[Ferro-Alloys.com] Largo Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to Largo’s Fourth Quarter and Full Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Alex Guthrie, Senior Manager of External Relations. Please go ahead.

Alex Guthrie: Thank you, operator. And thanks to all those who could attend our fourth quarter and full year 2023 financial results conference call. Our annual financial statements related MD&A and most recent AIF can be accessed on our website at largoinc.com as well as on SEDAR+ and EDGAR. Before continuing the call, I would like to remind you that some of the information you’ll hear during today’s discussion, will consist of forward-looking statements, including without limitation those regarding future business outlook. Please refer to the cautionary statements in the related MD&A, consolidated financial statements, and AIF, which can be found on our website within the Investor Relations resources section. And finally, all figures discussed today are in U.S. dollars unless otherwise stated.

On the call today is Daniel Tellechea, Largo’s Interim Chief Executive Officer and Director, Ernest Cleave, Largo’s CFO, Paul Vollant, Largo’s Chief Commercial Officer, and Francesco D’Alessio, the President of Largo Clean Energy. Following delivery of our prepared remarks, we’ll open the call for questions. We ask that participants restrict their questions to two and then re-queue, if there are additional questions to allow the others the opportunity to participate. I’ll now turn the call over to Daniel.

Daniel Tellechea: Thank you, Alex. And thank you all for joining us today, as we discuss Largo’s performance over the last past year. Despite facing a mix of accomplishments and challenges, we remain committed to ensuring the longevity and success of Largo’s well into the future. As we had pre-reported our results yesterday evening, I will speak to providing the important highlights, before we open it up for questions from the audience. Our primary focus has been on enhancing operational efficiency at the Maracás Menchen mine, to meet production and sales targets, particularly given the current depressed vanadium prices. Despite the industry-wide pressure, we have diligently worked to control what we can within Largo and believe that our lower cost profile position us better than others, to weather these challenging times.

Throughout the year, we encountered various hurdles, such as delay in our infield drilling program, a traffic accident, a tragic accident at our mine facility, and technical setbacks with equipment commissioning, due to engineering and design problems. However, we remain focused on enhancing operational efficiency, at the Maracás Menchen mine, investing significantly in waste rock, pre-stripping, a new crushing system, and refining our operational management practice and policies, resulting in notable improvements in the latter quarters of 2023, particularly in Q4. In Q4, 2023, our V2O5 equivalent production saw a 38 increase, compared to Q4, 2022, with total ore mine and crush also experiencing substantial growth. Notably, we achieved record high-purity vanadium production in Q4, 2023, achieving a record production of 1,670 tonnes of high-purity V2O5 equivalent, representing 60% of the company’s quarterly V2O5 output.

Although our annual V2O5 production is slightly dip, compared to the previous year, we remain our annual production guidance range. Also, 2023 marked several significant milestones for Largo, including the successful construction and commissioning of a new ilmenite concentration plant. We have seen a steady improvement in ilmenite concentrate production and quality over the last quarter, which will contribute to the diversification of our revenue stream, beyond vanadium in the future. Our exploration program surrounding the Maracás Menchen mine has become an increasingly important part of our story, over the last few quarters, and I’d like to spend a brief moment discussing, some of the highlights. We are conducting exploration efforts in the areas surrounding the Campo field, to – both optimize current operations and plan for future developments and expansion, through the identification and conversion of resources.

Our ongoing program aims to expand our understanding of the mineralization surrounding the Campo pit so that we may gauge the possibility of continuing mineralization North and South of the pit. As part of this program, we have also identified significant PGM grades in non-magnetic tailing ponds. The major significance of this discovery is that the higher grades of PGMs could be associated with our non-magnetic material rather than massive vanadium ore as previously thought. We plan to conduct further studies, to evaluate the potential to recover PGMs as an additional byproduct of large vanadium and ilmenite operations following the completion of our ilmenite concentration plant. Additionally, our Clean Energy Division reached a significant milestone in 2023, following the delivery of our six megawatt our VRFP to our Clean Energy partner, Enel Green Power in Spain.

This installation represents the largest VRFP installed in Europe, and has become a key catalyst in our recent announcement regarding stripping energy and Largo Clean Energy. I will let Francesco touch more on that later in the call. While the current vanadium market presents great challenges to our financial performance, we remain focused on executing on our strategic initiatives, reducing costs, and meeting production and sales targets in the year ahead. We appreciate continued support as we navigate through these dynamic times, and remain committed to creating long-term value, for our shareholders. With that, I will turn the call over to Ernest, to provide an overview of our financial performance in 2023.

Ernest Cleave: Thanks, Daniel. As highlighted on this call, the impact of declining vanadium prices on our financial performance over the last year has been significant. In Q4, 2023, our revenues were $44.2 million, down 7% from Q4, 2022, with revenues per pound sold of $7.69, compared to $7.77 in the same period last year. For the full year 2023, revenues stood at $198.7 million, a 13% reduction from 2022, with revenues per pound sold at $8.66, compared to $9.38 in 2022. This decline is primarily attributed to the substantial reduction in the European vanadium price, which dropped by 22% in Q4, 2023, compared to Q4, 2022, and a 31% year-over-year reduction, with the most recent price hitting $5.90 per pound. Despite these challenges, our focus remains on optimizing operations, to mitigate costs.

As discussed in previous quarters, we made notable progress in this area, seeing reductions in key consumable costs, such as sodium carbonate and overhead costs through targeted headcount reductions. Our operating costs in Q4, 2023, totaled $43.2 million, slightly down from $44.5 million in Q4, 2022, while for the full year 2023, operating costs were $174.8 million, compared to $169.7 million in 2022. Direct mine and production costs increased in 2023, due to higher total ore mined, cost impacts from low ore availability earlier in the year, and planned shutdowns for maintenance. However, direct mine and production costs decreased in Q4, 2023, compared to the same period last year, reflecting cost-saving initiatives and softer prices for consumables.

Cash operating costs excluding royalties per pound of V2O5 equivalent sold, were $5.30 for 2023, and this compares with $4.57 last year, remaining within our revised annual guidance for 2023. In terms of other expenses, total professional consulting and management fees, decreased by 9% in 2023, compared to 2022, and other general and administrative expenses decreased by 18%, primarily due to reduced activity and headcount Largo Clean Energy during the strategic review. Additionally, technology startup costs, decreased by 52% in 2023, compared to the same period last year. We reported a net loss of $13.3 million in Q4, 2023, versus a net loss of $15.6 million in Q4, 2022, which included $8 million in non-recurring items. For the full year, we reported a net loss of $32.4 million, compared to a net loss of $2.2 million in 2022, which also included $10.3 million in non-recurring items.

To provide better insights into our financial performance, we have introduced a new metric, to our financial reporting this quarter, adjusted EBITDA. In Q4, 2023, adjusted EBITDA increased by 138%, compared to Q4, 2022, reaching $1.4 million. For the full year, adjusted EBITDA was $12.1 million, and that compares with $41.6 million in 2022. Exiting the year, we maintained a cash balance of $42.3 million, a net working capital surplus of $94.7 million, and debt of $75 million. It’s evident that our financial performance, along with the broader market conditions, presents significant challenges. As Daniel emphasized, our primary focus remains on implementing cost reduction initiatives, driven by operational efficiencies, to combat this downward pressure.

I’ll now turn it over to Paul for his update.

Paul Vollant: Thanks, Ernest, and thank you all for joining us today. I’d like to echo the sentiments shared by my colleagues, regarding the ongoing challenges we face in the vanadium market, particularly with the continued downward trend in prices through 2023, culminating in a significant decline in Q4. In Europe, V2O5 ended the year 2023, 31% lower than at December 31, 2022, and ferrovanadium dropped 21%, over the same period. Despite soft demand in 2023, largely driven by challenges in the Chinese steel industry, we observed continued strong demand from the aerospace and VRFB sector, which presents promising opportunities for future quarters. Looking at Largo’s results, we sold 2,605 tonnes of V2O5 equivalent in Q4, inclusive of 139 tonnes of purchased material, compared to 2,774 tonnes in Q4, 2022.

Annual V2O5 equivalent sales for 2023, totaled 10,396 tonnes, inclusive of [929] tonnes of purchased material, which is on the high side of our sales guidance of 8,700 to 10,700 tonnes. Subsequent to Q4, we maintained sales momentum with 1,072 tonnes sold in January 2024, followed by 1,065 tonnes sold in February. On the ilmenite front, we’re excited about the prospect of diversifying Largo’s product offering and revenues in 2024. We completed our first 500 tonnes ilmenite sale in January, and anticipate selling between 18,000 and 22,000 tonnes at a healthy profit in the first half of this year. Finally, I’d like to highlight the significance of our exclusive offtake agreement with Gladieux Metals Recycling, signed in 2021. In December 2023, we got delivery of the first lot of vanadium pentoxide produced by Gladieux in Texas, and after converting it in Canada, we will soon deliver our first fully American-made ferrovanadium to a U.S. customer.

Largo has a 10-year offtake agreement, covering the entire vanadium production from Gladieux, further solidifying our presence in the American and global markets. In conclusion, despite the challenges, we remain fully committed to navigating these conditions strategically while capitalizing on emerging opportunities to drive growth for Largo. Let me now turn it over to Francesco.

Francesco D’Alessio: Great. Thanks, Paul. Welcome, everyone. And again, I appreciate the opportunity to update everyone on some significant developments within our Clean Energy business. Firstly, I’d like to revisit a milestone, we mentioned during our last quarterly update, which has now been officially announced by our partners this week. Back in October, Largo Clean Energy successfully deployed its 6-megawatt-hour redox flow battery at the Son Orlandis plant in Mallorca, Spain. This deployment marks a significant achievement, as it now stands as the largest energy storage deployment in Europe, utilizing vanadium flow batteries. The integration of our vanadium redox flow battery system with a 3.34-megawatt peak photovoltaic plant at Son Orlandis is truly special.

With a specific management system in place, the battery optimizes loading and unloading operations based on renewable production and grid requirements, thereby effectively managing demand peaks. This technological advancement is a crucial step, towards establishing long-term storage solutions, particularly vital for energy management in regions like Mallorca. Furthermore, the implementation of the battery system will play a pivotal role in enhancing grid stability and facilitating the increased adoption of renewable energy sources, thereby reducing reliance on fossil fuels and hastening the journey towards energy self-sufficiency for the islands. Now, alongside this significant achievement, I’m thrilled to share another major development that was announced, just this past Monday.

Building on the success of our partnership with Enel, we’ve taken a significant step – forward in concluding the strategic review of Largo Clean Energy, with the announcement of a proposed joint venture with Stryten Energy. The proposed JV is a testament, to the unique value proposition that Largo Clean Energy brings, to the vanadium flow battery market, particularly in the realm of long-duration energy storage. This includes our patented vanadium flow battery stack technology, electrolyte purification technology, and access to vanadium through Largo Physical Vanadium. Stryten’s extensive – experience in U.S.-based manufacturing and their robust infrastructure including five North American R&D facilities with more than 2 million square feet of manufacturing space, and a team of 2,500 employees make them an ideal partner, to capitalize on our efforts, to make thus far in Clean Energy.

Together, we envision transforming the landscape of long-duration energy storage in North America. While discussions are ongoing, it’s important to note that the proposed joint venture is subject to various conditions, including the negotiation of definitive agreements, completion of due diligence, and regulatory approvals. Now I’ll turn it back over to the operator, to begin our question-and-answer sessions. Thank you.

• [Editor:tianyawei]