Largo (LGO) Q2 2026 Earnings Call Transcript

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DATE

Friday, Aug. 21, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Executive Chairman and Co-Chief Executive Officer - Jesus Alberto Arias
• Co-Chief Executive Officer - James Bannantine

TAKEAWAYS

• Revenue -- $44.0 million, representing a 68.5% increase driven by higher sales volumes and improved realized vanadium pricing.
• Adjusted EBITDA -- $2.7 million, compared with $34,000 in the prior year period.
• Net Loss -- $22.7 million, reflecting significant non-cash items including a write-down of vanadium assets and deferred income tax expenses.
• Vanadium Production -- 2,900 tonnes of vanadium pentoxide equivalent, a 28.5% increase resulting from better ore availability and plant stability.
• Vanadium Sales -- 2,773 tonnes, rising 53.5% due to stronger commercial execution and improved market access.
• Realized Revenue -- $6.96 per pound sold, increasing from $6.39 a year ago and $5.80 in the first quarter of 2026.
• Cash Operating Costs -- $5.10 per pound sold, compared with $4.63 a year ago, reflecting higher prices for diesel, explosives, and reagents.
• Debt Restructuring -- $82.2 million of commercial debt maturity was extended from Sept. 2026 to March 2030, reducing near-term refinancing risk.
• DLA Order -- $60.1 million delivery order secured from the U.S. Defense Logistics Agency to supply high-purity vanadium products.
• Copper-PGM Guidance -- 300 to 380 tonnes per month of concentrate, with expected grades of 15% copper and 41 grams per tonne of PGMs and gold.
• Full-Year Production Guidance -- 10,500 to 12,000 tonnes of vanadium pentoxide equivalent, which management reiterated as unchanged.
• Full-Year Sales Guidance -- 7,500 to 9,500 tonnes of vanadium pentoxide equivalent, supported by existing contracts and market demand.
• Total Ore Mined -- 712,198 tonnes, a 46.6% increase resulting from improved mine access and execution.
• Ilmenite Sales -- 10,059 tonnes, increasing 67.0% as a secondary revenue stream from vanadium operations.
• Cash Balance -- $5.1 million as of June 30, 2026, while total debt stood at $114.2 million.
• ATM Program -- $24.8 million in net proceeds raised through the at-the-market equity offering program since the start of the year.
• Adjusted Cash Operating Costs -- $4.12 per pound sold, up from $3.18 per pound in the prior year period.
• Mining Operations Adjusted EBITDA -- $4.4 million, a 64.8% increase reflecting improved operational performance at the Maracas Menchen Mine.
• Cash Provided Before Working Capital -- $6.6 million, more than tripling from $2.2 million in the prior year period.

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RISKS

• Bannantine reported that cash operating costs rose to $5.10 per pound, stating the increase "reflected the higher prices for diesel, explosives and sulfur-derived reagents, together with the higher level of activity needed to support the increased sales."
• Arias noted the vanadium market has been oversupplied, stating it was "mainly driven by the slowdown of the construction market in China," which is the largest global consumer of vanadium.
• Management reported a net loss of $22.7 million, noting the quarter included "a write-down of vanadium assets and a deferred income tax expense" along with higher professional and finance costs.

SUMMARY

Management at Largo Inc. (NASDAQ:LGO) reported a return to positive adjusted EBITDA and significant revenue growth driven by increased production and higher realized pricing. The company secured a major delivery order with the U.S. Defense Logistics Agency and restructured $82.2 million of its commercial debt to extend maturities to 2030. Operational focus shifted toward diversifying revenue through the launch of copper and platinum group metals byproduct production while maintaining its core vanadium production targets for the year. Management stated that these initiatives, combined with improved mine access and cost management, are intended to strengthen the company's liquidity and position in the critical minerals supply chain.

• The company commenced full-scale copper-PGM concentrate production on Aug. 7, 2026, using existing ilmenite flotation infrastructure.
• Co-CEO Bannantine stated the $60.1 million DLA order "is a strong endorsement of our product quality and commercial capabilities, and it reinforces Largo's role in U.S. critical mineral supply chains."
• Management reported that vanadium pentoxide is expressly exempt from a 25% U.S. tariff recently applied to certain Brazilian products under the HTSUS 2825.30 classification.
• The company is evaluating strategic options for its tungsten assets, including the Northern Dancer deposit in Canada and the Currais Novos tailings project in Brazil, following a rise in market prices.
• Executive Chairman Arias noted that China's use of vanadium in data center flow battery projects is a growing priority for the company's 37% owned Storion joint venture.
• Management expects initial copper-PGM shipments to begin following current commercial discussions with potential smelters and traders.
• Bannantine stated that the company is optimizing fixed and variable costs against profitable production levels rather than focusing solely on maximizing output in a challenging market.

INDUSTRY GLOSSARY

• Vanadium Pentoxide (V2O5): The primary chemical form of vanadium used in steel alloys and chemical catalysts.
• Ferrovanadium (FeV): An iron-vanadium alloy used as an additive to increase the strength and durability of steel.
• Ilmenite: A titanium-iron oxide mineral that serves as a secondary byproduct for the company.
• PGM: Platinum Group Metals, a group of six precious metals including platinum and palladium.
• DLA: Defense Logistics Agency, the U.S. agency responsible for managing strategic and critical mineral stockpiles.
• HTSUS: Harmonized Tariff Schedule of the United States, used to classify imported goods and determine duty rates.
• Vanadium Flow Battery (VFB): A type of rechargeable battery that uses vanadium ions in different oxidation states to store chemical potential energy.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen. Welcome to Largo's Second Quarter 2026 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at largoinc.com. [Operator Instructions]. Questions must be submitted in writing using a Q&A function on the webcast platform. The company will be reviewing the questions received and select a number for management to address. Similar questions may be combined and we may not be able to answer every question submitted. Before we continue, please note that today's discussion may include forward-looking statements and references to non-GAAP financial measures. These statements are subject to the risks and uncertainties described in Largo's public filings.

Reconciliations of non-GAAP measures and additional information are included in the company's second quarter 2026 earnings release. Financial statements and MD&A. Presenting this conference, we have Mr. Alberto Arias, Executive Chairman and Co-Chief Executive Officer; and Mr. Jim Bannantine, Co-Chief Executive Officer; Now I will turn the conference over to Mr. Arias and Mr. Bannantine. Please, you may begin your conference.

Jesus Alberto Arias: Thank you, and good afternoon, everyone, and thank you for joining us today. The second quarter show us the work underway across Largo is gaining real momentum. We produced more, sold more, grew revenue and returned to positive adjusted EBITDA. Just as importantly, the progress we made since the quarter end across our balance sheet, our U.S. commercial position and our copper PGM initiative have strengthened the business and broadened the opportunities ahead. Let's start with our second quarter operating results. Ore availability improved during the quarter. Total ore mined increased 46.6% year-over-year to 712,198 tonnes, reflecting better mine access and continued improvement in execution.

The better ore availability, together with improved plant stability helped lift vanadium production 28.5% to 2,900 tonnes near the upper end of our quarterly guidance range. For the first half of the year, production reached 5,516 tonnes up 55.2% from the same period last year. Importantly, our commercial performance kept pace with the improvement in production. Vanadium sales increased 53% to 2,773 tonnes of vanadium pentoxide equivalent, ilmenite concentrate sales also performed well, increasing 67% to 10,059 tonnes. The market backdrop also became more supportive. European vanadium pentoxide benchmark averaged $6.03 per pound, up 17.5% year-over-year. European ferrovanadium prices increased 15.6%, while the average U.S. ferrovanadium benchmark also rose 45.8%.

The stronger pricing flowed through our realized revenue per pound sold, which increased to $6.96 from $5.80 in the first quarter and $6.39 a year ago. The combination of higher volumes and better pricing translated directly into our financial results. Revenue increased 68.5% to $44 million, including $42 million from vanadium and $1.4 million from ilmenite. Jim?

James Bannantine: Thanks, Alberto. This is Jim. On the financial front, adjusted EBITDA returned to positive territory at $2.7 million compared with $34,000 a year ago. Mining operations adjusted EBITDA increased 64.8% to $4.4 million. Cash generation improved as well. Cash provided before working capital items more than tripled to $6.6 million from $2.2 million in the prior year period. Turning to costs. The quarter reflected a combination of higher input prices and increased operating activity as sales volumes grew. Cash operating costs, excluding royalties, were $5.10 per pound sold compared with $4.63 a year ago. On an adjusted basis, cash operating costs, excluding royalties, were $4.12 per pound compared with $3.18 per pound a year ago.

These reflect the increased material costs from the Iran war. The increase largely reflected the higher prices for diesel, explosives and sulfur-derived reagents, together with the higher level of activity needed to support the increased sales. Some of these pressures are external, but the response is within our control in the form of disciplined execution, stable plant performance and tighter cost management. As production and sales strengthen, our goal is to convert that momentum into better unit economics, margins and cash generation. On the bottom line, we reported a net loss of $22.7 million. It is important to put that result into context.

The quarter included significant noncash items, principally a write-down of vanadium assets and a deferred income tax expense. It also included higher operating professional and finance costs. We don't minimize the reported loss, but the return to positive adjusted EBITDA and the improvement in cash provided before working capital adjustments show that the underlying business moved in the right direction.

Jesus Alberto Arias: Let me now turn on what happened since the quarter end because these developments meaningfully changed the context for Largo. First, we added to the management team, Jim Bannantine, as Co-CEO of Largo. I have known Jim for over 15 years when my private equity fund was one of the largest shareholders of Aura Minerals. Jim was appointed CEO of Aura back then, and I saw firsthand the positive contribution Jim had to that company, which was a great investment for my fund and all its shareholders. Moving back to Largo. On June 30, Largo had $5.1 million in cash and $114.2 million in debt. Addressing our short-term maturities was, therefore, an immediate priority.

On August 20, we announced a binding agreement with Banco do Brasil, BTG Pactual, Bradesco, Santander and Caixa Economica Federal to restructure approximately $82.2 million of outstanding commercial debt. The agreement extends this final maturity from September 2026 to March 2030, materially reducing near-term refinancing risk. Under the revised terms, principal payments benefit from a 6-month grace period, followed by a 36-month quarterly principal amortization, while interest remains paying monthly. This is an important milestone for Largo and addresses a key near-term financial priority. The revised schedule improves our near-term liquidity profile and gives us greater runway to execute our operating plan, improve cash generation and advance the value creation opportunities as Maracas Menchen and Largo in general. Jim?

James Bannantine: Thanks, Alberto. And meanwhile, back in the United States, 2 developments have strengthened our commercial position. First, on July 7, Largo secured a $60.1 million delivery order from the U.S. Defense Logistics Agency's Strategic Materials Department under our existing 5-year contract with that agency. This order is a strong endorsement of our product quality and commercial capabilities, and it reinforces Largo's role in U.S. critical mineral supply chains. Second, we received greater clarity on U.S. trade policy and tariffs. Vanadium oxides and hydroxides under HTSUS classification 2825.30 were expressly exempt from the additional 25% tariff recently applied to certain Brazilian products.

As a result, Brazilian origin V2O5 imported under this classification is not subject to the new Brazil-specific tariff, an important outcome for our valuable high-purity business. The exemption unfortunately does not extend to ferrovanadium exported directly from Brazil. However, our exposure is limited here because the majority of Largo's ferrovanadium sales to the U.S. are not supplied directly from Brazil. We are also moving quickly to unlock more value from the material we already mined Maracas Menchen.

Jesus Alberto Arias: Yes. Brazil's National Mining Agency approved our request to produce and sell copper, platinum, group metals, nickel, cobalt as byproducts from our existing operation. Following successful industrial scale test, we began full-scale copper PGM concentrate production on August 7 using our existing ilmenite flotation infrastructure. What makes this opportunity especially compelling is its economics. Copper PGM concentrate is a byproduct of vanadium production. So most of its costs are shared with our primary operation. Combined with the use of infrastructure already in place and the absence of material capital expenditure, this makes copper PGM a high-margin new revenue stream that can significantly improve resource utilization and unlock additional value for Maracas Menchen Mine.

To maximize this opportunity during the initial ramp-up, we have temporarily paused ilmenite concentrate production and are prioritizing copper PGM output through the existing flotation circuit. At the same time, we are evaluating additional equipment that would allow us to recover ilmenite from copper flotation tailings and capture value for both products streams over time.

James Bannantine: Commercial discussions with potential smelters and traders are progressing for our first copper PGM shipment. As our operational and commercial opportunities expand, we have strengthened the leadership team as well to help drive the next phase of our execution. As we look ahead, our previously issued vanadium guidance remains unchanged, and we are also introducing initial guidance for copper PGM concentrate. We continue to expect full year vanadium production of 10,500 to 12,000 tonnes of vanadium pentoxide equivalent and sales of 7,500 to 9,500 tonnes. We're also maintaining our adjusting cash operating cost guidance at this point of $3.50 to $4.50 per pound.

For copper PGM concentrate, our initial guidance is 300 to 380 tonnes per month with expected average grades of approximately 15% copper, 41 grams per tonne of PGMs and gold and 53 grams per tonne of silver. We expect output to become progressively more consistent within this range as we continue to optimize the operation.

Jesus Alberto Arias: With that road map in place, our focus is on execution, sustaining the improvement at the Maracas Menchen operations, meeting our vanadium production and sales targets, fulfilling the DLA order and ramping up copper PGM production. It also means converting grading operating stability and higher volumes into lower unit cost and stronger cash generation. The debt restructuring gives us greater financial flexibility to advance these priorities and further strengthen Largo's financial position. Taken together, these developments give Largo a stronger foundation and several clear avenues for growth. We are the world's largest primary vanadium producer with an established high-purity business and growing relevance to U.S. critical mineral supply chains.

Copper PGM broadens our opportunity by allowing us to capture additional value from the resource and infrastructure already in place at the Maracas Menchen operations. We still have work to do, particularly on cost and cash generation, but we believe Largo enters the second half of the year with stronger operations, greater financial flexibility and more opportunities to create value.

James Bannantine: Thank you again, Alberto, and I'm just very pleased to have joined Largo at such an important point for the company. The progress described in this call gives us a solid platform, but there's still a great deal of work to do. My focus is straightforward, build on the improving consistency at Maracas Menchen Mine, strengthen cost and cash performance and help the team capture the opportunities in front of us. Largo has a strong operating asset, and established position in vanadium and growing relevance to critical mineral supply chains in the United States. The DLA order and copper PGM production give us practical avenues to create value, while the debt restructuring gives us greater runway to pursue them.

I look forward to working with Alberto, the Board and the entire Largo team to turn this momentum into consistent results. Thank you.

Jesus Alberto Arias: Thank you, Jim, and thank you to all of our employees, customers and shareholders for their continued support. Operator, we are now ready to take questions.

Operator: Thank you. We will now start Q&A. [Operator Instructions]. We already received our first question. How does the debt restructuring change Largo's priorities over the next 12 months?

Jesus Alberto Arias: Yes. No, thank you. Well, the restructuring gives us this runway that we need, but does not change our focus on financial discipline. This extension of approximately $82 million of commercial bank debt from September 2026, which is next month to March 2030, have removed a significant near-term refinancing pressure, and we also are going to be benefiting from this 6-month principal grace period followed by the quarterly amortizations over 36 months. Our priorities continue to be on improvements of cash flow generations to fulfill the DLA contract, which is extremely important for us and the ramp-up and improvements of the copper PGM production that we have been discussing in this conference call.

As we have that performance improve, we remain focused on reducing debt and strengthening the balance sheet.

Operator: The next question comes from Tate Sullivan with Maxim Group. How might the U.S. Defense Logistics Agency manage the buying piece of vanadium from Largo? Might the DLA make cash payments for forward supply delivery? Based on developments in the vanadium flow battery market, do you think that the value of our vanadium flow battery joint venture investments has increased?

James Bannantine: Why don't I take the Defense Logistics Agency and then Alberto can talk about the batteries. The Defense Logistics Agency contract, remember, is a stockpiling objective by the U.S. government of Strategic Materials. So the deliveries -- initial delivery schedule is 20 tonnes per week, which is governed by the Defense Logistics Agency's logistics capability to accept the material in their warehouse. So we'll have at least 20 tonnes a week, but as the warehouse availability and loading capacity becomes available, we could accelerate that and the DLA has told us that. The DLA remember pays us on a net 30 basis for whatever we deliver. So if we accelerate deliveries, then we'll accelerate cash receipts.

Jesus Alberto Arias: Right. And the question on the vanadium flow battery. That's a very exciting part of the vanadium's story in general. From a supply-demand perspective, what we have seen is the biggest increase in demand coming out of this industry, primarily in China. I think China is demonstrating to the world that commercial flow batteries is a commercial reality for the vanadium industry. And we're seeing it firsthand through our joint venture partnership in Storion, where we have a 37%. Our partners are seeing significant increase in demand for vanadium coming on flow battery projects that are focused on data centers.

So that's become a key priority, and I think that's what is going to be a source of future value creation for Largo.

Operator: [Operator Instructions] Our next question comes from [ Jael ] Price with DLD. Do you think that the final terms of the debt restructuring will require Largo to raise equity or impose other punitive terms for the currently shareholders?

Jesus Alberto Arias: Right. No, thank you for the question, and probably that's driven by the last year debt extension we did. No, there's not -- that's not been asked by the banks. And that's -- obviously, the details of the final documentation are going to come out probably in the middle of September. But we are very, very grateful for the Brazilian banks. They've been very supportive. They've been very commercial. So what we have done in yesterday's press release is communicate to the market the binding terms. And I think that reflects what the agreement is and people will have to wait for a few weeks for the final documentation.

But I think the essence of the transaction has been announced yesterday.

Operator: [Operator Instructions] Our next question comes from an individual investor [ Han Harold ]. Could you please give some comment regarding vanadium market in general? Is the market still oversupplied from China and Russia? If it is oversupplied, when do you think the market will balance?

Jesus Alberto Arias: I can take that question in terms of supply/demand, it's something that obviously is critically important for Largo and its business. What we have seen late the previous couple of years has been an oversupply market. It's mainly driven by the slowdown of the construction market in China. That is the biggest consumer of vanadium and rebar is the main use for vanadium globally. However, I believe that we're seeing positive signs emerging. First, we started to see a significant increase in prices in the United States and mainly driven by tariffs and protectionism in the United States that helped some of the price realizations of Largo.

But we are starting to see, as I mentioned before, that vanadium in Asia, particularly in China, have been surprising a lot of observers in the vanadium industry. And we are seeing that, that trend will probably continue and extend itself into the West. There's been very significant announcements of vanadium flow batteries in Europe recently. But I think, as I mentioned with our joint venture on Storion that we are hopeful to see much better demand from vanadium coming on the vanadium flow battery industry in the United States.

Operator: Okay. We already received the next question. What are the main actions underway to improve in cost and cash generation?

James Bannantine: Why don't I take that one? So the -- as everybody knows, the vanadium market that Alberto just discussed is challenging. We are adjusting our operating objectives and methodology to optimize our cost structure against profitable production levels. So not all vanadium sales are profitable in this market. We've got to select the profitable ones and then adjust production accordingly. And then we optimize our variable and fixed costs against that production level, which is how we're going forward. The first order objective is profitability as opposed to just maximize production.

Operator: [Operator Instructions] Our next question comes from Kevin [ Shea ]. Does the company have a smelter or trending partners set up for purchasing the Copper concentrate in this? So do they have an estimate for sale price per tonne?

James Bannantine: I'll take that one. Yes, there's a great demand for this copper concentrate. Not only is copper in high demand, as everyone knows, but the PGM precious metal grades in this concentrate are very good. So we have a strong demand from both the smelter and the trading community for the product, multiple interested buyers. You can see the grades, the approximate grades in our press release for the copper and PGMs, but it's a very good price per tonne.

Operator: The next question comes from Leo [indiscernible] with BTG Pactual. Any updates on the potential Tungsten sale?

Jesus Alberto Arias: Right. So we, maybe over a month ago, put a press release saying that we are looking at strategic options for our Tungsten assets. That was mainly driven by what we have seen in the Tungsten market, a significant increase in prices. China had restricted exports of Tungsten and prices really have gone up 10x since we last operated Currais Novos, which was one of our operations in Brazil. There's been some -- as we mentioned on that press release, inbounds of expressions of interest. So we are very engaged of talking with the potential interested parties, and we are going to optimize the value for Largo shareholders as a consequence of this interest for those assets.

Just as a highlight, there are 2 of them. We have Northern Dancer in the Yukon Territory of Canada. It is one of the world's largest undeveloped Tungsten deposits. There's a lot of the technical reports that were published back in 2011. And then we have the Currais Novos, which was an operation of tailings reprocessing that Largo operated in 2011 and 2012, and we basically put it in care of maintenance because the company wanted to focus its attention on the development of the Maracas vanadium mine. But [ Menchen ] prices have gone up tenfold since then. So I think it's a very interesting opportunity for a number of companies and investors.

But there's nothing really to report exactly about a price or a timing, but we're diligently working on that process.

Operator: Next question comes from [ Doug Adams ]. What avenues and margin expectations for the new PGM program?

James Bannantine: I'll take that one. Just referencing our press releases, you can see what the copper and PGM grades are for the concentrate that we're selling. You can also see the guidance and the volume of the tonnage we're going to expect to sell. As far as margin goes, as Alberto and I both referred to, the copper concentrate is a byproduct. So it doesn't have much additional cost to our existing vanadium production. So it's a very high margin as well.

Operator: Next question comes from [ Han Hao ]. Again will Europe do a similar thing like what the United States did with vanadium critical metal stockpile?

Jesus Alberto Arias: Well, just to put into context that vanadium is becoming a critical metal and critical material in a lot of jurisdictions. We have seen a lot of interest of this stockpiling of vanadium given that there has been recent reports in China that they have changed their category of vanadium to a strategic metal that is subject to stockpiling and potential export controls. So that's raised a lot of flags of warning that vanadium is very important to be stockpiled in the report that was -- is available in the Vanitec website for everyone to read. It clearly sees that China currently produces around 72% of the vanadium supply.

And I should remind people that Russia is another important producer around 15%, but both countries really dominate the vanadium market. So therefore, the need of the DLA and other jurisdictions to come up with this type of strategies. So if there is need for stockpiling, the endorsement that we got from DLA was very important, being part of the supply chain for the Department of Defense and the Defense Logistics Agency has been very important for Largo as a company, and I think it actually paves the way to the participants of any other stockpiling in other parts of the world.

James Bannantine: We've actually seen the EU, the U.K., Australia, Canada, basically kind of the free world following these initiatives.

Operator: [Operator Instructions] This concludes the question-and-answer section. At this time, I would like to turn the floor back to Arias for closing remarks.

Jesus Alberto Arias: Well, thank you very much for attending this conference call. We appreciate your support. I know it's been a very tough time for all investors and stakeholders to be in this depressed environment for vanadium. But from the Largo perspective and the team behind Largo, we're all working diligently for the benefit of all the stakeholders, for the communities that work with us, with our suppliers, our customers. So we think that the signs that we have recently in terms of the support of the Brazilian commercial banks is showing that we're here together to make Largo a success, and we're very committed on that. Thank you very much.

Operator: Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.

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