205 | ) | | - | | | (4,357 | ) |
| Effects of changes in foreign exchange rates | | 21 | | | 17 | | | 1,595 | | | 5,828 | | | - | | | 7,461 | |
| Balance at December 31, 2022 | $ | 1,575 | | $ | 265 | | $ | 38,746 | | $ | 107,068 | | $ | - | | $ | 147,654 | |
| Depreciation | | 605 | | | 6 | | | 3,674 | | | 9,702 | | | - | | | 13,987 | |
| | | | | | | | | | | | | | | | | | | |
| Effects of changes in foreign exchange rates | | 38 | | | 22 | | | 2,607 | | | 9,242 | | | - | | | 11,909 | |
| Balance at June 30, 2023 | $ | 2,218 | | $ | 293 | | $ | 45,027 | | $ | 126,012 | | $ | - | | $ | 173,550 | |
| | | | | | | | | | | | | | | | | | | |
| Net Book Value | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 | $ | 4,813 | | $ | 56 | | $ | 67,709 | | $ | 73,235 | | $ | 29,424 | | $ | 175,237 | |
| At June 30, 2023 | $ | 4,370 | | $ | 54 | | $ | 81,036 | | $ | 68,816 | | | 4$5,425 | | $ | 199,701 | |
Of the additions noted above, $25,205 related to the Mine Properties segment (year ended December 31, 2022 − $36,556) and $85 related to Largo Clean Energy (year ended December 31, 2022 − $3,599).
8) Accounts payable and accrued liabilities
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Accounts payable | $ | 22,518 | | $ | 20,459 | |
| Accrued liabilities | | 4,554 | | | 3,122 | |
| Accrued financial costs | | 948 | | | 287 | |
| Other taxes | | 769 | | | 3,092 | |
| Total | $ | 28,789 | | $ | 26,960 | |
| | | | | | | |
| Current | $ | 28,539 | | $ | 26,634 | |
| Non-current | | 250 | | | 326 | |
| Total | $ | 28,789 | | $ | 26,960 | |
9) Debt
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Total debt | $ | 65,000 | | $ | 40,000 | |
| | | | | | Cash flows | | | | |
| | | December 31, | | | | | | | | | June 30, | |
| | | 2022 | | | Proceeds | | | Repayment | | | 2023 | |
| Total debt | $ | 40,000 | | $ | 25,000 | | $ | - | | $ | 65,000 | |
| Total liabilities from financing activities | $ | 40,000 | | $ | 25,000 | | $ | - | | $ | 65,000 | |
| | | | | | | | | | |
| | | | | | Cash flows | | | | |
| | | December 31, | | | | | | | | | December 31, | |
| | | 2021 | | | Proceeds | | | Repayment | | | 2022 | |
| Total debt | $ | 15,000 | | $ | 55,000 | | $ | (30,000 | ) | $ | 40,000 | |
Credit facilities
In April 2022, the Company repaid in full its $15,000 working capital facility. At the same time, the Company secured a new working capital facility with a bank in Brazil. This facility was fully drawn down and proceeds of $15,000 were received. This facility was originally due to be repaid as a lump sum payment in April 2023, together with accrued interest at a rate of 3.65% per annum. The facility was repaid in full in December 2022.
In October 2022, the Company secured an additional debt facility of $20,000 with a bank in Brazil. Following an amendment finalized in June 2023, the facility is for three years, with the principal due for repayment at maturity. In addition to a fee of 0.8%, accrued interest at a rate of 8.51% p.a. is to be paid every six months.
In December 2022, the Company secured an additional debt facility of $20,000 with a bank in Brazil. The facility is for three years, with equal principal repayments due semi-annually after a grace period of 360 days. In addition to a fee of 0.70%, accrued interest at a rate of 8.20% p.a. is to be paid every six months.
In January 2023, the Company secured a two-year debt facility of $15,000, bearing interest at 6.85% per annum. Payments are due quarterly with principal repayments starting after a grace period of 180 days. Also in January 2023, and amended in June 2023, the Company secured a three-year debt facility of $10,000, bearing interest at 8.51% per annum and an initial fee of 0.80%. The principal is due for repayment at maturity, with interest payments due semi-annually.
10) Issued capital
a) Authorized
Unlimited common shares without par value.
b) Issued
| | | Six months ended | | | Year ended | |
| | | June 30, 2023 | | | December 31, 2022 | |
| | | Number of | | | | | | Number of | | | | |
| | | Shares | | | Cost | | | Shares | | | Cost | |
| Balance, beginning of the period | | 64,006 | | $ | 411,646 | | | 64,727 | | $ | 415,982 | |
| Exercise of warrants (note 11) | | - | | | - | | | 10 | | | 124 | |
| Exercise of stock options (note 11) | | - | | | - | | | 36 | | | 320 | |
| Exercise of restricted share units (note 11) | | 44 | | | 678 | | | 106 | | | 1,308 | |
| Share repurchase | | - | | | - | | | (873 | ) | | (6,088 | ) |
| Balance, end of the period | | 64,050 | | $ | 412,324 | | | 64,006 | | $ | 411,646 | |
11) Equity reserves
| | | RSUs | | | Options | | | Warrants | | | | |
| | | | | | | | | | | | Weighted | | | | | | | | | Weighted | | | | | | | |
| | | | | | | | | | | | average | | | | | | | | | average | | | | | | | |
| | | | | | | | | | | | exercise | | | | | | | | | exercise | | | | | | Total | |
| | | Number | | | Value | | | Number | | | price | | | Value | | | Number | | | price | | | Value | | | value | |
| December 31, 2021 | | 216 | | $ | 1,551 | | | 889 | | | C$12.78 | | $ | 4,857 | | | 1,832 | | | C$11.78 | | $ | 11,406 | | $ | 17,814 | |
| Share-based payments | | - | | | 564 | | | - | | | - | | | 1,714 | | | - | | | - | | | - | | | 2,278 | |
| Granted | | 111 | | | 640 | | | 363 | | | 11.79 | | | 359 | | | - | | | - | | | - | | | 999 | |
| Exercised | | (123 | ) | | (1,308 | ) | | (36 | ) | | (6.70 | ) | | (133 | ) | | (10 | ) | | (11.50 | ) | | (34 | ) | | (1,475 | ) |
| Expired | | - | | | - | | | - | | | - | | | - | | | (1,480 | ) | | - | | | (4,573 | ) | | (4,573 | ) |
| Forfeited | | (4 | ) | | (7 | ) | | (208 | ) | | (13.23 | ) | | (898 | ) | | - | | | - | | | - | | | (905 | ) |
| December 31, 2022 | | 200 | | $ | 1,440 | | | 1,008 | | | C$12.55 | | $ | 5,899 | | | 342 | | | C$13.00 | | $ | 6,799 | | $ | 14,138 | |
| Share-based payments | | - | | | 333 | | | - | | | - | | | 276 | | | - | | | - | | | - | | | 609 | |
| Granted | | 230 | | | 132 | | | 424 | | | 6.60 | | | 201 | | | - | | | - | | | - | | | 333 | |
| Exercised | | (62 | ) | | (678 | ) | | - | | | - | | | - | | | - | | | - | | | - | | | (678 | ) |
| Forfeited | | (85 | ) | | (694 | ) | | (407 | ) | | (12.18 | ) | | (1,656 | ) | | (14 | ) | | - | | | (78 | ) | | (2,428 | ) |
| June 30, 2023 | | 283 | | $ | 533 | | | 1,025 | | | C$10.23 | | $ | 4,720 | | | 328 | | | C$13.00 | | $ | 6,721 | | $ | 11,974 | |
During the three and six months ended June 30, 2023, the Company recognized a share-based payment expense related to the grant, vesting and forfeiture of stock options and RSUs of $413 and a recovery of $929 (three and six months ended June 30, 2022 - expenses of $491 and $1,301) for stock options and RSUs granted to the Company's directors, officers, employees and consultants. The total share-based payment expense was charged to operations.
a) RSUs
During the three and six months ended June 30, 2023, the Company granted 230 RSUs to officers and employees of the Company. These RSUs vest over time, with one-third vesting during each of the years 2024, 2025 and 2026.
b) Stock options
| | | | | | | | | Weighted | | | Weighted | | | Weighted | |
| | | | | | | | | average | | | average | | | average | |
| | | No. | | | No. | | | remaining | | | exercise | | | grant date | |
| Range of prices | | outstanding | | | exercisable | | | life (years) | | | price | | | share price | |
| C$ 5.71 - 10.00 | | 742 | | | 332 | | | 4.0 | | C$ | 6.70 | | C$ | C$6.70 | |
| 15.01 - 20.00 | | 222 | | | 141 | | | 3.3 | | | 17.33 | | | 17.33 | |
| 20.01 - 25.00 | | 29 | | | 29 | | | 0.1 | | | 24.00 | | | 24.00 | |
| 30.01 - 30.40 | | 32 | | | 32 | | | 0.5 | | | 30.40 | | | 30.40 | |
| | | 1,025 | | | 534 | | | | | C$ | C$10.23 | | | | |
During the six months ended June 30, 2023, the Company granted 424 (year ended December 31, 2022 - 363) stock options with a weighted average exercise price of C$6.60. The chart below details the inputs to the Black-Scholes model used in determining the fair value of the options granted during the year (with 0% dividend yield and 0% expected forfeiture rate).
| | | Six months ended | |
| | | June 30, 2023 | | | June 30, 2022 | |
| Risk-free interest rate | | 3.13% | | | 3.04% | | | 3.29% | | | 1.62% | | | 0.95% | |
| Expected volatility | | 68.58% | | | 68.25% | | | 68.48% | | | 75.50% | | | 81.13% | |
| Expected life of options | | 5 | | | 5 | | | 5 | | | 5 | | | 5 | |
| Fair value on grant date | $ | 4.75 | | $ | 3.92 | | $ | 3.38 | | $ | 6.93 | | $ | 12.58 | |
| Exercise price | $ | 8.04 | | $ | 6.67 | | $ | 5.71 | | $ | 11.22 | | $ | 19.52 | |
| Number of options granted (000) | | 34 | | | 313 | | | 77 | | | 54 | | | 176 | |
| Expiry | | 01/12/28 | | | 04/13/28 | | | 05/18/28 | | | 01/20/27 | | | 04/01/27 | |
Options vest in equal installments of one-third on the anniversary date of the grant. The remaining weighted average contractual life of options outstanding at June 30, 2023 was 3.6 years (December 31, 2022 - 2.7 years).
c) Warrants
| | | | | | | | Expected | Risk-free |
| No. | No. | Grant | Expiry | Exercise | Expected | Expected | dividend | Interest |
| outstanding | exercisable | Date | Date | price | volatility | life (years) | yield | rate |
| 328 | 328 | 12/07/20 | 12/08/25 | C$ 13.00 | 88% | 5.00 | 0% | 0% |
| 328 | 328 | | | C$ 13.00 | | | | |
12) Earnings (loss) per share
The total number of shares issuable from options, warrants and RSUs that are excluded from the computation of diluted earnings (loss) per share because their effect would be anti-dilutive was 1,636 and 1,636 for the three and six months ended June 30, 2023 (three and six months ended June 30, 2022 - 1,004 and 1,004).
13) Taxes
a) Tax expense
| | | Three months ended | | | Six months ended | |
| | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Income tax recovery (expense) | $ | 295 | | $ | (7,115 | ) | $ | (38 | ) | $ | (7,717 | ) |
| Deferred income tax (expense) recovery | | (1,614 | ) | | 2,671 | | | (3,203 | ) | | 505 | |
| Total | $ | (1,319 | ) | $ | (4,444 | ) | $ | (3,241 | ) | $ | (7,212 | ) |
b) Changes in deferred tax assets and liabilities
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Deferred income tax asset | $ | 2,141 | | $ | 4,596 | |
| Deferred income tax liability | | (713 | ) | | - | |
| Net deferred income tax asset | $ | 1,428 | | $ | 4,596 | |
| | | Six months | | | | |
| | | ended | | | Year ended | |
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Net deferred income tax asset, beginning of the period | $ | 4,596 | | $ | 3,343 | |
| Deferred income tax (expense) recovery | | (3,203 | ) | | 1,423 | |
| Effect of foreign exchange | | 35 | | | (170 | ) |
| Net deferred income tax asset, end of the period | $ | 1,428 | | $ | 4,596 | |
14) Related party transactions
In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.
The remuneration of directors and other members of key management personnel during the period was as follows:
| | | Three months ended | | | Six months ended | |
| | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Short-term benefits | $ | 370 | | $ | 1,889 | | $ | 1,460 | | $ | 2,523 | |
| Share-based payments | | 151 | | | 578 | | | 280 | | | 1,261 | |
| Total | $ | 521 | | $ | 2,467 | | $ | 1,740 | | $ | 3,784 | |
Refer to note 16 for additional commitments with management.
15) Segmented disclosure
The Company has six operating segments: sales & trading, mine properties, corporate, exploration and evaluation properties ("E&E properties") (included as part of inter-segment transactions & other), Largo Clean Energy and Largo Physical Vanadium. Corporate includes the corporate team that provides administrative, technical, financial and other support to all of the Company's business units, as well as being part of the Company's sales structure.
| | | | | | | | | | | | | | | | | | Inter- | | | | |
| | | | | | | | | | | | Largo | | | Largo | | | segment | | | | |
| | | Sales & | | | Mine | | | | | | Clean | | | Physical | | | transactions | | | | |
| | | trading | | | properties | | | Corporate | | | Energy | | | Vanadium | | | & other | | | Total | |
| Three months ended June 30, 2023 | | | | | | | | | | | | | | | | | | | | | |
| Revenues | $ | 43,810 | | $ | 43,940 | | $ | 35,737 | | $ | - | | $ | - | | $ | (70,377 | ) | $ | 53,110 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Operating costs | | (50,806 | ) | | (36,952 | ) | | (34,492 | ) | | - | | | - | | | 79,221 | | | (43,029 | ) |
| Professional, consulting and management fees | | (456 | ) | | (624 | ) | | (1,997 | ) | | (2,444 | ) | | (303 | ) | | - | | | (5,824 | ) |
| Foreign exchange gain (loss) | | 9 | | | (453 | ) | | (381 | ) | | (13 | ) | | 21 | | | - | | | (817 | ) |
| Other general and administrative expenses | | (452 | ) | | (545 | ) | | (880 | ) | | (1,253 | ) | | (29 | ) | | (174 | ) 1 | | (3,333 | ) |
| Share-based payments | | - | | | - | | | (413 | ) | | - | | | - | | | - | | | (413 | ) |
| Finance costs | | (10 | ) | | (1,662 | ) | | (3 | ) | | (18 | ) | | (286 | ) | | (2 | ) 1 | | (1,981 | ) |
| Interest income | | 1 | | | 141 | | | 338 | | | - | | | - | | | - | | | 480 | |
| Technology start-up costs | | - | | | - | | | - | | | (1,539 | ) | | - | | | - | 1 | | (1,539 | ) |
| Exploration and evaluation costs | | - | | | (625 | ) | | - | | | - | | | - | | | (676 | ) 2 | | (1,301 | ) |
| | | (51,714 | ) | | (40,720 | ) | | (37,828 | ) | | (5,267 | ) | | (597 | ) | | 78,369 | | | (57,757 | ) |
| Net income (loss) | | | | | | | | | | | | | | | | | | | | | |
| before tax | | (7,904 | ) | | 3,220 | | | (2,091 | ) | | (5,267 | ) | | (597 | ) | | 7,992 | | | (4,647 | ) |
| Income tax recovery | | 228 | | | 67 | | | - | | | - | | | - | | | - | | | 295 | |
| Deferred income tax (expense) recovery | | 237 | | | (1,675 | ) | | (176 | ) | | - | | | - | | | - | | | (1,614 | ) |
| Net income (loss) | $ | (7,439 | ) | $ | 1,612 | | $ | (2,267 | ) | $ | (5,267 | ) | $ | (597 | ) | $ | 7,992 | | $ | (5,966 | ) |
| Revenues (after elimination of inter-segment transactions) | $ | 43,721 | | $ | 8,974 | | $ | 415 | | $ | - | | $ | - | | | | | $ | 53,110 | |
| At June 30, 2023 | | | | | | | | | | | | | | | | | | | | | |
| Total non-current assets | $ | 1,697 | | $ | 171,774 | | $ | 19,437 | | $ | 10,621 | | $ | 25,234 | | $ | 4,228 | | $ | 232,991 | |
| Total assets | $ | 64,169 | | $ | 291,507 | | $ | 99,227 | | $ | 15,255 | | $ | 26,437 | | $ | (103,276 | )3 | $ | 393,319 | |
| Total liabilities | $ | 42,142 | | $ | 101,877 | | $ | 70,082 | | $ | 6,204 | | $ | 228 | | $ | (108,770 | )4 | $ | 111,763 | |
1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.
2. Amount relating to E&E properties.
3. Inter-segment transaction elimination of $107,548 partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total assets of $4,270 and E&E properties total assets of $2.
4. Inter-segment transaction elimination of $108,853 partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total liabilities of $83 and E&E properties total liabilities of $nil.
| | | | | | | | | | | | | | | | | | Inter- | | | | |
| | | | | | | | | | | | Largo | | | Largo | | | segment | | | | |
| | | Sales & | | | Mine | | | | | | Clean | | | Physical | | | transactions | | | | |
| | | trading | | | properties | | | Corporate | | | Energy | | | Vanadium | | | & other | | | Total | |
| Three months ended June 30, 2022 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Revenues | $ | 74,471 | | $ | 66,027 | | $ | 57,922 | | $ | - | | $ | - | | $ | (113,616 | ) | $ | 84,804 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Operating costs | | (61,844 | ) | | (42,319 | ) | | (55,776 | ) | | - | | | - | | | 109,235 | | | (50,704 | ) |
| Professional, consulting and management fees | | (568 | ) | | (1,567 | ) | | (1,584 | ) | | (2,337 | ) | | (324 | ) | | - | 1 | | (6,380 | ) |
| Foreign exchange (loss) gain | | (57 | ) | | 2,651 | | | (202 | ) | | 1 | | | 17 | | | - | | | 2,410 | |
| Other general and administrative expenses | | (137 | ) | | (3,051 | ) | | (390 | ) | | (1,354 | ) | | (41 | ) | | (129 | ) 1 | | (5,102 | ) |
| Share-based payments | | - | | | - | | | (491 | ) | | - | | | - | | | - | | | (491 | ) |
| Finance costs | | (8 | ) | | (264 | ) | | (3 | ) | | (21 | ) | | (1 | ) | | (17 | ) 1 | | (314 | ) |
| Interest income | | - | | | 153 | | | 60 | | | - | | | - | | | - | | | 213 | |
| Technology start-up costs | | - | | | - | | | - | | | (1,730 | ) | | - | | | (117 | ) 1 | | (1,847 | ) |
| Exploration and evaluation costs | | - | | | (178 | ) | | - | | | - | | | - | | | (2 | ) 2 | | (180 | ) |
| | | (62,614 | ) | | (44,575 | ) | | (58,386 | ) | | (5,441 | ) | | (349 | ) | | 108,970 | | | (62,395 | ) |
| Net income (loss) before tax | | 11,857 | | | 21,452 | | | (464 | ) | | (5,441 | ) | | (349 | ) | | (4,646 | ) | | 22,409 | |
| Income tax expense | | (810 | ) | | (6,305 | ) | | - | | | - | | | - | | | - | | | (7,115 | ) |
| Deferred income tax recovery (expense) | | (340 | ) | | 3,435 | | | (424 | ) | | - | | | - | | | - | | | 2,671 | |
| Net income (loss) | $ | 10,707 | | $ | 18,582 | | $ | (888 | ) | $ | (5,441 | ) | $ | (349 | ) | $ | (4,646 | ) | $ | 17,965 | |
| Revenues (after elimination of inter-segment transactions) | $ | 74,471 | | $ | 10,333 | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 84,804 | |
| At December 31, 2022 | | | | | | | | | | | | | | | | | | | | | |
| Total non-current assets | $ | 934 | | $ | 148,508 | | $ | 20,525 | | $ | 12,389 | | $ | 15,344 | | $ | 3,906 | | $ | 201,606 | |
| Total assets | $ | 73,874 | | $ | 250,926 | | $ | 90,770 | | $ | 15,941 | | $ | 27,086 | | $ | (102,847 | )3 | $ | 355,750 | |
| Total liabilities | $ | 56,566 | | $ | 72,842 | | $ | 53,373 | | $ | 5,092 | | $ | 374 | | $ | (107,051 | )4 | $ | 81,196 | |
1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.
2. Amount relating to E&E properties.
3. Inter-segment transaction elimination of $(106,773) partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total assets of $3,924 and E&E properties total assets of $2.
4. Inter-segment transaction elimination of $(107,225) partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total liabilities of $174.
| | | | | | | | | | | | | | | | | | Inter- | | | | |
| | | | | | | | | | | | Largo | | | Largo | | | segment | | | | |
| | | Sales & | | | Mine | | | | | | Clean | | | Physical | | | transactions | | | | |
| | | trading | | | properties | | | Corporate | | | Energy | | | Vanadium | | | & other | | | Total | |
| Six months ended June 30, 2023 | | | | | | | | | | | | | | | | | | | | | |
| Revenues | $ | 94,244 | | $ | 82,522 | | $ | 74,508 | | $ | - | | $ | - | | $ | (140,743 | ) | $ | 110,531 | |
| Operating costs | | (98,733 | ) | | (71,141 | ) | | (72,148 | ) | | - | | | - | | | 153,062 | | | (88,960 | ) |
| Professional, consulting and management fees | | (902 | ) | | (1,468 | ) | | (3,684 | ) | | (4,846 | ) | | (463 | ) | | - | | | (11,363 | ) |
| Foreign exchange gain (loss) | | 63 | | | (201 | ) | | (294 | ) | | (22 | ) | | 54 | | | - | | | (400 | ) |
| Other general and administrative expenses | | (625 | ) | | (973 | ) | | (2,096 | ) | | (2,685 | ) | | 51 | | | (278 | ) 1 | | (6,606 | ) |
| Share-based payments | | - | | | - | | | 929 | | | - | | | - | | | - | | | 929 | |
| Finance costs | | (19 | ) | | (3,059 | ) | | (7 | ) | | (32 | ) | | (287 | ) | | (3 | ) 1 | | (3,407 | ) |
| Interest income | | 2 | | | 658 | | | 532 | | | - | | | - | | | - | | | 1,192 | |
| Technology start-up costs | | - | | | - | | | - | | | (4,307 | ) | | - | | | (1 | ) 1 | | (4,308 | ) |
| Exploration and evaluation costs | | - | | | (862 | ) | | - | | | - | | | - | | | (678 | ) 2 | | (1,540 | ) |
| | | (100,214 | ) | | (77,046 | ) | | (76,768 | ) | | (11,892 | ) | | (645 | ) | | 152,102 | | | (114,463 | ) |
| Net income (loss) before tax | | (5,970 | ) | | 5,476 | | | (2,260 | ) | | (11,892 | ) | | (645 | ) | | 11,359 | | | (3,932 | ) |
| Income tax expense | | (38 | ) | | - | | | - | | | - | | | - | | | - | | | (38 | ) |
| Deferred income tax (expense) recovery | | 80 | | | (2,731 | ) | | (552 | ) | | - | | | - | | | - | | | (3,203 | ) |
| Net income (loss) | $ | (5,928 | ) | $ | 2,745 | | $ | (2,812 | ) | $ | (11,892 | ) | $ | (645 | ) | $ | 11,359 | | $ | (7,173 | ) |
| Revenues (after inter-segment eliminations) | $ | 92,578 | | $ | 16,049 | | $ | 1,904 | | $ | - | | $ | - | | $ | - | | $ | 110,531 | |
1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.
2. Amount relating to E&E properties.
| | | | | | | | | | | | | | | | | | Inter- | | | | |
| | | | | | | | | | | | Largo | | | Largo | | | segment | | | | |
| | | Sales & | | | Mine | | | | | | Clean | | | Physical | | | transactions | | | | |
| | | trading | | | properties | | | Corporate | | | Energy | | | Vanadium | | | & other | | | Total | |
| Six months ended June 30, 2022 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Revenues | $ | 108,621 | | $ | 102,893 | | $ | 88,950 | | $ | - | | $ | - | | $ | (172,972 | ) | $ | 127,492 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Operating costs | | (93,792 | ) | | (69,132 | ) | | (85,667 | ) | | - | | | - | | | 168,929 | | | (79,662 | ) |
| Professional, consulting and management fees | | (1,061 | ) | | (2,603 | ) | | (3,474 | ) | | (4,650 | ) | | (508 | ) | | - | | | (12,296 | ) |
| Foreign exchange (loss) gain | | (83 | ) | | 944 | | | 78 | | | (2 | ) | | 6 | | | - | | | 943 | |
| Other general and administrative expenses | | (248 | ) | | (3,318 | ) | | (808 | ) | | (2,197 | ) | | (56 | ) | | (130 | ) 1 | | (6,757 | ) |
| Share-based payments | | - | | | - | | | (1,301 | ) | | - | | | - | | | - | | | (1,301 | ) |
| Finance costs | | (14 | ) | | (413 | ) | | (6 | ) | | (39 | ) | | (1 | ) | | (18 | ) 1 | | (491 | ) |
| Interest income | | - | | | 297 | | | 100 | | | - | | | - | | | - | | | 397 | |
| Technology start-up costs | | - | | | - | | | - | | | (4,566 | ) | | - | | | (251 | ) 1 | | (4,817 | ) |
| Exploration and evaluation costs | | - | | | (281 | ) | | - | | | - | | | - | | | (4 | ) 2 | | (285 | ) |
| | | (95,198 | ) | | (74,506 | ) | | (91,078 | ) | | (11,454 | ) | | (559 | ) | | 168,526 | | | (104,269 | ) |
| Net income (loss) before tax | | 13,423 | | | 28,387 | | | (2,128 | ) | | (11,454 | ) | | (559 | ) | | (4,446 | ) | | 23,223 | |
| Income tax expense | | (956 | ) | | (6,761 | ) | | - | | | - | | | - | | | - | | | (7,717 | ) |
| Deferred income tax recovery (expense) | | (387 | ) | | 1,587 | | | (695 | ) | | - | | | - | | | - | | | 505 | |
| Net income (loss) | $ | 12,080 | | $ | 23,213 | | $ | (2,823 | ) | $ | (11,454 | ) | $ | (559 | ) | $ | (4,446 | ) | $ | 16,011 | |
| Revenues (after inter-segment eliminations) | $ | 108,621 | | $ | 18,557 | | $ | 314 | | $ | - | | $ | - | | $ | - | | $ | 127,492 | |
1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.
2. Amount relating to E&E properties.
16) Commitments and contingencies
At June 30, 2023, the Company was party to certain management and consulting contracts. Minimum commitments under the agreements are approximately $1,808 and all payable within one year. These contracts also require that additional payments of up to approximately $2,712 be made upon the occurrence of certain events such as change of control. As the triggering event has not occurred, the contingent payments have not been reflected in these consolidated financial statements.
In 2021, the Company signed a 10-year exclusive off-take agreement with a third party for the purchase of all standard and high purity grade vanadium products they produce. The annual quantity to be delivered to the Company in 2023 is 220 tonnes of V2O5, with the Company having a right of first refusal over additional amounts.
The Company is committed to the purchase of 60 tonnes per month of V2O5 from third parties for the remainder of 2023.
The Company's Largo Clean Energy business is required to pay a royalty of $120 per kilowatt capacity of a licensed product until such time as the licensed patents expire or are abandoned, and $60 per kilowatt thereafter. Refer to note 7 for details of the royalties payable at the Maracás Menchen Mine.
The Company is committed to a minimum amount of rental payments under five leases of office space which expire between December 31, 2023 and May 1, 2027. Minimum rental commitments remaining under the leases are approximately $299, including $185 due within one year.
At the Company's Maracás Menchen Mine and at Largo Clean Energy, the Company has entered into purchase order contracts with remaining amounts due related to goods not received or services not rendered as of June 30, 2023 of $9,315.
The Company, through its subsidiaries, is party to legal proceedings in the ordinary course of its operations related to legally binding agreements with various third parties under supply contracts and consulting agreements. During the year ended December 31, 2022, the Company received a ruling regarding one such proceeding in Brazil. This relates to a supply agreement for the Maracás Menchen Mine which was filed with the courts in October 2014. The ruling requires the Company to pay amounts due, plus interest and legal fees. At June 30, 2023, the Company recognized a provision of R$28,244 ($5,861) in the current portion of provisions (December 31, 2022 - $5,076). The Company is awaiting a further ruling from a higher court in Brazil.
The Company and its subsidiaries are party to legal proceedings regarding labour matters. A provision was recorded at December 31, 2022 for such proceedings in Brazil in an amount of R$1,223 ($234). At June 30, 2023, the provision recognized was R$1,223 ($254).
The outcome of these proceedings remains dependent on the final judgment. Management does not expect the outcome of any of the remaining proceedings to have a materially adverse effect on the results of the Company's financial position or results of operations.
17) Financial instruments
Financial assets and financial liabilities at June 30, 2023 and December 31, 2022 were as follows:
| | | June 30, | | | December 31, | |
| | | 2023 | | | 2022 | |
| Cash | $ | 63,980 | | $ | 54,471 | |
| Restricted cash | | 734 | | | 470 | |
| Trade and other receivables | | 20,348 | | | 18,313 | |
| Accounts payable and accrued liabilities (including non-current) | | 28,789 | | | 26,960 | |
| Total debt | | 65,000 | | | 40,000 | |
Restricted cash refers to cash amounts the Company was required to place on deposit. Refer to the liquidity risk discussion below regarding liabilities.
The Company's risk exposures and the impact on the Company's financial instruments are summarized below. There have been no changes in the risks, objectives, policies and procedures from the previous year.
a) Fair value
IFRS requires that the Company disclose information about the fair value of its financial assets and liabilities. Fair value estimates are made based on relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
The fair value hierarchy categorizes into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly such as those derived from prices.
• Level 3 inputs are unobservable inputs for the asset or liability.
The carrying amounts for trade receivables, amounts receivable and accounts payable and accrued liabilities in the condensed interim consolidated statements of financial position approximate fair values because of the limited term of these instruments. Cash and restricted cash are classified as FVTPL and included in level 1. The debt facilities were secured at interest rates consistent with the rates seen at June 30, 2023 and thus the carrying amount of debt approximates fair value.
There have been no changes in the classification of financial instruments in the fair value hierarchy since December 31, 2022. The Company does not have any financial instruments measured using Level 3 inputs. The Company does not offset financial assets with financial liabilities and there were no transfers between Level 1 and Level 2 input financial instruments.
b) Credit risk
The Company's maximum amount of credit risk is attributable to cash, restricted cash and amounts receivable.
The Company minimizes its credit risk with respect to cash by placing its funds on deposit with the highest rated banks in Canada, Ireland, the U.S. and Brazil. Financial instruments included in amounts receivable consist primarily of receivables from unrelated companies. Sales to customers outside of Brazil are protected either by the Company's credit insurance policies, which establishes credit limits for each customer, or by the Company requiring letters of credit or up-front payment prior to delivery occurring.
Of the total trade receivables balance of $20,320, $11,468 relates to customers in Brazil, which are not covered by the Company's credit insurance policies. The ratings for these companies range from AA to AAA. The Company applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables.
To measure expected credit losses, trade receivables are grouped based on risk characteristics and due dates. At June 30, 2023, no amounts are past due and in the six months ended June 30, 2023, the Company has not experienced any credit losses. At June 30, 2023, the loss allowance for trade receivables was determined to be $nil (December 31, 2022 - $nil), with any movement recognized as a component of finance costs (note 19). There have been no write offs of trade receivables.
c) Liquidity risk
The following table details the Company's expected remaining contractual cash flow requirements at June 30, 2023 for its financial liabilities with agreed repayment periods.
| | | Less than | | | 6 months | | | | | | | |
| | | 6 months | | | to 1 year | | | 1 to 3 years | | | Over 3 years | |
| Accounts payable and accrued liabilities (note 8) | $ | 28,504 | | $ | - | | $ | 285 | | $ | - | |
| Debt (note 9) | | - | | | 18,000 | | | 47,000 | | | - | |
Operating and purchase
commitments | | 10,312 | | | 997 | | | 80 | | | 33 | |
| Total | $ | 38,816 | | $ | 18,997 | | $ | 47,365 | | $ | 33 | |
The Company's principal sources of liquidity are its cash flows from operating activities and cash of $63,980 (December 31, 2022 - $54,471). Refer to note 16 for other commitments and contingencies.
d) Market risk
Interest rate risk
The Company's interest rate exposure is limited to that portion of its debt that is subject to floating interest rates. At June 30, 2023, the Company had no debt that is subject to floating interest rates and does not have any exposure to floating interest rates.
Foreign currency risk
At June 30, 2023, the Company's outstanding debt is 100% denominated in U.S. dollars (December 31, 2022 - 100% U.S. dollar denominated).
The impact of fluctuations in foreign currency on cash and debt relates primarily to fluctuations between the U.S. dollar, the Canadian dollar, the Brazilian real and the Euro. At June 30, 2023, the Company's U.S. dollar functional currency entities had cash denominated in Canadian dollars, Euros and Swiss francs and the Company's Brazilian real functional currency entities had cash and debt denominated in U.S. dollars.
A 5% change in the value of the Canadian dollar, the Euro and the Swiss franc relative to the U.S. dollar would affect the value of these cash balances at June 30, 2023 by approximately $178. A 5% change in the value of the Brazilian real relative to the U.S. dollar would affect the value of Brazilian real cash balances by approximately $291.
Price risk
The Company does not have any financial instruments with significant exposure to price risk.
18) Revenues
| | | Three months ended | | | Six months ended | |
| | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| V2O5 revenues | | | | | | | | | | | | |
| Produced products | $ | 30,558 | | $ | 45,976 | | $ | 65,084 | | $ | 67,790 | |
| Purchased products | | 2,937 | | | 1,143 | | | 5,465 | | | 1,529 | |
| | | 33,495 | | | 47,119 | | | 70,549 | | | 69,319 | |
| V2O3 revenues | | | | | | | | | | | | |
| Produced products | $ | 2,358 | | $ | - | | $ | 3,841 | | $ | - | |
| Purchased products | | - | | | - | | | 1,155 | | | - | |
| | | 2,358 | | | - | | | 4,996 | | | - | |
| FeV revenues | | | | | | | | | | | | |
| Produced products | $ | 17,230 | | $ | 22,883 | | $ | 34,658 | | $ | 41,911 | |
| Purchased products | | 27 | | | 14,802 | | | 328 | | | 16,262 | |
| | | 17,257 | | | 37,685 | | | 34,986 | | | 58,173 | |
| | | | | | | | | | | | | |
| Vanadium sales from contracts with customers | $ | 53,110 | | $ | 84,804 | | $ | 110,531 | | $ | 127,492 | |
19) Expenses
| | | Three months ended | | | Six months ended | |
| | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Finance costs: | | | | | | | | | | | | |
| Interest expense and fees | $ | 1,674 | | $ | 237 | | $ | 3,025 | | $ | 354 | |
| Interest on lease liabilities | | 14 | | | 35 | | | 28 | | | 53 | |
| Accretion | | 68 | | | 42 | | | 129 | | | 84 | |
| Write-down of vanadium assets | | 225 | | | - | | | 225 | | | - | |
| | $ | 1,981 | | $ | 314 | | $ | 3,407 | | $ | 491 | |
| Operating costs: | | | | | | | | | | | | |
| Direct mine and production costs | $ | 24,976 | | $ | 23,905 | | $ | 53,395 | | $ | 41,465 | |
| Conversion costs | | 2,220 | | | 2,337 | | | 4,138 | | | 4,184 | |
| Product acquisition costs | | 3,753 | | | 9,568 | | | 7,931 | | | 11,118 | |
| Royalties | | 2,450 | | | 3,742 | | | 4,895 | | | 5,768 | |
| Distribution costs | | 2,525 | | | 2,851 | | | 3,972 | | | 4,306 | |
| Inventory write-down (note 5) | | 683 | | | 2,572 | | | 683 | | | 2,572 | |
| Depreciation and amortization | | 6,202 | | | 5,507 | | | 13,453 | | | 9,812 | |
| Iron ore costs | | 220 | | | 222 | | | 493 | | | 437 | |
| | $ | 43,029 | | $ | 50,704 | | $ | 88,960 | | $ | 79,662 | |
