LGO - Earnings call transcript Q2 2022

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Operator

Good day, and thank you for standing by. Welcome to Largo Second Quarter 2022 Webcast and Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. to conference like speaker to now today. would hand over the your I Manager External Guthrie, of Alex Senior Relations. ahead. go Please

Alex Guthrie

Good morning, everyone. earnings And thanks for joining and conference our webcast. call second quarter

Ernest Misk, On is Vollant, Paul also presentation, Web have of the our President is uploaded call accompany VP Chief site Paulo available To today, the and Officer; on today Largo's CEO; at which call Cleave, Commercial. and a Largo's Financial webcast Largo's largoinc.com. we supplemental

AIF statements, are as financial Our related the SEDAR most recent available MD&A website, also QX well and and on on on as EDGAR.

would provide Before for Please quarter QX continuing company's the discussion the company's is to an the refer our by sales Ernest, call on for a to without vanadium update this agenda update limitation, of on that market. call, progress you including during call Paulo and will the the statements, I some overview an information of Slide morning cautionary today's will X will those will and progress; on forward-looking close hear notes. description The like followed results; provide the full Paulo an regarding outlook. you business our of consist as of will second with follows: remind trading who financial Largo's future

the the that, others to Paulo. Following then allow over requeue and two for I'll this, are participants questions. questions hand will their then to questions to call participate. should call if we to open We restrict And the note that additional opportunity there with

Paulo Misk

like providing business our brief it to thanks strategy. quarter relates pillar everyone for to by summary Thank results our a second joining today. And you, I'd as call Alex. of two our start

the with Let's profitable pillar. begin vanadium

the am of to in worked has the sales in quarter. I that start the team Our of performance report our the improved year. second and several challenges production pleased face at hard

over notable which QX. in produced the tonnes On equivalent a production of X,XXX is VXXX increase QX, side, we

this an intermediate X,XXX well great as also the as of sold. quarter in Following of for net basic and quarter Revenues with XX% achieved $XX strong QX a improvement reflect quarter million tonnes equivalent income company this performance prices per payers up reestablishment of and quarter The this financial inventories. share of VXXX operational the [our] company's were earnings vanadium stability, $X.XX. improved during this. was

to force date However, global [continue] to tonnes excluding now is [revised] sold XX,XXX inflationary guidance the costs, guidance revised XX,XXX impact and the XXXX. production $X.XX $X.XX to It XX,XXX XX,XXX to has has experienced down and company sales tonnes, increased due of to guidance from cash operational operating to equivalent pressures, ton to its from production $X.XX. expected for $X.XX and per

address focus management. to facility challenge cost the at actively We an on to operational continue improvements our increased with additional

As expected we the technical of important on part to meaning existing our that TiOX from QX noted Plant our be TiOX mining project is key Ilmenite and on found is Concentration Web from latest This SEDAR which the ore in our previously began An content new company feature of update, our vanadium in is required. sourced the April. pigment a of site. no this operations, construction outlined our be in project can report, announced project

the next delaying this commissioning are year in Ilmenite as expect Concentration we planned. to the of we of Although, CapEx begin spent Plant on project, QX

system, its quality pillar strategic battery In made continue management our to the progress second of Energy. achieved business teams CE ISO XXXX Largo our discuss certification gears and to our VCHARGE of of Clean July, shift and pursue LTE Let's late at system. certification

from negotiation was $X.X continued next obstacles. a in DOE early complete based will this the This $X.X and up be for LTE’s the award three system. These And budget VCHARGE years. in priority July. had $X of obstacles storage the for Energy project manufacturing flow total DOE face LTE on the have energy duration expect significant and a of was February concluded and expect progress funding selected LTE subject battery funding we receive is which negotiation million year, in project last we batteries US focus of and XXXX. provide to quarter Enel low over million to contract supply October delivery remains in we announced of us. timeline, previously Department As to chain this commissioned made to impact DOE notable now mid in was the million, to scale

We binding recent Green the Tech of a are of for generations a purpose commercial the in deployment to establishment negotiate Ansaldo VCHARGE the our and to Middle venture have also signing non of battery of Africa announced the Europe, power market. East pleased MOU with joint

to the renewable the embracing power plants of servicing Italy, Ansaldo products be are an the in we Genoa, installing that integrated of JV [energy] with which of to as for a Given energy and of I'd negotiation generation X,XXX can turbines. is player could integration. it extremely nature announcements, manufacturing, approximately headquartered [Indiscernible] is can European operates Ansaldo energy execution like developing, turbo micro XXXX. goal and nonbinding in will address no for transition provide a turbines, employees is the generators leading international provide turnkey It's it in turbines, the further lead the XXXX, reach more will the future that the these seeing Energia But and details Established assurance is on energy [growth] limited the successful, note the model, renewable has source Ansaldo. traditional Ansaldo needs over information and sector, of of in subsidiary revenues recognized with industry renewables negotiation the in there brings in to definitive in machinery, EURX.X gas billion of to if Green innovation field agreement. we of terms of energy. I potential what view towards globally steam and including in energy forms Tech

Finally, have This see we higher made to was sustainability I'm the our reflected in would far. in on like I fourth progress July. important proud which ESG several areas. the thus in report, touch annual published rating to is

Our other have report and Included priorities going many this is the we coming related and improvements in our journey measures forward. on the planned in continues TCFD progress sustainability performance sustainability of first month. release

carbon very and leader a sustainability, and industry. are We are new in on a we forward I practices contributor to moving to our am low [sustainable]. best to the on focus confident and by dedicating Largo respected to path continue exciting the become and ourselves that track on future of planet’s

stop Ernest a for our of things financial to turn results. Let over review there and me

Ernest Cleave

QX Thanks, a basic today. company everyone second share. solid the provides a million $X.XX we quarter for of Slide and net summary financial on to Paulo, or earnings welcome per our financial reported income $XX the results. of quarter and call of was X

last vanadium compared $X.XX stronger last we or royalties of with year. This QX $XX million result of increase in of a excluding costs represents QX equivalents sales XXXX year. pound As a pound in the prices, $XX.XX $X.XX were approximately XX% sold. QX revenues per in Cash from tonnes per in for generated quarter comparative operating over VXXX X,XXX revenues

cost the inflationary during we pressures critical half to increases As most market, quarters, and wider to in consumables. year our have continue for first of face noted similar the experienced of previous we the

the impacts year. we've for of remainder mentioned, to our updated Paulo cash cost guidance inflationary expected the reflect As the

cost agreements. cash Paulo for to TiOX million. Ilmenite plant for is a At to second accounts the capital million $X.XX reduction had to to earlier, impacted and of was of $XX this flow cash levels approximately of million from million current CapEx to cash opportunities previously, million pound. Working contracts but in $XX balance review review supply evaluate and being Plant royalties CapEx CapEx $XX said, that's range briefly costs, the continue excluding million in preservation, balances. certain previously. including from million of and and million approximately $X by Our million $XX $XX With cash the the and that's operating quarter touched of guidance of end, actively inventory $X.XX vanadium guidance, cash including restricted lowering now of that to and a also total the our the per Concentration adjusted the we've renegotiating of XXXX on portion and $XX receivable million, of increased $XX $X largely quarter company's processing we million to $X from we $XX

flat vanadium is difficult CapEx price movements up net the structure the and for uncertainty estimate movement vanadium the price the potential on assuming Given be the year, cash, year cash towards sales LPV, vanadium the it of exchange to rate to [demand] under year, remainder surrounding guidance is purchases remainder but end flows low $X the end Such the updated of of take current the expected $XX change and LPV sales price into the Every by to via vanadium the estimates pound fiscal cash million. EBITDA of end ultimate impact of two averages year US XXXX. in the X:X a the dollar guidance, guidance also and would for year. for approximately that and Brazilian per cost approximately account the the average purchases

to there call the me pass over Let Paul. and stop

Paul Vollant

average prices. the Europe very benchmark of as Ernest as $XX.XX an $X.XX increase Thanks volume, in We QX for sales in VXXX joining of an everyone price of XXXX. strong sold, QX with and quarter equivalents XXXX second per was pound high had seen increase a tonnes in the VXXX XX% X% from approximately thanks today. average of X,XXX of good and well of average of from $XX.XX, The

which lower demand inflation has important tonne These placed for we to down largest supply. are price sector $X ideally high our economic vanadium key situation important think company we've Largo, energy likely for are monitor require the However, drive drive and a are We was On has in of is from sector. steel that industry. August the positive and VXOX note, to been recently. strong in quarters. slower in the volume XXXX. as vanadium average it recently aerospace, of the in the actively This and the FX benchmark Europe as far VXOX market very The increase slowing but that products by consumption as growth, of a diversification per smaller prices placed they seen of focus for purity and volumes profitability in are we of driver markets extra chemical coming this impacted ideally

it update LPV, forward it TSX but over Lastly, afraid LPV can for you're all to I waiting look once approval, know that on Exchange we process complete. providing I'll analyst. on we only the stop to patiently the regulatory an turn update an from questions reiterate operator standard and approval the stages and is remains to subject I'm there Venture for

Operator

HC of Ihle Instructions] And Heiko Wainwright. we go [Operator will first to

Heiko Ihle

bit a mean is term happen think give the next the I mean obviously energy kind? you'd But quarter. to first, the I are, just clean roadmap catalysts division XX a going Can be just provide if you our I for system, division? catalysts longer in term, VCHARGE here. you month longer can maybe for viewI some which so primary battery

Paulo Misk

Could your question you repeat please? again,

Heiko Ihle

clean of fourth term, quarter. But is of system your term the There's for the number months please, a roadmap a battery with a provide come XX that is catalysts that there going just the expect next see? longer area shorter you energy the So VCHARGE, can to to bit division, business, of for catalysts. you in

Paulo Misk

next going year. we February LCE, commissioning now. deliver to We're the now are right to At on focused complete

that establish are focused in establish are to Italy. -- We JV this Ansaldo also we to with we intend

very think US our there’s very Also to in will it initiative continue important to good LCE. opportunities get plan strategic opportunities. be still for in -- I we

year but XXXX. are for next We something not expecting for

including initiatives the So are efficiency, plans, to battery, on [CAMX] some the [BiSB] all our of those working battery. improve cost reduce we

very those and ensure So energy very able will storage the a be battery a to good solution competitive all have systems. for measures you'll also

Heiko Ihle

of there amount thing get higher, to inflation don't that, should delays [bottlex] [essentially] this that is You the and in is so to locked I And [painting] revised Plant if know downward so expect running on there? up I to getting how XX building in much? the be mean money million that's bucks, /delay million, all equipment. and Concentration we Ilmenite timing. $XX mean, by you're in potential I just how pricing a million absolute spend all to the $XX with going down to but of

Paulo Misk

are implementation that our No, reimbursement postponed in fact in the we of some cycle, we -- plan. with line are

We start start QX will up be will deliver year. -- next in -- we

on We the expect main have purchase [following] CapEx impact the equipment, updated. the Ilmenite our expected plant. and so inflationary project We an is don't

planning are more very mining a and it business making competitive, we business. we in very step results our improve it's be So mining what and could line are really optimize confident our that important

Operator

our we'll Cooperman Lee next go Office. Family to And with from question Omega

Lee Cooperman

How is brought secondly, of for, what a lines, the what everything couple is trends a from goal buying not around in in and issuer I existing And why goal, if what ask titanium questions course much, the a back what but are are given business, business reason stock? potential stock, Just XXXX a realistic business? your of forecast view Energy earnings bid, that, adverse together, dioxide earnings? the profit it? same your Largo normalized putting on sense buying issue. So you any Clean revolving back and I'm saying, say, the is a normal your have why in And you the you recent the

Ernest Cleave

some that. answer and of try me Let

of back, of the terms purchases. forward of last will reflects shares. view, as we every fluidly, And that $X.X it June. look the day been XXX,XXX repurchased going we not reflective if of We've price direction, we be feel about those cash. number in we've million. think starts manage outlook brought two the kind are. reviewing very Again, that shares All curtail share underlying is We we about somewhat told, that's our going So the fundamentals since in [medium] candidly of purchasing days that the will what negatively a will we at and

that premiums XXX our expectation, the EBITDA in maybe really long be more to the we've as market. As just felt seen $XXX in a or on is past. when But long term to vanadium expectation, could favor, of term the reasonable price depending XXX of you've a more on in times million EBITDA are always much and

are described the that some document. On XX-XXX, in that EBITDA as very in business, the titanium substantial there's it's elucidated

from bunch probably to that building that kind we a of head, hundred [Indiscernible]. of we’re base number fluid. strategic of be but future, think million that to of just But to everything of and top a that from and couple I don't a the [with down I it’d get be and reviewing if lead exact I right path. that of put wonderful. my hate business now. an so I [Indiscernible] with would have my in off are wrong But But have battery We it’s Same people opportunities. a on top the million me] the $XXX perspective, on can

Operator

And our Markets. from comes RBC next with question Andrew Capital Wong

Andrew Wong

flying are Can you talk realizations improvements about forward? more what you're seeing high higher purity market, benefit we there the and if airplanes premiums any like the higher of going see on there could price purity price And now? some with high

Ernest Cleave

XX% more been for aerospace QX increase above a has strong of to High they where Vanitec XXXX. demand compared strong purity first definitely from a QX recently seeing statistics than and half market in of we're published see very the the demand year, in industry XXXX lows this XXXX has us XXXX.

as in all purity And know, of in are approved that. benefiting we to my you increase producer companies this profitability speech we I Largo earlier premium. focus a mentioned see us from key and as diversify help revenue a extra also that for real the products Largo reflecting position the that. by a So supply only unique and our one is is the from high that's aerospace benefit as with that definitely to and

the grab see focus [detectors]. larger for We But us premium will right volume where to go. now is

So truly us this bright it's for a yes, in spot year.

Andrew Wong

of because issues. maybe year on just Obviously, production, guidance the earlier operations. on was of some then the And lowered

run implement per to are just kind you going in sustainably that rate forward the X,XXX that level forward? make have at and of what facilities run to confidence stated the much how looking Going sure month actions do tonne you

Paulo Misk

We are very confident.

heavy the all beginning taken beginning have end last solve year. I'm of the We rain year, talking we measures that year falls this face this of to the of year. the problem the about and

heavy the to faced kiln at measures have July. all we have So of we beginning replacements rains. any correct and future prevent and have some -- problems all the the refractory Also we we the done

other the any expect or on plant. more So stoppage of we the kiln don't any area

stably we So keep we and the pretty running that the achieve much and are confident production will guidance.

much So it'll good. pretty be

Operator

next Gordon [Operator Instructions] with to go Paradigm will Lawson We Capital.

Gordon Lawson

answered, add trioxide baseline to assumptions? of to you price just already I'm my vanadium break with, out are on production you we in can questions going suggest so quarter if Two to or premium could the are and numbers those stick comment the a our perhaps able

Paulo Misk

the certifying of spent beginning in VXXX, producing first and with quality We some start customers. half the time approving year. the We this

orders know are we according you production are we increasing it the to receiving. Our

with excited of will sense terms Vollant going right how to complement the QX, reacting Paul. on will is sales. of I it a aerospace in are give Paul very his forward be the ask to expectations We Please industry now. how just

Paul Vollant

high VXXX chemical aerospace, energy or to is much linked very our it's purity even all storage. of in market, whether

production a market, this more adding market VXXX premium. So high and drive volumes portfolio to for drive the us purity of this is really high in essential to purity

Just in is in than V at look that VXXX. terms a equivalent. VXXX you VXXX about of price, on VXXX it in should the more is XX% VXXX There more priced -- is way

and sold at so less there's So again, tonne VXXX essentially volume arbitrage of than you no real for X to of get VXXX. XX% VXXX a But premium roughly tonne there. is it's VXXX, equivalent

Gordon Lawson

the But for you costs? do benefit conversion get a

Paul Vollant

with Conversion what?

Gordon Lawson

Our cost to…

Paulo Misk

or there the same is material. difference, VXXX the no is same, from come produce the of source to …get raw VXXX both

don't no VXXX. we to but the produce from VXXX VXXX, is additional -- there cost produce no so is there So from [AXB],

Operator

remarks. And Guthrie queue, turn to other to would like Alex with closing I call the questions now in for no over

Alex Guthrie

and and Bye investor take joining call. our care. then, now. And for session that the answer question quarterly Until everyone. Thanks Thanks. Great. concludes

Operator

participation. for concludes today's this your call. Again, Thank you

disconnect. now may You

Largo (LGO) 11 Aug 222022 Q2 Earnings call transcript