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Friday, December 4, 2020

Largo Resources Ltd (OTCMKTS:LGORF) Battles The Skeptics

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Largo Resources Ltd (OTCMKTS:LGORF) just announced its third quarter 2019 operational and financial results, highlighted by 2,952 tons of vanadium pentoxide produced at a cash operating cost excluding royalties of $2.81 per pound of V2O5.

Paulo Misk, President and Chief Executive Officer for Largo, stated: “Operations at the Maracás Menchen Mine performed well in the third quarter 2019 following increased production from the expansion project. Cash operating costs excluding royalties2 were US$2.81 per pound V2O5 in Q3 2019 representing a decrease of 8% over Q3 2018. Although the Company achieved lower operating and unit costs during the quarter, profitability continued to be impacted as a result of lower vanadium prices combined with the Company’s re-measurement of trade receivables / payables as a result of its current off-take agreement and consequently, the Company recorded a net loss of $8.6 million in Q3 2019. The Board realizes that the share price does not currently reflect the business value of the Company and is considering instituting a share repurchase program by way of a Normal Course Issuer Bid.”

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 its third quarter 2019 operational and financial results, highlighted by 2,952 tons of vanadium pentoxide produced at a cash operating cost excluding royalties of $2.81 per pound of V2O5.

The chart shows 8% piled on for shareholders of the stock during the trailing week. In addition, the listing has witnessed a pop in interest, as transaction volume levels have recently pushed 99% above its longer-run average levels.

Misk continued, “The Company believes that vanadium prices are unsustainably low and expects sentiment and prices to improve as evidenced by the recent price increase for ferrovanadium in Europe. Despite greater vanadium consumption in China over the last two years, the current price environment is largely attributable to high iron ore prices and a dramatic increase in Chinese V2O5 slag production earlier in 2019 from vanadium-titano magnetite (VTM) deposits. The increase in Chinese vanadium supply, combined with greater than anticipated niobium substitution put vanadium prices under pressure throughout 2019. Going forward, we expect vanadium market sentiment to improve following current shutdowns from high cost stone coal producers, a decline in V2O5 slag production and a reverse in niobium substitution on the back of lower vanadium prices.”

At this time, carrying a capital value in the market of $342M, LGORF has a significant war chest ($154.8M) of cash on the books, which stands against about $96.1M in total current liabilities. LGORF is pulling in trailing 12-month revenues of $283.4M. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -78.5%. 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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