All financial figures are in Canadian dollars
unless otherwise stated.
Q2 2019 Highlights
- Production of 2,515 tonnes (5.5 million
pounds1) of V2O5, an
increase of 20% over Q1 2019 and 2% over Q2 2018
- New monthly V2O5 production record of
1,042 tonnes in July
- Global V2O5 recovery
rate2 of 79.1%; Second quarter of strong
global recoveries in 2019
- Cash operating costs excluding
royalties3 of $4.43 (US$3.30) per
pound of V2O5
- Revenues of $29.5 million (net
of the re-measurement of trade receivables / payables of
$46.3 million on vanadium sales from
a contract with a customer of $75.8
million)
- Net loss of $20.5 million and
a loss per share of $0.04
- Cash used before non-cash working capital items of
$7.8 million
- Cash balance of $190.3 million
exiting Q2 2019
- Successful start to expansion project ramp up; Ramp up of
all areas is expected to be completed by the end of Q3
2019
- Company remains on track to achieve its production and cost
guidance for 2019
TORONTO, Aug. 13, 2019 /CNW/ - Largo Resources Ltd.
("Largo" or the "Company") (TSX: LGO)
(OTCQX: LGORF) announces its second quarter 2019 operational
and financial results with 2,515 tonnes of vanadium pentoxide
("vanadium" or "V2O5") produced
at an average global V2O5 recovery
rate2 of 79.1% and cash operating costs excluding
royalties3 of US$3.30 per
pound of V2O5.
Mark Smith, Chief Executive
Officer for Largo, stated: "We are very pleased with operations
in Q2 2019 though declining
V2O5 prices combined with the
re-measurement of trade receivables / payables under the Company's
off-take agreement continued to impact profitability. The Company
achieved consecutive monthly production records in June and July
following the initial expansion project ramp up which included the
start-up of the new deammoniator unit. Another key highlight during
Q2 2019 was the Company's second quarter of strong global
recoveries, which is highlighted by 80.9% achieved in June. He
continued: "With the expansion project ramp up expected to
conclude by the end of Q3 2019, the Company is well positioned for
strong operational performance during the second half of
2019."
A summary of the operational and financial performance for Q2
2019 is provided in the tables below:
Financial
|
|
|
|
|
|
Three months
ended
|
Six months
ended
|
|
|
|
June 30, 2019
|
|
June
30, 2018
|
|
June 30, 2019
|
|
June
30, 2018
|
Revenues
|
|
$
|
29,462
|
$
|
103,321
|
$
|
73,776
|
$
|
194,414
|
Direct mine and mill
costs
|
|
|
(22,550)
|
|
(19,128)
|
|
(42,014)
|
|
(39,430)
|
Operating
costs
|
|
|
(33,284)
|
|
(30,220)
|
|
(62,355)
|
|
(61,403)
|
Net income (loss)
before tax
|
|
|
(20,279)
|
|
50,305
|
|
(18,865)
|
|
99,829
|
Income tax (expense)
recovery
|
|
|
138
|
|
(5,163)
|
|
(976)
|
|
(8,843)
|
Deferred income tax
(expense) recovery
|
|
|
(360)
|
|
45,593
|
|
(2,828)
|
|
45,593
|
Net income
(loss)
|
|
|
(20,501)
|
|
90,735
|
|
(22,669)
|
|
136,579
|
Basic earnings (loss)
per share
|
|
|
(0.04)
|
|
0.17
|
|
(0.04)
|
|
0.26
|
Diluted earnings
(loss) per share
|
|
|
(0.04)
|
|
0.14
|
|
(0.04)
|
|
0.22
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used)
before non-cash working capital items
|
|
$
|
(7,829)
|
$
|
77,654
|
$
|
13,859
|
$
|
139,509
|
Net cash provided by
operating activities
|
|
|
21,759
|
|
69,530
|
|
117,175
|
|
94,470
|
Net cash (used in)
financing activities
|
|
|
(6,936)
|
|
(22,250)
|
|
(99,295)
|
|
(48,811)
|
Net cash (used in)
investing activities
|
|
|
(18,969)
|
|
(5,082)
|
|
(27,171)
|
|
(8,796)
|
Net change in
cash
|
|
|
(422)
|
|
34,010
|
|
(15,910)
|
|
29,469
|
|
|
|
|
|
|
|
|
|
As
at
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December
31, 2018
|
Cash
|
|
|
|
|
|
$
|
190,278
|
|
206,188
|
Restricted
cash
|
|
|
|
|
|
|
-
|
|
21
|
Working
capital4
|
|
|
|
|
|
|
100,159
|
|
135,258
|
Operational
|
|
|
|
Maracás Menchen
Mine Production
|
|
Q2
2019
|
Q2 2018
|
|
|
|
|
Total Ore Mined
(tonnes)
|
|
308,858
|
173,059
|
Ore Grade Mined -
Effective Grade5 (%)
|
|
1.21
|
1.07
|
|
|
|
|
Effective Grade of
Ore Milled (%)
|
|
1.49
|
1.85
|
Concentrate Produced
(tonnes)
|
|
102,320
|
85,639
|
Grade of Concentrate
(%)
|
|
3.30
|
3.37
|
Contained
V2O5 (tonnes)
|
|
3,380
|
2,889
|
|
|
|
|
Crushing Recovery
(%)
|
|
98.0
|
97.2
|
Milling Recovery
(%)
|
|
97.9
|
95.8
|
Kiln Recovery
(%)
|
|
88.8
|
89.7
|
Leaching Recovery
(%)
|
|
95.7
|
97.6
|
Chemical Plant
Recovery (%)
|
|
97.1
|
97.2
|
Global Recovery
(%)2
|
|
79.1
|
79.2
|
|
|
|
|
V2O5 produced (Flake + Powder)
(tonnes)
|
|
2,515
|
2,458
|
V2O5 produced (equivalent
pounds)1
|
|
5,544,619
|
5,418,956
|
Cash operating
costs3 per pound produced
|
CAD$
|
$4.75
|
$4.97
|
US$6
|
$3.54
|
$3.85
|
Cash operating costs
excluding royalties3 per pound produced
|
CAD$
|
$4.43
|
$4.32
|
US$6
|
$3.30
|
$3.35
|
Revenues per pound
sold 7, 8
|
CAD$
|
$5.39
|
$18.91
|
US$
|
$4.02
|
$14.62
|
Vanadium sales per
pound sold7, 8
|
CAD$
|
$13.86
|
$18.42
|
US$
|
$10.33
|
$14.24
|
Second Quarter 2019 Financial Results
Total sales of V2O5 in Q2 2019 were 2,480
tonnes which includes 360 tonnes of high purity
V2O5. The Company's total sales of high
purity V2O5 in the six months ended
June 30, 2019 are 800 tonnes.
The Company recorded a net loss of $20.5
million in Q2 2019 after the recognition of an income tax
recovery of $0.1 million and a
deferred income tax expense of $0.4
million. This compares to net income of $90.7 million in Q2 2018 and is primarily due to
a decrease in revenues and an increase in operating and finance
costs during the quarter.
Following the $46.3 million
reduction in revenues as a result of the remeasurement of trade
receivables / payables under the Glencore contract, the Company
recognized revenues of $29.5 million
in Q2 2019 compared with revenues of $103.3
million in Q2 2018. Revenues per pound sold7 in
Q2 2019 was $5.39 (US$4.02) compared with $18.91 (US$14.62)
per pound in Q2 2018.
Vanadium sales from a contract with a customer was $75.8 million in Q2 2019, compared with
$100.7 million in Q2 2018. Vanadium
sales per pound sold 7 in Q2 2019 was $13.86 (US$10.33)
compared to $18.42 (US$14.24) per pound in Q2 2018. This decrease is
primarily attributable to a decrease in the
V2O5 price, with the average price per lb of
V2O5 of approximately US$8.59 for Q2 2019, compared with approximately
US$15.44 for Q2 2018. Assuming
the quarterly average price per lb of
V2O5 of approximately US$8.59 and quarterly
V2O5 sales of 2,480 tonnes, the Company
could have earned estimated revenue8 of
$62.9 million (US$46.7 million) in Q2 2019. The most recent
European Metal Bulletin price range quotation for
V2O5 posted as of August 9, 2019 was US$7.00 – 7.50 per lb.
|
Three months
ended
|
Six months
ended
|
June 30,
2019
|
June 30,
2018
|
June 30,
2019
|
June 30,
2018
|
Vanadium sales from a
contract with a customer
|
$
|
75,786
|
100,664
|
177,189
|
167,223
|
Vanadium sales per
pound sold7 ($/lb)
|
$
|
13.86
|
18.42
|
17.55
|
16.14
|
Vanadium sales per
pound sold7 (US$/lb)
|
$
|
10.33
|
14.24
|
13.13
|
12.60
|
|
|
|
|
|
|
Re-measurement of
trade receivables / payables
|
$
|
(46,324)
|
2,657
|
(103,413)
|
27,191
|
Revenue adjustment
per pound9 ($/lb)
|
$
|
(10.15)
|
0.49
|
(10.24)
|
2.63
|
Revenue adjustment
per pound9 (US$/lb)
|
$
|
(7.57)
|
0.38
|
(7.66)
|
2.06
|
|
|
|
|
|
|
Revenues
|
$
|
29,462
|
103,321
|
73,776
|
194,414
|
Revenues per pound
sold7 ($/lb)
|
$
|
5.39
|
18.91
|
7.31
|
18.77
|
Revenues per pound
sold7 ($US/lb)
|
$
|
4.02
|
14.62
|
5.47
|
14.65
|
The Company's trade payables balance at June 30, 2019 was $67.4
million and the revenue adjustment payable9 was
$78.9 million. Assuming
V2O5 prices remain the same as at
June 30, 2019, the Company's total
estimated revenue adjustment payable9 to
June 30, 2019 is $94.9 million. At the date of this press release,
the Company's estimated revenue adjustment payable for
V2O5 sold9 to July 31, 2019 is approximately $99.5 million.
Operating costs for Q2 2019 were $33.3
million compared to $30.2
million in Q2 2018 and include direct mine and mill costs of
$22.6 million, depreciation and
amortization of $9.0 million and
royalties of $1.8 million. The
increase in operating costs over Q2 2018 is primarily attributable
to an increase in production, the impact of the ramp-up in
production following the completion of the kiln refractory
replacement in March 2019 and
increased HFO and diesel costs.
Cash operating costs excluding royalties3 in Q2
2019 were $4.43 (US$3.30) per pound compared to $4.32 (US$3.35) in
Q2 2018, representing an increase of 3%. The increase seen in Q2
2019 compared with Q2 2018 is largely due to the impact of foreign
exchange as well as increased HFO and diesel costs, with a decrease
seen in the US$ values and consistent global recovery and
production levels between the two periods.
Finance costs in Q2 2019 were $10.9
million, representing an increase of $2.5 million from $8.4
million in Q2 2018. The increase is primarily attributable
to the expensing of the deferred transaction costs on the long-term
debt as a result of the committed redemption of the Company's 9.25%
Senior Secured Notes due 2021 (the "Notes") that was
completed in July 2019.
The Company generated positive cash from operating activities,
with net cash provided by operating activities of $21.8 million, compared with $69.5 million in Q2 2018. This decrease was
primarily due to revenues exceeding direct mine and mill costs and
royalties by $5.1 million in Q2 2019,
compared with $80.7 million in Q2
2018. This contributed to cash used before non-cash working capital
items of $7.8 million, compared with
cash provided before non-cash working capital items of $77.7 million in Q2 2018.
Cash used in investing activities in Q2 2019 was $19.0 million representing an increase of
$13.9 million from the $5.1 million seen in Q2 2018. This increase is
primarily due to the expansion project being undertaken by the
Company in 2019 which remains on budget.
Second Quarter 2019 Operational Results
Total production during Q2 2019 from the Maracás Menchen Mine
was 2,515 tonnes of V2O5, representing a 20%
increase over Q1 2019 and a 2% increase over Q2 2018. Production
increased throughout Q2 2019 following the completion of the kiln
refractory replacement in March, with 755 tonnes of
V2O5 produced in April and 834 tonnes in May.
The Company achieved a monthly V2O5
production record in June of 926 tonnes following the installation
and start-up of the new deammoniator unit as part of the expansion
project ramp up. This was superseded by a new monthly
V2O5 production record set in July of 1,042
tonnes, representing an increase of 13% over the month prior.
In Q2 2019, 308,858 tonnes of ore with an effective
V2O5 grade5 of 1.21% were mined
and the crushing unit was fed with 296,325 tonnes with an effective
V2O5 grade of 1.11%. Milling was fed with
102,320 tonnes of pre-concentrate ore with an effective
V2O5 grade of 1.49%, reflecting the increase
provided by the dry-magnetic separator. Crushing, milling,
calcining and the chemical plant performed well throughout the
quarter by achieving budget targets and increasing the in-process
stocks of V2O5.
Global V2O5 recovery rates2
averaged 79.1% in Q2 2019, which are in line with Q2 2018 and
demonstrate another quarter of strong global recoveries2
for the Company. The performance during the quarter is mainly due
to the operational stability throughout all sections of the plant
and significant process control improvements made by the
operational teams. In April, the global recovery was impacted by
the lower kiln recovery rate as the kiln returned to optimal
operation following its shutdown for the refractory
replacement.
The expansion project to increase production capacity by 25% at
the Maracás Menchen Mine continues to progress successfully
following the start-up of the new deammoniator unit. The expansion
project is expected to be completed during Q3 2019 with the
start-up of the new ball mill and evaporator units. The ramp up of
all areas is expected to be completed by the end of Q3 2019. The
Company anticipates that total capital expenditures for its
expansion project will remain in the range of $27.0 to $29.0
million for 2019, with between $8.0 and $10.0
million expected in the remainder of the year.
Repayment of All Outstanding Debt
On July 8, 2019, the Company
announced that following its election to redeem its outstanding
Notes, it had redeemed in full its outstanding Notes. The
Notes were redeemed on July 8, 2019
at a price equal to 104.625% of the principal amount of the Notes
plus accrued and unpaid interest to, but not including, the
redemption date. The total amount paid was US$23.6 million, including the principal amount
of Notes outstanding of US$22.4
million. Following this redemption, the Company is debt-free
representing a significant milestone achieved for Largo.
Appointment of Paul Vollant as
Director of Sales and Trading
On June 19, the Company announced
that Mr. Paul Vollant will be
joining the Largo team as Director of Sales and Trading effective
September 2019. In this position, Mr.
Vollant will lead the development of Largo's sales and trading
business and work to further enhance the Company's presence in the
global vanadium market. Mr. Vollant brings extensive commodity
sales and trading experience with a focus in specialty metals,
including vanadium and titanium.
Novo Amparo Norte Mineral Resource Estimate Update
The Company announced an updated mineral resource for its
Novo Amparo Norte deposit
("NAN") at its Maracás Menchen Mine on June 11, 2019. The Company's exploration program
successfully delivered a significant increase to the overall
resource base at NAN with the successful conversion of resources
from the Inferred category to the Measured and Indicated categories
in addition to increasing the Inferred Resources. The updated
resource estimate is based on approximately 12,912 m of diamond drilling over 88 holes
(including 5,404 m in 47 drill holes
completed in 2019) and 5,549 sample intervals across the deposit.
NAN is located approximately 6.5 km north of the Company's current
mining operation at the Maracás Menchen Mine, Campbell Pit.
Novo Amparo Norte Mineral Resource Estimate as of
May 31, 2019
Category
|
Tonnes
(Mt)
|
Head Grade
V2O5 %
|
% Magnetics
|
Magnetic
Concentrate
V2O5 %
|
Contained
V2O5 in
Magnetic
Concentrate
(Tonnes)
|
Measured
|
6.25
|
0.91
|
33.1
|
2.32
|
45,274
|
Indicated
|
5.98
|
0.85
|
28.1
|
2.50
|
37,811
|
Total M &
I
|
12.23
|
0.88
|
30.7
|
2.41
|
83,086
|
|
|
|
|
|
|
Inferred
|
11.33
|
0.90
|
31.2
|
2.46
|
78,782
|
1.
|
Mineral Resources
have been classified using the Canadian Institute of Mining,
Metallurgy and Petroleum ("CIM"), CIM Standards on Mineral
Resources and
Reserves, Definitions and Guidelines prepared by the CIM Standing
Committee
on Reserve Definitions and adopted by the CIM Council.
|
2.
|
Mineral Resources
which are not Mineral Reserves do not have demonstrated
economic viability. The Inferred Mineral Resource in this
estimate has a lower
level of confidence than that applied to the Measured and Indicated
Mineral
Resource. It is reasonably expected that a portion of the
Inferred Mineral
Resource could be upgraded to an Indicated Mineral Resource with
continued
exploration.
|
3.
|
Magnetite content is
determined by Davis Tube Test methodology.
V2O5 content
of the magnetite concentrate was determined by XRF79C methodology
at the SGS
facility in Belo Horizonte, Brazil.
|
4.
|
Assuming only
mineralized zones grading 0.45% V2O5 or
greater.
|
5.
|
Numbers may not add
up exactly due to rounding.
|
Following the successful increase to NAN's overall resource
base, the Company has postponed any further geological, engineering
and economic studies to further upgrade the understanding of the
deposit and will instead continue its focus on planned exploration
of the other Satellite Deposits during the second half of 2019.
Drilling will focus on the Gulçari A Norte mineralized zone which
lies to the north of the Campbell Pit and on the Gulçari A South
target which lies just south of the Campbell Pit.
Conference Call
Largo Resources' management will host a conference call on
Wednesday, August 14, 2019, at
11:30 a.m. EDT, to discuss both
operational and financial results for the second quarter of 2019.
In addition, the Company's third-party independent consultant, Mr.
Terry Perles, will provide an update
on the vanadium market during the call.
Conference Call Details:
Date:
|
Wednesday, August 14,
2019
|
Time:
|
11:30 a.m.
EDT
|
|
|
Dial-in
Number:
|
Local /
International: +1 (416) 764-8688
|
|
North American Toll
Free: (888) 390-0546
|
|
Brazil Toll
Free: 08007621359
|
Conference
ID:
|
69944520
|
|
|
Replay
Number:
|
Local /
International: + 1 (416) 764-8677
|
|
North American Toll
Free: (888) 390-0541
|
|
Replay Passcode:
944520#
|
Website:
|
To view press
releases or any additional financial information, please visit our
Investor
Relations section of the Largo Resources website
at: www.largoresources.com/investors
|
A playback recording will be available on the Company's website
for a period of 60-days following the conference call.
The information provided within this release should be read in
conjunction with Largo's unaudited condensed interim consolidated
financial statements for the three and six months ended
June 30, 2019 and 2018 and its
management's discussion and analysis for the three and six months
ended June 30, 2019, which are
available on our website at www.largoresources.com and on
SEDAR.
Quality Assurance and Quality Control
All drill core samples were delivered to the SGS facility in
Belo Horizonte, Brazil for
analysis of select elements by XRF79C. Davis Tube test work is
carried out on all mineralized samples. Quality control entailed
the insertion of company blanks and standards into the drill core
sample stream. In addition, SGS routinely inserts blanks, standards
and duplicate analysis.
Qualified Person
Mr. Paul Sarjeant B.Sc. P.Geo.,
Manager of Geology at Largo is a Qualified Person as defined under
National Instrument 43-101 Standards of Disclosure for Mineral
Projects and has reviewed the technical information in this press
release.
About Largo Resources
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 under the symbol
"LGO". For more information on Largo, please visit our website at
www.largoresources.com.
Neither the Toronto Stock Exchange (nor its regulatory
service provider) accepts responsibility for the adequacy or
accuracy of this release.
Forward Looking Information
This press release contains forward-looking information under
Canadian securities legislation, some of which may be considered
"financial outlook" for the purposes of application Canadian
securities legislation ("forward-looking statements").
Forward‐looking information in this press release
includes, but is not limited to, statements with respect to timing
for and completion of the Maracás Menchen Mine expansion project
and the costs associated therewith; the timing and amount of
estimated future production; costs of future activities and
operations; and the extent of capital and operating.
Forward-looking statements can be identified by the use of
forward-looking terminology such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved". All
information contained in this news release, other than statements
of current and historical fact, is forward looking information.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Largo to be
materially different from those expressed or implied by such
forward-looking statements, including but not limited to those
risks described in the annual information form of Largo and in its
public documents filed on SEDAR from time to time. Forward-looking
statements are based on the opinions and estimates of management as
of the date such statements are made. Although management of Largo
has attempted to identify important factors that could cause actual
results to differ materially from those contained in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. Largo does not
undertake to update any forward-looking statements, except in
accordance with applicable securities laws. Readers should also
review the risks and uncertainties sections of Largo's annual and
interim MD&As which also apply.
Non-GAAP10 Measures
The Company uses certain non-GAAP financial performance
measures in its Management's Discussion and Analysis for the three
and six months ended June 30, 2019,
which are described in the following section.
Revenues Per Pound
This press release refers to revenues per pound sold,
including vanadium sales per pound sold and revenue adjustment per
pound sold. These are non-GAAP performance measures and are
used to provide investors with information about key measures used
by management to monitor performance of the Maracás Menchen
Mine.
These measures, along with cash operating costs, are
considered to be one of the key indicators of the Company's ability
to generate operating earnings and cash flow from its Maracás
Menchen Mine. These revenues per pound measures do not have any
standardized meaning prescribed by IFRS and differ from measures
determined in accordance with IFRS. These measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. These measures are not necessarily
indicative of net earnings or cash flow from operating activities
as determined under IFRS.
The following tables provide a reconciliation of these
measures per pound sold for the Maracás Menchen Mine to revenues as
per the Q2 2019 unaudited condensed interim consolidated financial
statements.
|
|
|
|
|
Three months
ended
|
|
|
|
June
30, 2019
|
|
June
30, 2018
|
Revenues1
|
|
$
|
29,462
|
$
|
103,321
|
V2O5 sold (000s lb)
|
|
|
5,467
|
|
5,465
|
Revenues per pound
sold ($/lb)
|
|
$
|
5.39
|
$
|
18.91
|
Revenues per pound
sold (US$/lb)2
|
|
$
|
4.02
|
$
|
14.62
|
|
|
|
|
|
|
Vanadium sales from a
contract with a customer1
|
|
$
|
75,786
|
$
|
100,664
|
V2O5 sold (000s lb)
|
|
|
5,467
|
|
5,465
|
Vanadium sales per
pound sold ($/lb)
|
|
$
|
13.86
|
$
|
18.42
|
Vanadium sales per
pound sold (US$/lb)2
|
|
$
|
10.33
|
$
|
14.24
|
|
|
|
|
|
|
Re-measurement of
trade receivables / payablesi
|
|
$
|
(46,324)
|
$
|
2,657
|
V2O5 sold subject to
re-measurement (000s lb)
|
|
|
4,564
|
|
5,423
|
Revenue adjustment
per pound ($/lb)
|
|
$
|
(10.15)
|
$
|
0.49
|
Revenue adjustment
per pound (US$/lb)ii
|
|
$
|
(7.57)
|
$
|
0.38
|
i.
|
As per note 19 in
the Company's unaudited condensed interim consolidated
financial
statements for the three and six months ended June 30, 2019 and
2018.
|
ii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.34
and
1.29 for Q2 2019 and Q2 2018, respectively.
|
|
|
|
|
|
Six months
ended
|
|
|
|
June
30, 2019
|
|
June
30, 2018
|
Revenuesii
|
|
$
|
73,776
|
$
|
194,414
|
V2O5 sold (000s lb)
|
|
|
10,097
|
|
10,360
|
Revenues per pound
sold ($/lb)
|
|
$
|
7.31
|
$
|
18.77
|
Revenues per pound
sold (US$/lb)ii
|
|
$
|
5.47
|
$
|
14.65
|
|
|
|
|
|
|
Vanadium sales from a
contract with a customeri
|
|
$
|
177,189
|
$
|
167,223
|
V2O5 sold (000s lb)
|
|
|
10,097
|
|
10,360
|
Vanadium sales per
pound sold ($/lb)
|
|
$
|
17.55
|
$
|
16.14
|
Vanadium sales per
pound sold (US$/lb)ii
|
|
$
|
13.13
|
$
|
12.60
|
|
|
|
|
|
|
Re-measurement of
trade receivables / payablesi
|
|
$
|
(103,413)
|
$
|
27,191
|
V2O5 sold subject to
re-measurement (000s lb)
|
|
|
10,097
|
|
10,318
|
|
|
|
Six months
ended
|
Revenue adjustment
per pound ($/lb)
|
|
$
|
(10.24)
|
$
|
2.63
|
Revenue adjustment
per pound (US$/lb)ii
|
|
$
|
(7.66)
|
$
|
2.06
|
i.
|
As per note 19 in
the Company's unaudited condensed interim consolidated
financial
statements for the three and six months ended June 30, 2019 and
2018.
|
ii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.34
and
1.28 for the six months ended June 30, 2019 and 2018,
respectively.
|
Cash Operating Costs
This press release refers to cash operating costs per pound
produced, a non-GAAP performance measure, in order to provide
investors with information about a key measure used by management
to monitor performance. This information is used to assess how well
the Maracás Menchen Mine is performing compared to plan and prior
periods, and also to assess its overall effectiveness and
efficiency.
Cash operating costs includes mine site operating costs such
as mining costs, plant and maintenance costs, sustainability costs,
mine and plant administration costs, royalties and sales, general
and administrative costs, but excludes depreciation and
amortization, share-based payments, foreign exchange gains or
losses, commissions, reclamation, capital expenditures and
exploration and evaluation costs. These costs are then
divided by the pounds of production from the Maracás Menchen Mine
to arrive at the cash operating costs per pound produced.
These measures, along with revenues, is considered to be one
of the key indicators of the Company's ability to generate
operating earnings and cash flow from its Maracás Menchen Mine.
These cash operating costs measures do not have any standardized
meaning prescribed by IFRS and differ from measures determined in
accordance with IFRS. These measures are intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS. These measures are not necessarily indicative of net
earnings or cash flow from operating activities as determined under
IFRS.
In addition, the Company's press release refers to cash
operating costs excluding royalties. This is a non-GAAP performance
measure and is calculated as cash operating costs less royalties,
as disclosed in the following tables.
The following tables provide a reconciliation of cash
operating costs per pound produced for the Maracás Menchen Mine to
operating costs, excluding depreciation expense as per the Q2 2019
unaudited condensed interim consolidated financial
statements.
|
|
|
Three months
ended
|
|
|
June
30, 2019
|
|
June
30, 2018
|
Operating
costsi
|
$
|
33,284
|
$
|
30,220
|
Professional,
consulting and management feesii
|
|
1,604
|
|
3,823
|
Other general and
administrative expensesii
|
|
389
|
|
501
|
Less: depreciation
and amortization expensei
|
|
(8,953)
|
|
(7,593)
|
Cash operating
costs
|
$
|
26,324
|
$
|
26,951
|
Less:
royaltiesi
|
|
(1,781)
|
|
(3,499)
|
Cash operating costs
excluding royalties
|
$
|
24,543
|
$
|
23,452
|
V2O5 produced (000s
lb)
|
|
5,545
|
|
5,419
|
Cash operating costs
per pound produced ($/lb)
|
$
|
4.75
|
$
|
4.97
|
Cash operating costs
per pound produced (US$/lb)iii
|
US$
|
3.54
|
US$
|
3.85
|
Cash operating costs
excluding royalties per pound produced ($/lb)
|
$
|
4.43
|
$
|
4.32
|
Cash operating costs
excluding royalties per pound produced
(US$/lb)iii
|
US$
|
3.30
|
US$
|
3.35
|
i.
|
As per note 20 in
the Company's unaudited condensed interim consolidated financial
statements for the three
and six months ended June 30, 2019 and 2018.
|
ii.
|
As per the Mine
properties segment in note 16 in the Company's unaudited condensed
interim consolidated
financial statements for the three and six months ended June 30,
2019 and 2018.
|
iii.
|
Calculated from
"$/lb" using average CDN$/US$ foreign exchange rates of 1.34 and
1.29 for Q2 2019 and Q2
2018, respectively.
|
Revenue Adjustment Payable
This press release refers to revenue adjustment payable, a
non-GAAP performance measure used to provide investors with
information about a key measure used by management as part of its
monitoring of the financial liquidity of the Company.
This measure is considered to be one of the key components
monitored relating to the Company's projected financial liquidity
and capital resources. This revenue adjustment payable does not
have any standardized meaning prescribed by IFRS and differs from
measures determined in accordance with IFRS. This measure is
intended to provide additional information and should not be
considered in isolation or as a substitute for measures of
performance, financial liquidity or capital resources prepared in
accordance with IFRS. This measure is not necessarily indicative of
cash flow from operating activities or disclosed commitments as
determined and presented under IFRS.
The following table provides a reconciliation of this measure
to trade receivables / payables as per the Q2 2019 unaudited
condensed interim consolidated financial statements.
|
|
|
|
|
|
|
June
30, 2019
|
Trade
payablesi
|
|
$
|
67,401
|
Add: amounts to be
received included in trade payables
|
|
|
11,501
|
Revenue adjustment
payable
|
|
$
|
78,902
|
Add: estimated future
re-measurement for V2O5
soldii
|
|
|
15,958
|
Estimated revenue
adjustment payable for V2O5 sold
|
|
$
|
94,860
|
i.
|
As per note 9 in
the Company's unaudited condensed interim consolidated
financial statements for the three and six months ended June 30,
2019 and
2018.
|
ii.
|
Estimated based on
the quantity of V2O5 sold in the six
months ended June
30, 2019 that is subject to re-measurement. The estimate assumes
there is
no change in the price per pound of V2O5 for
the remainder of the duration
of the Company's off take agreement from that stated as being the
price at
June 30, 2019 in the "Liquidity and Capital Resources" section of
the
Company's Management's Discussion and Analysis for the Three
and
Six Months Ended June 30, 2019 and it assumes no receipt or
payment
of cash in relation to any amount in this table.
|
________________________________
1 Conversion of tonnes to
pounds, 1 tonne = 2,204.62 pounds or
lbs.
2 Global recovery is
the product of crushing recovery, milling recovery, kiln recovery,
leaching recovery and chemical plant
recovery.
3 The
cash operating costs per pound produced and cash operating costs
excluding royalties per pound produced reported are on a non-GAAP
basis. Refer to the "Non-GAAP Measures" section of this press
release.
4 Defined
as current assets less current liabilities per the consolidated
statements of financial
position.
5 Effective
grade represents the percentage of magnetic material mined
multiplied by the percentage of V2O5 in the magnetic
concentrate.
6 Refer
to Management's Discussion and Analysis for the three and six
months ended June 30, 2019 for
exchange rates used.
7 Revenues
per pound sold and vanadium sales per pound sold are calculated
based on the quantity of V2O5 sold
during the stated period. Revenue adjustment per pound is
calculated based on the quantity of V2O5 sold
that is subject to re-measurement. This may or may not differ to
the quantity sold. Accordingly, these three measures may not, and
are not intended to,
sum.
8 Estimated revenue is
on a non-GAAP basis and calculated from "$/lb" using average
CDN$/US$ foreign exchange rate of 1.34, the average European Metal
Bulletin V2O5 price for Q2 2019 and the quantity of
V2O5 produced during the
quarter.
9 The revenue adjustment payable
is on a non-GAAP basis. Refer to the "Non-GAAP Measures" section of
this press release.
10 GAAP
– Generally Accepted Accounting Principles.
SOURCE Largo Resources Ltd.