Largo (LGO) Q2 2024 earnings summary

Executive summary

• Q2 2024 marked by operational improvements, cost reductions, and progress in production targets despite persistent low vanadium prices and challenging market conditions.

• Revenues fell to $28.6 million from $53.1 million year-over-year, mainly due to lower vanadium prices and sales volumes.

• Net loss of $14.5 million, including $8.5 million in non-recurring items such as inventory write-downs and FX losses, widened from $6.0 million loss in Q2 2023.

• Ilmenite sales surged to 12,261 tonnes in Q2 2024, up from 513 tonnes in Q1 2024, due to a catch-up in sales.

• Sustainability initiatives advanced, including biodiversity management and decarbonization efforts.

Financial highlights

• Q2 2024 revenue was $28.6 million, significantly impacted by lower vanadium prices and reduced sales volumes.

• Operating costs decreased to $36.4 million, reflecting a 40% drop in direct mine and production costs and a 15% decrease year-over-year.

• Cash operating costs (excluding royalties) were $5.97/lb, up 15% year-over-year due to lower recoveries and inventory write-downs.

• Adjusted EBITDA was negative $0.8 million, down from $6.0 million in Q2 2023.

• Cash balance at quarter-end was $35.8 million; net working capital surplus was $59.8 million; debt stood at $84.7 million.

Outlook and guidance

• Annual V2O5 production guidance maintained at 9,000–11,000 tons; ilmenite concentrate production and sales guidance revised to 40,000–50,000 tons and 27,000–42,000 tons, respectively.

• Anticipation of improved vanadium demand due to new Chinese rebar standards effective September 2024.

• Annual kiln maintenance rescheduled to November 2024 to avoid rainy season, not expected to impact vanadium production guidance.

• Additional cost reductions expected in Q3 2024 from ongoing operational initiatives.