NEW
YORK, March 28, 2023 /PRNewswire/ -- Argus
Research, an independent investment research firm, has launched
Equity Research Report coverage on Largo Inc. (NasdaqGS: LGO,
TSX: LGO).
Click Here to view full Argus Equity Research
Report.
COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus
Analyst Steve Silver) include:
LGO: Serving Global Vanadium and Renewable Energy Markets
- Largo is among the lowest cost producers of naturally occurring
element Vanadium, a key input in steel construction and used in
industries including aerospace, chemicals and renewable energy. We
expect vanadium demand to exceed supply for the foreseeable future,
which should support sustained higher prices above the commodity's
historical average, with premium, high purity products used in
non-steel markets expected to support robust cash flow and
profitability for the company.
- In our view, the company's Maracás Menchen Mine in Brazil is poised to improve yield and
efficiency in the coming years, as Largo moves past operational
challenges that dampened 2022 results, including a change in mining
contractors and higher than average rainfall that resulted in
atypical operational downtime. We are encouraged by Largo's
decision to advance several planned maintenance projects, including
the upgrading of its pumping system, that were performed during the
down period.
- Beginning in 2024, we expect results to benefit from the
production of ilmenite, which is a by-product of its existing
vanadium production, and should incur modest incremental production
costs. We expect the ilmenite plant to be commissioned around the
middle of 2023. We also see potential for Largo to produce another
by-product, titanium, though this project has been delayed, as
Largo works to finance it. Still, we favorably view a late 2021
technical report on the site that suggested more than 20 years of
remaining mine life for the Brazil
operation, including these additional revenue sources, with a
projected NPV of more than $2 billion
that compares favorably to the current market capitalization of
approximately $310 million.
- We also view positively Largo's foresight to diversify its
business to capitalize on long-term growth trends. In 2020, the
company acquired 12 patent assets that provided entry into the
nascent long duration vanadium battery (VRFB) storage market, which
we see benefiting from global economic shifts towards a lower
carbon footprint. Largo Clean Energy's VCHARGE VRFBs offer an
efficient, safe system that is fully recyclable at the end of its
expected 25+ year lifetime. Over time, we expect Largo Physical
Vanadium, a partially owned but separately listed entity on the TSX
Venture Exchange that will own the vanadium element to be used in
these battery projects, to lower the upfront capex of that battery
system by 40%-50%.
- Although we see Largo's diversification into the renewable
energy space requiring capital investment and adding an element of
risk to Largo's investment thesis, we view the outlook for
sustained long-term demand for vanadium and pricing strength in a
more normalized, post-COVID-19 world as not fully valued by
investors.
- As of December 31, 2022, Largo
had $54.5 million in cash, and
$115.2 million in working capital.
The company has entered into new debt agreements totaling
$40 million, which we anticipate will
enable it to weather near-term operational challenges and
internally fund projects including the ilmenite production plant
that we expect to begin contributing to revenues and EBITDA by
2024.
- Largo's stock declined 42% in 2022, and we think its current
valuation does not adequately reflect the company's strong
underlying fundamentals. Based on our EV/NPV analysis, we arrive at
a fair value estimate of $9, well
above its current price near $5.
INVESTMENT THESIS: Click Here to view full Argus Equity
Research Report and Investment Thesis.
About Largo Inc. (NasdaqGS: LGO, TSX:
LGO)
www.largoinc.com
Based in Toronto, Ontario,
Largo is a dual-listed mining and battery energy storage system
company that we view as among the world's leading high-quality and
low-cost vanadium suppliers, sourced from its Maracás Menchen Mine
in Brazil. Recently, the Company
established a U.S.-based clean energy unit that develops and sells
vanadium-based electrical energy storage battery systems to support
the global deployment of long duration, renewable energy solutions.
Largo has also established a separate public entity, Largo Physical
Vanadium, that is designed to lower the costs of Largo's battery
customers, while also giving investors direct exposure to vanadium,
which never existed before.
For more information please contact:
Alex Guthrie
Senior Manager, External Results
aguthrie@largoinc.com
+1.416.861.9778
About Argus Research Corp.
Headquartered in NYC, Argus Research (www.argusresearch.com) is
a leading independent equity research firm (est. 1934) ̶
providing fundamental and quantitative research coverage on
more than 1,600 companies across all 11 sectors of the S&P 500,
as well as macroeconomic and equity market forecasts, thematic
research, model portfolios and IPO research. In addition,
Argus has recently committed to providing a sponsored research
solution for small & mid-cap companies seeking coverage.
Argus's Equity Research & earnings estimates are available on
major research / earnings estimate aggregator platforms, including
Bloomberg, Thomson Reuters, Factset and S&P Global.
For more Information please contact:
Darrell Stone
646-747-5438
dstone@argusresearch.com
Argus Research Co. has received a flat fee from the company
discussed in this report as part of a Sponsored Research agreement
between Argus and the company. No part of Argus Research's
compensation is directly or indirectly related to the content of
this assessment or to other opinions expressed in this report.
Please refer to the full Argus report and the disclaimer for
complete disclosures.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/argus-research-initiates-equity-research-report-coverage-on-largo-inc-nasdaqgs-lgo-tsx-lgo-301783204.html
SOURCE Argus Research
