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Monday, November 30, 2020

Why Largo Resources Ltd (OTCMKTS:LGORF) Sprung Back Into Gear

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We continue to stand by our recent pullback long idea in Largo Resources Ltd (OTCMKTS:LGORF). To help frame the story, the company just announced a corporate update that contained a number of key pieces of information about current operations.

As noted in the update, “In accordance with standard practice, INEMA published confirmation of the renewal of our operating license for the Maracas Menchen Mine on October 5, 2018. The renewed L.O. is valid for a period of 2 years and may then be further extended within 6 months of the L.O.’s new expiry date for an additional 2-5 years period.”

Largo Resources Ltd (OTCMKTS: LGORF) bills itself as a natural resource development and exploration company, engages in the acquisition, exploration, and development of mining and exploration properties located in Brazil and Canada.

The company primarily explores for vanadium, iron, tungsten, molybdenum, chromite, palladium, and platinum group metals. Its flagship project is the Maracás Menchen Mine that consists of 18 concessions covering an area of 17,690.45 hectares located in Bahia State, Brazil.

The company was formerly known as Consolidated Kaitone Holdings Ltd. and changed its name to Largo Resources Ltd. in June 2004. Largo Resources Ltd. was incorporated in 1988 and is headquartered in Toronto, Canada.

Moreover, Largo Resources Ltd. is a mid-tier mining development company primarily focused on the production of vanadium at its Maracas Menchen Mine in Brazil.

According to company materials, “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.“

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As noted above, LGORF just updated the market on its current mining operations. For a little context, the stock first got a jolt of energy when it was named on CNBC as a top pick by legendary fund manager Leon Cooperman because of its access to rare stores of vanadium pentoxide.

To follow that up, the company announced record net income of $90.7 million ($0.17 per share) and cash flows provided before non-cash working capital items of $77.7 million on revenues of $103.3 million in the three-month period ended June 30, 2018.

According to its most recent corporate update, “In addition and as previously announced (see press release dated October 3, 2018), our Maracás Menchen Mine achieved a new quarterly production recording producing 2,563 tonnes of vanadium pentoxide (“V2O5”) in Q3 2018 and Largo exited Q3 2018 with record overall V2O5 recovery rate averaging 82.2% in September. Total production in Q3 2018 was 6% above the plant’s nameplate capacity and management expects production to continue at these levels for the remainder of the year.”

When we covered the name about a week ago, just before this corporate update, we suggested traders may want to take advantage of the dip for a long side trade. Thus far, that strategy has been solid, capturing a potential 17-25% on the bounce.

Earning a current market cap value of $1.53B, LGORF has a significant war chest ($285.4M) of cash on the books, which stands against about $271.5M in total current liabilities. One should also note that debt has been growing over recent quarters. LGORF is pulling in trailing 12-month revenues of $296.9M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 188.6%. This is an exciting story, and we look forward to a follow-up chapter as events transpire. Sign-up for continuing coverage on shares of $LGORF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $LGORF, either long or short, and we have not been compensated for this article.

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