In the category of “buy the dip” potential for former high flyers with thematic potential, Largo Resources Ltd (OTCMKTS:LGORF) may rank near the top of the list right now. This is a vanadium play, which became a very exciting niche in 2018, particularly after breaking out powerfully in July 2018 following national TV exposure when investing legend Leon Cooperman recommended LGORF as a strong micro-cap pick.
Now, however, we see this being discounted. To wit: the company just announced that its Q1 2019 financial results will be significantly impacted by the decline in the price of vanadium pentoxide (“V2O5”) since the start of 2019 and the impact of the remeasurement of trade receivables under the Glencore off-take agreement during the quarter, as previously discussed in its fourth quarter and full year 2018 production results press release on March 26, 2019 and in the Company’s annual filings.
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 announced that its Q1 2019 financial results will be significantly impacted by the decline in the price of vanadium pentoxide since the start of 2019 and the impact of the remeasurement of trade receivables under the Glencore off-take agreement during the quarter, as previously discussed in its fourth quarter and full year 2018 production results press release on March 26, 2019 and in the Company’s annual filings.
It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat and looking for something new to spark things. What’s more, the name has seen a jump in recent trading volume to the tune of just shy of 140% above the average volume levels in play in this stock over the longer term.
According to the release, “Under the terms of the Company’s off-take agreement, vanadium prices are provisionally set at the time revenue is recognized based upon market V2O5 prices. Revenue, and a trade receivable, is recognized at the time of shipment. Changes in the measurement of the trade receivable, which is remeasured once the date that final selling prices will be determined has been set by the Company’s off-take partner, Glencore International AG, are also recognized as a component of revenues in the period in which the final price is determined. Variations can occur between the price recorded on the date of revenue recognition and the actual final price under the terms of the contract due to changes in market V2O5 prices. The Company anticipates that the remeasurement adjustment will range from CDN$55 million to CDN$60 million. Consequently, the Company anticipates that its net income (loss) for the quarter will be in approximately breakeven range.”
Currently trading at a market capitalization of $706.02M, LGORF has a significant war chest ($206.2M) of cash on the books, which stands against about $151.2M in total current liabilities. LGORF is pulling in trailing 12-month revenues of $521.4M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 262.4%. We will update the story again soon as developments 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.