Interview with Mark Smith, CEO of Largo Resources (TSX: LGO) Vanadium producer Largo Resources has a large market cap c.$730M (today) producing the highest-grade Vanadium in the world. It's also the lowest-cost producer. They are targeting sales to the high-purity Vanadium market. This smells like shareholder value in all but share price. We find out what they are going to do about share price. We ask Mark Smith about his plan and how he is going to deliver it.
Largo Resources focuses on hiring the right people to make the right decisions to continue to build and grow Largo Resources. We can't argue with that logic. The genesis of this business was taking publicly available data and re-interpreting the iron resource and focusing on the Vanadium potential. The metallurgical work proved the hypothesis right. However, since then, they have got in to production quickly (testament to the management team). They have also increased the production levels by 25% with the new plant expansion project.
Largo Resources is coming to the end of their off-take contract with Glencore. This is a huge opportunity to improve their margins by targeting the high-purity market. Largo has understood the need to recruit the right people to be able to sell in to these markets. High-purity equates to premiums and high-margins. This is good for the bottom line.
It is clear that Mark is focused on shaving costs off the bottom line and increasing the price achieved for its sales. In other words maximising profits. This commercial attitude to achieving margin means that Largo Resources is not talking the well worn distraction technique employed by other Vanadium companies of talking about VRFB. Vanadium Redox Flow batteries will be brought back to the table when it makes economic sense for the immediate term but it is not a focus. Is this the right strategy or should they be investing in the future? Mark responds.
Mark talks about his view on Vanadium pricing in the market and what the future looks like for Largo Resources. He feels the production will be inelastic. China has changed and is delivering on its environmental claims and enforcing the rebar standards.
The drilling programme suggests that Largo may be able to extend their life of mine for another 12 years. Let's see how this develops and how it models out. Mark outlines their strategy on how they develop the satellite. Plus the move to a 100% local workforce coincides with an increase in productivity.
Largo Resources is now debt free but the market has not rewarded them for it. We ask why? This is a company that feels like it knows what is doing. Not only terms of developing the assets but also in terms of how it sells in the market. The price of Vanadium is way off its peak but those were extraordinary days. Mark feels that the future price of Vanadium will settle to around $15-$17, which is twice todays price. The Chinese reinforcement of the rebar standards will drive this, then Vanadium producers will obviously benefit. What is interesting to us is Largo Resources ability to tap in to the high-purity market. Watch this space.
1:53 - Overview of The Company
3:00, 27:36, 38:47 - Strategy and Focus: What Is It They’re Trying to Build?
6:50, 16:10 - Glencore Contract Ending, What Does That Mean for The Company?
8:47 - Dividends and Benefits for Shareholders
11:06, 18:20 - The Vanadium Market and Competitors: How Are They Standing Out?
21:51 - Increasing Production Capacity & Exploration Drilling
16:21, 37:37 - The Team and Remuneration
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