UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2023

Commission File Number: 001-40333

LARGO INC.

(Translation of registrant's name into English)

55 University Avenue

Suite 1105

Toronto, Ontario M5J 2H7

Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☐              Form 40-F ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

Exhibit Index

Exhibit No. Description of Exhibit
   
99.1 Unaudited Condensed Interim Consolidated Financial Statements for the three and nine months ended September 30, 2023 and 2022
   
99.2 Management's Discussion and Analysis for the three and nine months ended September 30, 2023
   
99.3 Form 52-109F2 Certification of Interim Filings Full Certificate - CEO
   
99.4 Form 52-109F2 Certification of Interim Filings Full Certificate - CFO
   
99.5 Press release dated November 8, 2023


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 8, 2023

LARGO INC.

By: /s/ Ernest Cleave
Name: Ernest Cleave
Title: Chief Financial Officer



 

 

 

Largo Inc.

Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022

(Expressed in thousands / 000's of U.S. dollars)

 

 



Table of Contents  
Condensed Interim Consolidated Statements of Financial Position 1
Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) 2
Condensed Interim Consolidated Statements of Changes in Equity 3
Condensed Interim Consolidated Statements of Cash Flows 4
Notes to the Unaudited Condensed Interim Consolidated Financial Statements  
1) Nature of operations 5
2) Statement of compliance 5
3) Basis of preparation, significant accounting policies, and future accounting changes 5
4) Amounts receivable 6
5) Inventory 6
6) Other intangible assets 7
7) Mine properties, plant and equipment 7
8) Accounts payable and accrued liabilities 8
9) Debt 8
10) Issued capital 10
11) Equity reserves 10
12) Earnings (loss) per share 11
13) Taxes 12
14) Related party transactions 12
15) Segmented disclosure 13
16) Commitments and contingencies 16
17) Financial instruments 17
18) Revenues 20
19) Expenses 20
20) Subsequent events 21


Largo Inc.

Expressed in thousands / 000's of U.S. dollars

Condensed Interim Consolidated Statements of Financial Position

      As at  
      September 30,     December 31,  
  Notes   2023     2022  
Assets              
Cash   $ 39,572   $ 54,471  
Restricted cash     734     470  
Amounts receivable 4   28,214     20,975  
Inventory 5   62,647     64,221  
Prepaid expenses     5,986     14,007  
Total Current Assets     137,153     154,144  
Other intangible assets 6   6,461     7,263  
Mine properties, plant and equipment 7   201,077     175,237  
Vanadium assets     23,298     14,510  
Deferred income tax asset 13(b)   4,257     4,596  
Total Non-current Assets     235,093     201,606  
Total Assets   $ 372,246   $ 355,750  
Liabilities              
Current portion of lease liability   $ 595   $ 581  
Accounts payable and accrued liabilities 8   26,853     26,634  
Deferred revenue     3,459     1,698  
Debt 9   8,000     4,000  
Current portion of provisions     7,211     6,060  
Total Current Liabilities     46,118     38,973  
Lease liability     1,066     1,473  
Non-current accounts payable and accrued liabilities 8   164     326  
Long term debt 9   57,000     36,000  
Provisions     5,034     4,424  
Total Non-current Liabilities     63,264     42,223  
Total Liabilities     109,382     81,196  
Equity              
Issued capital 10   412,291     411,646  
Equity reserves 11   11,977     14,138  
Accumulated other comprehensive loss     (104,205 )   (112,165 )
Deficit     (65,702 )   (48,227 )
Equity attributable to owners of the Company     254,361     265,392  
Non-controlling Interest     8,503     9,162  
Total Equity     262,864     274,554  
Total Liabilities and Equity   $ 372,246   $ 355,750  
               
Commitments and contingencies 7, 16            
Subsequent events 20            


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

      Three Months ended     Nine Months ended  
      September 30,     September 30,  
  Notes   2023     2022     2023     2022  
Revenues 18 $ 43,983   $ 54,258   $ 154,514   $ 181,750  
Expenses                          
Operating costs 19   (42,580 )   (45,602 )   (131,540 )   (125,264 )
Professional, consulting and management                          
fees     (5,975 )   (7,246 )   (17,338 )   (19,542 )
Foreign exchange (loss) gain     (606 )   967     (1,006 )   1,910  
Other general and administrative expenses     (3,125 )   (4,108 )   (9,731 )   (10,865 )
Share-based payments 11   (336 )   (131 )   593     (1,432 )
Finance costs 19   (3,454 )   (296 )   (6,861 )   (787 )
Interest income     546     401     1,738     798  
Technology start-up costs     (903 )   303     (5,211 )   (4,514 )
Exploration and evaluation costs     (2,294 )   (506 )   (3,834 )   (791 )
      (58,727 )   (56,218 )   (173,190 )   (160,487 )
Net income (loss) before tax   $ (14,744 ) $ (1,960 ) $ (18,676 ) $ 21,263  
Income tax expense 13(a)   (10 )   (1,307 )   (48 )   (9,024 )
Deferred income tax recovery (expense) 13(a)   2,870     666     (333 )   1,171  
Net income (loss)   $ (11,884 ) $ (2,601 ) $ (19,057 ) $ 13,410  

                         
Other comprehensive income (loss)                          
Items that subsequently will be reclassified to operations:                          
Unrealized (loss) gain on foreign currency translation     (7,144 )   (6,702 )   7,960     591  
Comprehensive income (loss)   $ (19,028 ) $ (9,303 ) $ (11,097 ) $ 14,001  
Net income (loss) attributable to:                          
Owners of the Company   $ (11,397 ) $ (2,104 ) $ (18,398 ) $ 14,187  
Non-controlling interests   $ (487 ) $ (497 ) $ (659 ) $ (777 )
    $ (11,884 ) $ (2,601 ) $ (19,057 ) $ 13,410  
Comprehensive income (loss) attributable to:                          
Owners of the Company   $ (18,541 ) $ (8,852 ) $ (10,438 ) $ 14,732  
Non-controlling interests   $ (487 ) $ (451 ) $ (659 ) $ (731 )
    $ (19,028 ) $ (9,303 ) $ (11,097 ) $ 14,001  
Basic earnings (loss) per Common Share 12 $ (0.19 ) $ (0.04 ) $ (0.30 ) $ 0.21  
Diluted earnings (loss) per Common Share 12 $ (0.19 ) $ (0.04 ) $ (0.30 ) $ 0.21  
Weighted Average Number of Shares Outstanding (in 000's)
                         
- Basic 12   64,050     64,217     64,034     64,594  
- Diluted 12   64,050     64,217     64,034     64,899  


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares

Condensed Interim Consolidated Statements of Changes in Equity

          Attributable to owners of the Company              
          Issued     Equity     Accumulated Other           Non-controlling     Shareholders'  
    Shares     Capital     Reserves     Comprehensive Loss     Deficit     interest     Equity  
Balance at December 31, 2021   64,727   $ 415,982   $ 17,814   $ (118,772 ) $ (49,327 ) $ -   $ 265,697  
Share-based payments   -     -     1,432     -     -     -     1,432  
Exercise of warrants   10     124     (34 )   -     -     -     90  
Exercise of stock options   36     320     (133 )   -     -     -     187  
Exercise of restricted share units   105     1,286     (1,286 )   -     -     -     -  
Share repurchase   (873 )   (6,088 )   -     -     -     -     (6,088 )
Sale of non-controlling interest   -     -     -     -     (2,023 )   9,930     7,907  
Currency translation adjustment   -     -     -     545     -     46     591  
Net income (loss) for the period   -     -     -     -     14,187     (777 )   13,410  
Balance at September 30, 2022   64,005   $ 411,624   $ 17,793   $ (118,227 ) $ (37,163 ) $ 9,199   $ 283,226  
                                           
Balance at December 31, 2022   64,006   $ 411,646   $ 14,138   $ (112,165 ) $ (48,227 ) $ 9,162   $ 274,554  
Share-based payments   -     -     (1,073 )   -     480     -     (593 )
Exercise of restricted share units   45     645     (645 )   -     -     -     -  
Expiry of warrants   -     -     (78 )   -     78     -     -  
Expiry of stock options   -     -     (365 )   -     365     -     -  
Currency translation adjustment   -     -     -     7,960     -     -     7,960  
Net loss for the period   -     -     -     -     (18,398 )   (659 )   (19,057 )
Balance at September 30, 2023   64,051   $ 412,291   $ 11,977   $ (104,205 ) $ (65,702 ) $ 8,503   $ 262,864  


Largo Inc.

Expressed in thousands / 000's of U.S. dollars

Condensed Interim Consolidated Statements of Cash Flows

      Three Months ended     Nine Months ended  
      September 30,     September 30,  
  Notes   2023     2022     2023     2022  
Operating Activities                          
Net income (loss) for the period   $ (11,884 ) $ (2,601 ) $ (19,057 ) $ 13,410  
Depreciation     6,808     5,858     21,857     16,553  
Share-based payments 11   336     131     (593 )   1,432  
Unrealized foreign exchange loss (gain)     341     1,777     605     (1,267 )
Non-cash listing expense     -     604     -     604  
Finance costs 19   3,454     296     6,861     787  
Interest income     (546 )   (401 )   (1,738 )   (798 )
Income tax expense 13(a)   10     1,307     48     9,024  
Deferred income tax (recovery) expense 13(a)   (2,870 )   (666 )   333     (1,171 )
Income tax paid     (9 )   (1,977 )   (685 )   (3,095 )
Cash (Used) Provided Before Working Capital Items     (4,360 )   4,328     7,631     35,479  
Change in amounts receivable     (4,781 )   8,034     (6,797 )   (1,899 )
Change in inventory     400     (6,480 )   3,330     (27,471 )
Change in prepaid expenses     2,284     (2,203 )   8,365     (6,215 )
Changes in accounts payable and provisions     (1,522 )   5,472     1,062     11,054  
Change in deferred revenue     321     886     1,761     (2,059 )
Net Cash (Used in) Provided by Operating Activities     (7,658 )   10,037     15,352     8,889  
Financing Activities 9                        
Receipt of debt   15,000     -     40,000     15,000  
Repayment of debt 9   (15,000 )   -     (15,000 )   (15,000 )
Interest paid     (1,605 )   -     (3,697 )   -  
Interest received     544     401     1,735     798  
Lease payments     (147 )   (149 )   (433 )   (427 )
Change in restricted cash     -     15,524     (264 )   -  
Sale of non-controlling interest     -     7,547     -     7,797  
Share repurchase 10   -     (5,765 )   -     (6,088 )
Issuance of common shares     -     93     -     277  
Net Cash (Used in) Provided by Financing Activities     (1,208 )   17,651     22,341     2,357  
Investing Activities                          
Intangible assets     (120 )   (1,745 )   (314 )   (3,434 )
Mine properties, plant and equipment     (15,232 )   (10,936 )   (42,612 )   (24,898 )
Vanadium assets     -     (4,996 )   (10,115 )   (4,996 )
Net Cash Used in Investing Activities     (15,352 )   (17,677 )   (53,041 )   (33,328 )
Effect of foreign exchange on cash     (190 )   (176 )   449     1,005  
Net Change in Cash     (24,408 )   9,835     (14,899 )   (21,077 )
Cash position - beginning of the period     63,980     52,878     54,471     83,790  
Cash Position - end of the period   $ 39,572   $ 62,713   $ 39,572   $ 62,713  


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

1) Nature of operations and liquidity

Largo Inc. ("the Company") is a producer and supplier of high-quality vanadium products, which are sourced from one of the world's highest-grade vanadium deposits at the Company's Maracás Menchen Mine located in Brazil. The Company is also focused on the advancement of renewable energy storage solutions through Largo Clean Energy and its vanadium redox flow battery technology ("VRFB"), as well as providing investors with exposure to physical vanadium through Largo Physical Vanadium Corp. ("LPV"). In addition to advancing its US- based clean energy storage business, the Company completed the construction of its ilmenite plant. While the Company's Maracás Menchen Mine has reached commercial production, future changes in market conditions and feasibility estimates could result in the Company's mineral resources not being economically recoverable.

The Company is a corporation governed by the Business Corporations Act (Ontario) and domiciled in Canada whose shares are listed on the Toronto Stock Exchange ("TSX") and on the Nasdaq Stock Market ("Nasdaq"). The head office, principal address and records office of the Company are located at 55 University Avenue, Suite 1105, Toronto, Ontario, Canada M5J 2H7.

The Company has experienced declining operating results and cash flows over the course of the last year. The Company has plans in place to address the underlying operating issues which, based on the information currently available and prevailing market conditions, are expected to result in the Company's Maracás Menchen Mine returning to normal operations.

The Company is also actively pursuing various alternatives to increase its liquidity and capital resources including additional secured debt, which could be provided by banks, private capital providers and/or institutional investors and additional unsecured debt. In addition, the Company is evaluating strategic alternatives with respect to its Largo Clean Energy business, which may include the disposition of all or an interest in this business. There can be no assurance that the Company will be successful in achieving financing solutions on terms acceptable to the Company or that the strategic evaluations discussed above will result in a transaction.

If the Company does not return to expected operating levels or secure additional financing, the Company may have to implement alternative plans to ensure that it will have sufficient liquidity for the year ending December 31, 2024 from continuing operations. These alternatives may impact future operating and financial performance.

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes the Company will continue in operation for the foreseeable future and can realize its assets and discharge its liabilities in the normal course of business.

2) Statement of compliance

These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting.

The unaudited condensed interim consolidated financial statements were approved by the Board of Directors of the Company on November 7, 2023.

3) Basis of preparation, significant accounting policies, and future accounting changes

The basis of presentation, and accounting policies and methods of their application in these unaudited condensed interim consolidated financial statements, including comparatives, are consistent with those used in the Company's audited annual consolidated financial statements for the year ended December 31, 2022 and should be read in conjunction with those statements.

These unaudited condensed interim consolidated financial statements are presented in thousands of U.S. dollars, unless otherwise noted. References to the symbol "C$" or "CAD" mean the Canadian dollar, references to the symbol "EUR" mean the Euro and references to the symbol "R$" or "BRL" mean the Brazilian real, the official currency of Brazil. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

a) Critical judgements and estimation uncertainties

The preparation of unaudited condensed interim consolidated financial statements requires the Company's management to make judgments, estimates and assumptions about the carrying amount of its assets and liabilities that are not readily apparent from other sources. These estimates and assumptions are disclosed in note 3(d) of the Company's audited annual consolidated financial statements for the year ended December 31, 2022. There have been no significant changes to the areas of estimation and judgment during the three and nine months ended September 30, 2023.

b) Significant accounting policies

These unaudited condensed interim consolidated financial statements, including comparatives, have been prepared following the same accounting policies and methods of computation as the audited annual consolidated financial statements for the year ended December 31, 2022.

Amendments to IAS 1, Presentation of Financial Statements, IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors and IAS 12, Income Taxes, became effective on January 1, 2023 with no impact on the Company's unaudited condensed interim consolidated financial statements.

4) Amounts receivable

    September 30,     December 31,  
    2023     2022  
Trade receivables $ 22,193   $ 18,285  
Current taxes recoverable - Brazil   4,887     2,156  
Current taxes recoverable - Other   1,106     506  
Other receivables   28     28  
Total $ 28,214   $ 20,975  

5) Inventory

    September 30,     December 31,  
    2023     2022  
Finished products - Vanadium $ 44,339   $ 48,546  
Finished products - Ilmenite   137     -  
Work-in-process   653     998  
Stockpiles   1,309     284  
Warehouse materials   16,209     14,393  
Total $ 62,647   $ 64,221  

During the three and nine months ended September 30, 2023, the Company recognized a net realizable value write-down of $nil and $107 for battery components (three and nine months ended September 30, 2022 - $nil and $nil), with the write-down included in technology start-up costs. The value of battery components inventory at September 30, 2023 and December 31, 2022 was $nil. During the three and nine months ended September 30, 2023, the Company recognized a net realizable value write-down of $961 and $1,644 for vanadium finished products (three and nine months ended September 30, 2022 - $1,655 and $1,655) and a net realizable value write-down of $17 and $17 for ilmenite finished products (three and nine months ended September 30, 2022 - $nil and $nil). As inventory is sold, previously recorded net realizable value write-downs are reclassified from inventory write-down to direct mine and production costs or product acquisition costs as appropriate (note 19). 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

6) Other intangible assets

At September 30, 2023, the remaining estimated useful life of patents held by the Company was 7.25 years (December 31, 2022 - 8 years). At September 30, 2023, the remaining estimated useful life of capitalized software costs was 4.25 years (December 31, 2022 - 5 years).

    Intellectual              
    Property     Software     Total  
Cost                  
Balance at December 31, 2021 $ 4,366   $ -   $ 4,366  
Additions   -     4,041     4,041  
Balance at December 31, 2022 $ 4,366   $ 4,041   $ 8,407  
Additions   -     152     152  
Balance at September 30, 2023 $ 4,366   $ 4,193   $ 8,559  
Accumulated Depreciation                  
Balance at December 31, 2021 $ 437   $ -   $ 437  
Depreciation   436     271     707  
Balance at December 31, 2022 $ 873   $ 271   $ 1,144  
Depreciation   327     627     954  
Balance at September 30, 2023 $ 1,200   $ 898   $ 2,098  
Net Book Value                  
At December 31, 2022 $ 3,493   $ 3,770   $ 7,263  
At September 30, 2023 $ 3,166   $ 3,295   $ 6,461  

7) Mine properties, plant and equipment

At September 30, 2023 and December 31, 2022, the Company's economic interest in the Maracás Menchen Mine totaled 99.94%. The remaining 0.06% economic interest is held by Companhia Baiana de Pesquisa Mineral ("CBPM") owned by the state of Bahia. CBPM retains a 3% net smelter royalty ("NSR") in the Maracás Menchen Mine. The property is also subject to a royalty of 2% on certain operating costs under the Brazilian Mining Act. Under a separate agreement, Anglo Pacific Plc receives a 2% NSR in the Maracás Menchen Mine.

    Office and                 Buildings,              
    Computer           Mine     Plant and     Construction        
    Equipment     Vehicles     Properties     Equipment     In Progress     Total  
Cost                                    
Balance at December 31, 2021 $ 3,968   $ 243   $ 94,477   $ 163,234   $ 5,113   $ 267,035  
Additions   2,530     61     7,147     6,788     27,575     44,101  
Disposals   (152 )   -     -     (4,205 )   -     (4,357 )
Reclassifications   -     -     -     3,523     (3,523 )   -  
Effects of changes in foreign                                    
exchange rates   42     17     4,831     10,963     259     16,112  
Balance at December 31, 2022 $ 6,388   $ 321   $ 106,455   $ 180,303   $ 29,424   $ 322,891  


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

    Office and                 Buildings,              
    Computer           Mine     Plant and     Construction        
    Equipment     Vehicles     Properties     Equipment     In Progress     Total  
Additions   158     -     20,005     4,293     16,586     41,042  
Reclassifications   -     -     -     14     (14 )   -  
Effects of changes in foreign                                    
exchange rates   27     13     3,404     7,127     1,421     11,992  
Balance at September 30, 2023 $ 6,573   $ 334   $ 129,864   $ 191,737   $ 47,417   $ 375,925  
Accumulated Depreciation                                    
Balance at December 31, 2021 $ 508   $ 243   $ 32,450   $ 87,175   $ -   $ 120,376  
Depreciation   1,198     5     4,701     18,270     -     24,174  
Disposals   (152 )   -     -     (4,205 )   -     (4,357 )
Effects of changes in foreign exchange rates   21     17     1,595     5,828     -     7,461  
Balance at December 31, 2022 $ 1,575   $ 265   $ 38,746   $ 107,068   $ -   $ 147,654  
Depreciation   908     10     6,090     14,507     -     21,515  
Effects of changes in foreign exchange rates   17     10     1,207     4,445     -     5,679  
Balance at September 30, 2023 $ 2,500   $ 285   $ 46,043   $ 126,020   $ -   $ 174,848  
Net Book Value                                    
At December 31, 2022 $ 4,813   $ 56   $ 67,709   $ 73,235   $ 29,424   $ 175,237  
At September 30, 2023 $ 4,073   $ 49   $ 83,821   $ 65,717   $ 47,417   $ 201,077  

Of the additions noted above, $40,325 related to the Mine Properties segment (year ended December 31, 2022 − $36,556) and $85 related to Largo Clean Energy (year ended December 31, 2022 − $3,599).

8) Accounts payable and accrued liabilities

    September 30,     December 31,  
    2023     2022  
Accounts payable $ 20,000   $ 20,459  
Accrued liabilities   4,936     3,122  
Accrued financial costs   1,391     287  
Other taxes   690     3,092  
Total $ 27,017   $ 26,960  
             
Current $ 26,853   $ 26,634  
Non-current   164     326  
Total $ 27,017   $ 26,960  

9) Debt

    September 30,     December 31,  
    2023     2022  
Total debt $ 65,000   $ 40,000  


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

          Cash flows        
    December 31,               September 30,  
    2022     Proceeds     Repayment     2023  
Total debt $ 40,000   $ 40,000   $ (15,000 ) $ 65,000  
Total liabilities from financing activities $ 40,000   $ 40,000   $ (15,000 ) $ 65,000  
                   
          Cash flows        
    December 31,                 December 31,  
    2021     Proceeds     Repayment     2022  
Total debt $ 15,000   $ 55,000   $ (30,000 ) $ 40,000  

Credit facilities

In April 2022, the Company repaid in full its $15,000 working capital facility. At the same time, the Company secured a new working capital facility with a bank in Brazil. This facility was fully drawn down and proceeds of $15,000 were received. This facility was originally due to be repaid as a lump sum payment in April 2023, together with accrued interest at a rate of 3.65% per annum. The facility was repaid in full in December 2022.

In October 2022, the Company secured an additional debt facility of $20,000 with a bank in Brazil. Following an amendment finalized in June 2023, the facility is for three years, with the principal due for repayment at maturity. In addition to a fee of 0.80%, accrued interest at a rate of 8.51% p.a. is to be paid every six months.

In December 2022, the Company secured an additional debt facility of $20,000 with a bank in Brazil. The facility is for three years, with equal principal repayments due semi-annually after a grace period of 360 days. In addition to a fee of 0.70%, accrued interest at a rate of 8.20% p.a. is to be paid every six months.

In January 2023, the Company secured a two-year debt facility of $15,000, bearing interest at 6.85% per annum. Payments are due quarterly with principal repayments starting after a grace period of 180 days. Also in January 2023, and amended in June 2023, the Company secured a three-year debt facility of $10,000, bearing interest at 8.51% per annum and an initial fee of 0.80%. The principal is due for repayment at maturity, with interest payments due semi-annually.

In September 2023, the Company secured a new debt facility with a bank in Brazil and repaid in full its existing $15,000 facility. This new facility is for three years, with four equal principal repayments due semi-annually after a grace period of 540 days. Accrued interest at a rate of 8.75% p.a. is to be paid every six months.

Refer to note 20, subsequent events, for details of a further debt restructuring after September 30, 2023. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

10) Issued capital

a) Authorized

Unlimited common shares without par value.

b) Issued

    Nine months ended     Year ended  
    September 30, 2023     December 31, 2022  
    Number of           Number of        
    Shares     Cost     Shares     Cost  
Balance, beginning of the period   64,006   $ 411,646     64,727   $ 415,982  
Exercise of warrants (note 11)   -     -     10     124  
Exercise of stock options (note 11)   -     -     36     320  
Exercise of restricted share units (note 11)   45     645     106     1,308  
Share repurchase   -     -     (873 )   (6,088 )
Balance, end of the period   64,051   $ 412,291     64,006   $ 411,646  

11) Equity reserves

    RSUs       Options     Warrants        
                      Weighted                 Weighted              
                      average                 average              
                      exercise                 exercise           Total  
    Number     Value     Number     price     Value     Number     price     Value     value  
December 31, 2021   216   $ 1,551     889   C$ 12.78   $ 4,857     1,832   C$ 11.78   $ 11,406   $ 17,814  
Share-based payments   -     564     -     -     1,714     -     -     -     2,278  
Granted   111     640     363     11.79     359     -     -     -     999  
Exercised   (123 )   (1,308 )   (36 )   (6.70 )   (133 )   (10 )   (11.50 )   (34 )   (1,475 )
Expired   -     -     -     -     -     (1,480 )   -     (4,573 )   (4,573 )
Forfeited   (4 )   (7 )   (208 )   (13.23 )   (898 )   -     -     -     (905 )
December 31, 2022   200   $ 1,440     1,008   C$ 12.55   $ 5,899     342   C$ 13.00   $ 6,799   $ 14,138  
Share-based payments   -     458     -     -     481     -     -     -     939  
Granted   230     262     424     6.60     230     -     -     -     492  
Exercised   (63 )   (645 )   -     -     -     -     -     -     (645 )
Expired   -     -     (29 )   (24.00 )   (365 )   -     -     -     (365 )
Forfeited   (125 )   (793 )   (472 )   (11.47 )   (1,711 )   (14 )   -     (78 )   (2,582 )
September 30, 2023   242   $ 722     931   C$ 10.03   $ 4,534     328   C$ 13.00   $ 6,721   $ 11,977  

During the three and nine months ended September 30, 2023, the Company recognized a share-based payment expense related to the grant, vesting and forfeiture of stock options and RSUs of $336 and a recovery of $593 (three and nine months ended September 30, 2022 - expenses of $131 and $1,432) for stock options and RSUs granted to the Company's directors, officers, employees and consultants. The total share-based payment expense was charged to operations. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

a) RSUs

During the nine months ended September 30, 2023, the Company granted 230 RSUs to officers and employees of the Company. These RSUs vest over time, with one-third vesting during each of the years 2024, 2025 and 2026.

b) Stock options

                    Weighted     Weighted     Weighted  
                    average     average     average  
        No.     No.     remaining     exercise     grant date  
  Range of prices     outstanding     exercisable     life (years)     price     share price  
C$ 5.71 - 10.00     683     332     3.6   C$ 6.75   C$ 6.75  
  15.01 - 20.00     216     141     3.0     17.37     17.37  
  30.01 - 30.40     32     32     0.3     30.40     30.40  
        931     505         C$ 10.03        

During the nine months ended September 30, 2023, the Company granted 424 (year ended December 31, 2022 - 363) stock options with a weighted average exercise price of C$6.60. The chart below details the inputs to the Black-Scholes model used in determining the fair value of the options granted during the year (with 0% dividend yield and 0% expected forfeiture rate).

    Nine months ended  
    September 30, 2023     September 30, 2022  
Risk-free interest rate   3.13%     3.04%     3.29%     1.62%     0.95%  
Expected volatility   68.58%     68.25%     68.48%     75.50%     81.13%  
Expected life of options   5     5     5     5     5  
Fair value on grant date $ 4.75   $ 3.92   $ 3.38   $ 6.93   $ 12.58  
Exercise price $ 8.04   $ 6.67   $ 5.71   $ 11.22   $ 19.52  
Number of options granted (000)   34     313     77     54     176  
Expiry   01/12/28     04/13/28     05/18/28     01/20/27     04/01/27  

Options vest in equal installments of one-third on the anniversary date of the grant. The remaining weighted average contractual life of options outstanding at September 30, 2023 was 3.3 years (December 31, 2022 - 2.7 years).

c) Warrants

                                            Expected     Risk-free  
  No.     No.     Grant     Expiry     Exercise     Expected     Expected     dividend     Interest  
  outstanding     exercisable     Date     Date     price     volatility     life (years)     yield     rate  
  328     328     12/07/20     12/08/25   C$ 13.00     88%     5.00     0%     0%  
  328     328               C$ 13.00                          

12) Earnings (loss) per share

The total number of shares issuable from options, warrants and RSUs that are excluded from the computation of diluted earnings (loss) per share because their effect would be anti-dilutive was 1,501 and 1,501 for the three and nine months ended September 30, 2023 (three and nine months ended September 30, 2022 - 2,898 and 2,370). 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

13) Taxes

a) Tax recovery (expense)

    Three months ended     Nine months ended  
    September 30,   September 30,   September 30,     September 30,  
    2023     2022     2023     2022  
Income tax expense $ (10 ) $ (1,307 ) $ (48 ) $ (9,024 )
Deferred income tax recovery (expense)   2,870     666     (333 )   1,171  
Total $ 2,860   $ (641 ) $ (381 ) $ (7,853 )

b) Changes in deferred tax assets and liabilities

    September 30,     December 31,  
    2023     2022  
Deferred income tax asset $ 4,257   $ 4,596  
Deferred income tax liability   -     -  
Net deferred income tax asset $ 4,257   $ 4,596  
             
    Nine months        
    ended     Year ended  
    September 30,     December 31,  
    2023     2022  
Net deferred income tax asset, beginning of the period $ 4,596   $ 3,343  
Deferred income tax (expense) recovery   (333 )   1,423  
Effect of foreign exchange   (6 )   (170 )
Net deferred income tax asset, end of the period $ 4,257   $ 4,596  

14) Related party transactions

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.

The remuneration of directors and other members of key management personnel during the period was as follows:

    Three months ended     Nine months ended  
    September 30,     September 30,     September     September  
    2023     2022     30,     30,  
                2023     2022  
Short-term benefits $ 519   $ 494   $ 1,979   $ 3,017  
Share-based payments   170     323     450     1,584  
Total $ 689   $ 817   $ 2,429   $ 4,601  

Refer to note 16 for additional commitments with management. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

15) Segmented disclosure

The Company has six operating segments: sales & trading, mine properties, corporate, exploration and evaluation properties ("E&E properties") (included as part of inter-segment transactions & other), Largo Clean Energy and Largo Physical Vanadium. Corporate includes the corporate team that provides administrative, technical, financial and other support to all of the Company's business units, as well as being part of the Company's sales structure.

                                  Inter-        
                      Largo     Largo     segment        
    Sales &     Mine           Clean     Physical     transactions        
    trading   properties   Corporate     Energy     Vanadium     & other     Total  
Three months ended September 30, 2023                                          
Revenues $ 38,343   $ 32,223   $ 27,686   $ -   $ -   $ (54,269 ) $ 43,983  
Operating costs   (33,415 )   (34,762 )   (26,770 )   -     -     52,367     (42,580 )
                                           
Professional, consulting and management fees   (416 )   (747 )   (2,032 )   (2,540 )   (230 )   (10 )   (5,975 )
Foreign exchange loss   (36 )   (337 )   (222 )   (9 )   (2 )   -     (606 )
Other general and administrative expenses   (222 )   (836 )   (754 )   (1,129 )   (34 )         (3,125 )
Share-based payments   -     -     (336 )   -     -     -     (336 )
Finance costs   (5 )   (2,291 )   (3 )   (12 )   (1,128 )   (15 ) 1   (3,454 )
Interest income   2     89     455     -     -     -     546  
Technology start-up costs   -     -     -     (904 )   -     1   1   (903 )
Exploration and evaluation costs   -     (2,207 )   -     -     -           (2,294 )
    (34,092 )   (41,091 )   (29,662 )   (4,594 )   (1,394 )   52,106     (58,727 )
Net income (loss) before tax   4,251     (8,868 )   (1,976 )   (4,594 )   (1,394 )   (2,163 )   (14,744 )
Income tax expense   (10 )   -     -     -     -     -     (10 )
Deferred income tax recovery (expense)   551     2,664     (345 )   -     -     -     2,870  
Net income (loss) $ 4,792   $ (6,204 ) $ (2,321 ) $ (4,594 ) $ (1,394 ) $ (2,163 ) $ (11,884 )
Revenues (after elimination of inter-segment transactions) $ 37,734   $ 5,525   $ 724   $ -   $ -   $ -   $ 43,983  
At September 30, 2023                                          
Total non-current assets $ 2,247   $ 175,209   $ 18,786   $ 10,035   $ 24,132   $ 4,684   $ 235,093  
Total assets $ 65,560   $ 275,160   $ 81,668   $ 14,183   $ 25,058   $ (89,383 ) 3 $ 372,246  
Total liabilities $ 38,741   $ 99,485   $ 58,631   $ 5,726   $ 268   $ (93,469 ) 4 $ 109,382  

1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.

2. Amount relating to E&E properties.

3. Inter-segment transaction elimination of $94,175 partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total assets of $4,791 and E&E properties total assets of $1.

4. Inter-segment transaction elimination of $93,605 partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total liabilities of $135 and E&E properties total liabilities of $1. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

                                  Inter-        
                      Largo     Largo     segment        
    Sales &     Mine           Clean     Physical   transactions        
    trading     properties     Corporate     Energy     Vanadium     & other     Total  
Three months ended September 30, 2022                                          
Revenues $ 47,000   $ 45,441   $ 39,709   $ -   $ -   $ (77,892 ) $ 54,258  
                                           
Operating costs   (56,843 )   (36,203 )   (38,413 )   -     -     85,857     (45,602 )
Professional, consulting and management fees   (303 )   (1,181 )   (1,753 )   (2,813 )   (1,196 )   -   1   (7,246 )
Foreign exchange (loss)
gain
  (47 )   972     22     7     13     -     967  
Other general and administrative expenses   (132 )   (2,433 )   (362 )   (1,232 )   50     1   1   (4,108 )
Share-based payments   -     -     (131 )   -     -     -     (131 )
Finance costs   (5 )   (253 )   (2 )   (24 )   (9 )   (3 ) 1   (296 )
Interest income   -     137     107     -     157     -     401  
Technology start-up costs   -     -     -     791     -     (488 ) 1   303  
Exploration and evaluation costs   -     (505 )   -     -     -     (1 ) 2   (506 )
    (57,330 )   (39,466 )   (40,532 )   (3,271 )   (985 )   85,366     (56,218 )
Net income (loss) before tax   (10,330 )   5,975     (823 )   (3,271 )   (985 )   7,474     (1,960 )
Income tax (expense)                                          
recovery   771     (2,078 )   -     -     -     -     (1,307 )
Deferred income tax                                          
recovery (expense)   288     648     (270 )   -     -     -     666  
Net income (loss) $ (9,271 ) $ 4,545   $ (1,093 ) $ (3,271 ) $ (985 ) $ 7,474   $ (2,601 )
Revenues (after elimination of inter-segment transactions) $ 47,000   $ 7,258   $ -   $ -   $ -   $ -   $ 54,258  
At December 31, 2022                                          
Total non-current assets $ 934   $ 148,508   $ 20,525   $ 12,389   $ 15,344   $ 3,906   $ 201,606  
Total assets $ 73,874   $ 250,926   $ 90,770   $ 15,941   $ 27,086   $ (102,847 ) 3 $ 355,750  
Total liabilities $ 56,566   $ 72,842   $ 53,373   $ 5,092   $ 374   $ (107,051 ) 4 $ 81,196  

1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.

2. Amount relating to E&E properties.

3. Inter-segment transaction elimination of $(106,773) partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total assets of $3,924 and E&E properties total assets of $2.

4. Inter-segment transaction elimination of $(107,225) partially offset by Largo Titânio Ltda. and Largo Tech Ltda. total liabilities of $174. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

                                  Inter-        
                      Largo     Largo     segment        
    Sales &     Mine           Clean     Physical     transactions        
    trading   properties   Corporate     Energy     Vanadium     & other     Total  
Nine months ended September 30, 2023                                          
Revenues $ 132,587   $ 114,745   $ 102,194   $ -   $ -   $ (195,012 ) $ 154,514  
                                           
Operating costs   (132,148 )   (105,903 )   (98,918 )   -     -     205,429     (131,540 )
Professional, consulting and management fees   (1,318 )   (2,215 )   (5,716 )   (7,386 )   (693 )   (10 )   (17,338 )
Foreign exchange gain (loss)   27     (538 )   (516 )   (31 )   52     -     (1,006 )
Other general and administrative expenses   (847 )   (1,809 )   (2,850 )   (3,814 )   17     (428 ) 1   (9,731 )
Share-based payments   -     -     593     -     -     -     593  
Finance costs   (24 )   (5,350 )   (10 )   (44 )   (1,415 )   (18 ) 1   (6,861 )
Interest income   4     747     987     -     -     -     1,738  
Technology start-up costs   -     -     -     (5,211 )   -     -   1   (5,211 )
Exploration and evaluation costs   -     (3,069 )   -     -     -     (765 ) 2   (3,834 )
    (134,306 )   (118,137 )   (106,430 )   (16,486 )   (2,039 )   204,208     (173,190 )
Net income (loss) before tax   (1,719 )   (3,392 )   (4,236 )   (16,486 )   (2,039 )   9,196     (18,676 )
Income tax expense   (48 )   -     -     -     -     -     (48 )
Deferred income tax (expense) recovery   631     (67 )   (897 )   -     -     -     (333 )
Net income (loss) $ (1,136 ) $ (3,459 ) $ (5,133 ) $ (16,486 ) $ (2,039 ) $ 9,196   $ (19,057 )
Revenues (after inter-segment eliminations) $ 130,312   $ 21,574   $ 2,628   $ -   $ -   $ -   $ 154,514  

1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.

2. Amount relating to E&E properties. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

                                  Inter-        
                      Largo     Largo     segment        
    Sales &     Mine           Clean     Physical   transactions        
    trading     properties     Corporate     Energy     Vanadium     & other     Total  
Nine months ended September 30, 2022                                          
Revenues $ 155,621   $ 148,334   $ 128,659   $ -   $ -   $ (250,864 ) $ 181,750  
                                           
Operating costs   (150,635 )   (105,335 )   (124,080 )   -     -     254,786     (125,264 )
Professional, consulting and management fees   (1,364 )   (3,784 )   (5,227 )   (7,463 )   (1,704 )   -     (19,542 )
Foreign exchange (loss) gain   (130 )   1,916     100     5     19     -     1,910  
Other general and administrative expenses   (380 )   (5,751 )   (1,170 )   (3,429 )   (6 )   (129) 1     (10,865 )
Share-based payments   -     -     (1,432 )   -     -     -     (1,432 )
Finance costs   (19 )   (666 )   (8 )   (63 )   (10 )   (21) 1     (787 )
Interest income   -     434     207     -     157     -     798  
Technology start-up costs   -     -     -     (3,775 )   -     (739) 1     (4,514 )
Exploration and evaluation costs   -     (786 )   -     -     -     (5) 2     (791 )
    (152,528 )   (113,972 )   (131,610 )   (14,725 )   (1,544 )   253,892     (160,487 )
Net income (loss) before tax   3,093     34,362     (2,951 )   (14,725 )   (1,544 )   3,028     21,263  
Income tax expense   (185 )   (8,839 )   -     -     -     -     (9,024 )
Deferred income tax recovery (expense)   (99 )   2,235     (965 )   -     -     -     1,171  
Net income (loss) $ 2,809   $ 27,758   $ (3,916 ) $ (14,725 ) $ (1,544 ) $ 3,028   $ 13,410  
Revenues (after inter-segment eliminations) $ 155,621   $ 25,815   $ 314   $ -   $ -   $ -   $ 181,750  

1. Amounts relating to Largo Titânio Ltda. and Largo Tech Ltda., which are not an operating segment.

2. Amount relating to E&E properties.

16) Commitments and contingencies

At September 30, 2023, the Company was party to certain management and consulting contracts. Minimum commitments under the agreements are approximately $1,794 and all payable within one year. These contracts also require that additional payments of up to approximately $2,691 be made upon the occurrence of certain events such as change of control. As the triggering event has not occurred, the contingent payments have not been reflected in these consolidated financial statements.

In 2021, the Company signed a 10-year exclusive off-take agreement with a third party for the purchase of all standard and high purity grade vanadium products they produce. The quantity to be delivered to the Company in the 12 months following the first delivery is 220 tonnes of V2O5, with the Company having a right of first refusal over additional amounts.

The Company is committed to the purchase of 40 tonnes per month of V2O5 from third parties in each of December 2023 and January 2024. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

The Company's Largo Clean Energy business is required to pay a royalty of $120 per kilowatt capacity of a licensed product until such time as the licensed patents expire or are abandoned, and $60 per kilowatt thereafter. Refer to note 7 for details of the royalties payable at the Maracás Menchen Mine.

The Company is committed to a minimum amount of rental payments under five leases of office space which expire between December 31, 2023 and May 1, 2027. Minimum rental commitments remaining under the leases are approximately $226, including $126 due within one year.

At the Company's Maracás Menchen Mine and at Largo Clean Energy, the Company has entered into purchase order contracts with remaining amounts due related to goods not received or services not rendered as of September 30, 2023 of $7,560.

The Company, through its subsidiaries, is party to legal proceedings in the ordinary course of its operations related to legally binding agreements with various third parties under supply contracts and consulting agreements. During the year ended December 31, 2022, the Company received a ruling regarding one such proceeding in Brazil. This relates to a supply agreement for the Maracás Menchen Mine which was filed with the courts in October 2014. The ruling requires the Company to pay amounts due, plus interest and legal fees. At September 30, 2023, the Company recognized a provision of R$30,362 ($6,063) in the current portion of provisions (December 31, 2022 - $5,076). The Company is awaiting a further ruling from a higher court in Brazil.

The Company and its subsidiaries are party to legal proceedings regarding labour matters. A provision was recorded at December 31, 2022 for such proceedings in Brazil in an amount of R$1,223 ($234). At September 30, 2023, the provision recognized was R$1,194 ($238).

The outcome of these proceedings remains dependent on the final judgment. Management does not expect the outcome of any of the remaining proceedings to have a materially adverse effect on the results of the Company's financial position or results of operations.

17) Financial instruments

Financial assets and financial liabilities at September 30, 2023 and December 31, 2022 were as follows:

    September 30,     December 31,  
    2023     2022  
Cash $ 39,572   $ 54,471  
Restricted cash   734     470  
Trade and other receivables   22,221     18,313  
Accounts payable and accrued liabilities (including non-current)   27,017     26,960  
Total debt   65,000     40,000  

Restricted cash refers to cash amounts the Company was required to place on deposit. Refer to the liquidity risk discussion below regarding liabilities.

The Company's risk exposures and the impact on the Company's financial instruments are summarized below. There have been no changes in the risks, objectives, policies and procedures from the previous year.

a) Fair value

IFRS requires that the Company disclose information about the fair value of its financial assets and liabilities. Fair value estimates are made based on relevant market information and information about the financial instrument.

These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

The fair value hierarchy categorizes into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

 Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

 Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly such as those derived from prices.

 Level 3 inputs are unobservable inputs for the asset or liability.

The carrying amounts for trade receivables, amounts receivable and accounts payable and accrued liabilities in the condensed interim consolidated statements of financial position approximate fair values because of the limited term of these instruments. Cash and restricted cash are classified as FVTPL and included in level 1. The debt facilities were secured at interest rates consistent with the rates seen at September 30, 2023 and thus the carrying amount of debt approximates fair value.

There have been no changes in the classification of financial instruments in the fair value hierarchy since December 31, 2022. The Company does not have any financial instruments measured using Level 3 inputs. The Company does not offset financial assets with financial liabilities and there were no transfers between Level 1 and Level 2 input financial instruments.

b) Credit risk

The Company's maximum amount of credit risk is attributable to cash, restricted cash and amounts receivable.

The Company minimizes its credit risk with respect to cash by placing its funds on deposit with the highest rated banks in Canada, Ireland, the U.S. and Brazil. Financial instruments included in amounts receivable consist primarily of receivables from unrelated companies. Sales to customers outside of Brazil are protected either by the Company's credit insurance policies, which establishes credit limits for each customer, or by the Company requiring letters of credit or up-front payment prior to delivery occurring.

Of the total trade receivables balance of $22,193, $7,276 relates to customers in Brazil, which are not covered by the Company's credit insurance policies. The ratings for these companies range from AA to AAA. The Company applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables.

To measure expected credit losses, trade receivables are grouped based on risk characteristics and due dates. At September 30, 2023, no amounts are past due and in the nine months ended September 30, 2023, the Company has not experienced any credit losses. At September 30, 2023, the loss allowance for trade receivables was determined to be $nil (December 31, 2022 - $nil), with any movement recognized as a component of finance costs (note 19). There have been no write offs of trade receivables.

c) Liquidity risk

The following table details the Company's expected remaining contractual cash flow requirements at September 30, 2023 for its financial liabilities with agreed repayment periods. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

    Less than     6 months              
    6 months     to 1 year     1 to 3 years     Over 3 years  
Accounts payable and accrued liabilities (note 8) $ 26,853   $ -   $ 164   $ -  
Debt (note 9)   -     8,000     57,000     -  
Operating and purchase commitments   8,520     960     77     23  
Total $ 35,373   $ 8,960   $ 57,241   $ 23  

The Company's principal sources of liquidity are its cash flows from operating activities and cash of $39,572 (December 31, 2022 - $54,471). Refer to note 16 for other commitments and contingencies.

d) Market risk

Interest rate risk

The Company's interest rate exposure is limited to that portion of its debt that is subject to floating interest rates. At September 30, 2023, the Company had no debt that is subject to floating interest rates and does not have any exposure to floating interest rates.

Foreign currency risk

At September 30, 2023, the Company's outstanding debt is 100% denominated in U.S. dollars (December 31, 2022 - 100% U.S. dollar denominated).

The impact of fluctuations in foreign currency on cash and debt relates primarily to fluctuations between the U.S. dollar, the Canadian dollar, the Brazilian real and the Euro. At September 30, 2023, the Company's U.S. dollar functional currency entities had cash denominated in Canadian dollars, Euros and Swiss francs and the Company's Brazilian real functional currency entities had cash and debt denominated in U.S. dollars.

A 5% change in the value of the Canadian dollar, the Euro and the Swiss franc relative to the U.S. dollar would affect the value of these cash balances at September 30, 2023 by approximately $136. A 5% change in the value of the Brazilian real relative to the U.S. dollar would affect the value of Brazilian real cash balances by approximately $5.

Price risk

The Company does not have any financial instruments with significant exposure to price risk. 


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

18) Revenues

    Three months ended     Nine months ended  
    September 30,     September 30,     September 30,     September 30,  
    2023     2022     2023     2022  
V2O5 revenues                        
Produced products $ 25,268   $ 30,831   $ 90,352   $ 98,621  
Purchased products   2,066     1,655     7,531     3,184  
    27,334     32,486     97,883     101,805  
V2O3 revenues                        
Produced products $ 3,734   $ 3,798   $ 7,575   $ 3,798  
Purchased products   -     482     1,155     482  
    3,734     4,280     8,730     4,280  
FeV revenues                        
Produced products $ 11,750   $ 12,756   $ 46,408   $ 54,667  
Purchased products   1,058     4,736     1,386     20,998  
    12,808     17,492     47,794     75,665  
                         
Vanadium sales from contracts with customers $ 43,876   $ 54,258   $ 154,407   $ 181,750  
Iron ore sales from contracts with customers   107     -     107     -  
  $ 43,983   $ 54,258   $ 154,514   $ 181,750  

19) Expenses

    Three months ended     Nine months ended  
    September 30,     September 30,   September 30,     September 30,  
    2023     2022     2023     2022  
Operating costs:                        
Direct mine and production costs $ 24,366   $ 24,655   $ 77,761   $ 66,120  
Conversion costs   1,413     1,655     5,551     5,839  
Product acquisition costs   5,449     7,248     13,380     20,651  
Royalties   2,024     2,497     6,919     8,265  
Distribution costs   2,202     2,581     6,174     6,887  
Inventory write-down (note 5)   978     1,655     1,661     1,942  
Depreciation and amortization   6,003     5,111     19,456     14,923  
Iron ore costs   145     200     638     637  
  $ 42,580   $ 45,602   $ 131,540   $ 125,264  


Largo Inc.

Expressed in thousands / 000's of U.S. dollars and shares (except per share information)

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

    Three months ended     Nine months ended  
    September 30,     September 30,     September 30,     September 30,  
    2023     2022     2023     2022  
Finance costs:                        
Interest expense and fees $ 2,271   $ 221   $ 5,296   $ 575  
Interest on lease liabilities   13     16     41     69  
Accretion   68     59     197     143  
Write-down of vanadium assets   1,102     -     1,327     -  
  $ 3,454   $ 296   $ 6,861   $ 787  

20) Subsequent events

In October 2023, the Company secured a three-year debt facility of $20,000, bearing interest at 8.90% p.a. Interest payments are due quarterly with 50% of the principal to be repaid in October 2025 and 50% to be repaid in October 2026. This new facility was used to repay in full the Company's $20,000 facility that had been secured in December 2022. 



 

Management's Discussion and Analysis

For The Three and Nine Months Ended September 30, 2023

 


Table of contents

To Our Shareholders 1
   
The Company 1
   
Q3 2023 Highlights 1
   
Significant Events and Transactions Subsequent to Q3 2023 1
   
Q3 2023 Summary 2
   
Selected Quarterly Information 9
   
2023 Guidance 9
   
Operations 10
   
Financial Instruments 12
   
Liquidity And Capital Resources 12
   
Outstanding Share Data 14
   
Transactions With Related Parties 14
   
Commitments And Contingencies 14
   
Disclosure Controls And Procedures And Internal Controls Over Financial Reporting 15
   
Significant Accounting Judgments, Estimates And Assumptions 16
   
Changes In Accounting Policies 16
   
Non-GAAP Measures 16
   
Risks And Uncertainties 19
   
Cautionary Statement Regarding Forward-Looking Information 19
   
Additional Information 25


To Our Shareholders

The following Management's Discussion and Analysis ("MD&A") relates to the financial condition and results of operations of Largo Inc. ("we", "our", "us", "Largo", or the "Company") for the quarter ended September 30, 2023 ("Q3 2023") and should be read in conjunction with (i) the unaudited condensed interim consolidated financial statements and related notes for the same period, (ii) the audited annual consolidated financial statements and related notes for the year ended December 31, 2022 and (iii) the MD&A for the year ended December 31, 2022. Note references in the following discussion refer to the note disclosures contained in the Q3 2023 unaudited condensed interim consolidated financial statements. References in the following discussion to "Q3 2022" refer to the quarter ended September 30, 2022.

The financial statements and related notes of Largo have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to a going concern. Certain non-GAAP measures are discussed in this MD&A, which are clearly disclosed as such. Additional information about the Company has been filed electronically through SEDAR+ and is available online under the Company's profile at www.sedarplus.ca and www.sec.gov.

This MD&A reports the Company's activities through November 7, 2023, unless otherwise indicated. References to "the date of this MD&A" mean November 7, 2023. Except as otherwise set out herein, all amounts expressed herein are in thousands of U.S. dollars, denominated by "$". The Company's shares, options, units and warrants are expressed in thousands. Prices are not expressed in thousands. References to the symbol "C$" mean the Canadian dollar and references to the symbol "R$" mean the Brazilian real.

Mr. Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission), is a Qualified Person as defined under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and has reviewed and approved the technical information in this MD&A.

The Company

Largo is a Canadian based company that is one of the world's leading high-quality vanadium suppliers with its VPURETM and VPURE+TM products, which are sourced from the Company's Maracás Menchen Mine in Brazil. In addition to advancing its U.S.-based clean energy storage business, the Company has completed the construction of its ilmenite plant. Largo's VCHARGE vanadium batteries offer an efficient, safe, and long-life storage system that is fully recyclable at the end of its expected 25+ year lifetime. The Company's strategy is centered around two important pillars: a profitable supply of its industry-preferred vanadium products from Brazil combined with its emerging clean energy storage business to support the world's low carbon future.

The Company is organized and exists under the Business Corporations Act (Ontario) and its common shares are listed on the Toronto Stock Exchange under the symbol "LGO" and on the Nasdaq Stock Market under the symbol "LGO".

Q3 2023 Highlights

 The Company recorded net loss before tax of $14,744 for Q3 2023 and a net loss of $11,884.

 The Company's Maracás Menchen Mine produced 2,163 tonnes of vanadium pentoxide ("V2O5 ") equivalent in Q3 2023 and had sales of 2,385 tonnes of V2O5 equivalent (including 256 tonnes of purchased products).

 The Company completed the construction of its ilmenite plant and was focused on its commissioning and ramp up in Q3 2023, with initial ilmenite concentrate production of 350 tonnes in August and 700 tonnes in September. The commissioning and ramp up is expected to be completed in Q4 2023.

Significant Events and Transactions Subsequent to Q3 2023

 On October 9, 2023, Mr. Celio Pereira assumed the role of Chief Operating Officer (COO) of Largo Vanádio de Maracás S/A following the departure of Álvaro Resende.


Q3 2023 Summary

Financial
    Three months ended               
   

September 30,

2023

   

September 30,
2022

    Movement  
Revenues $ 43,983   $ 54,258   $ (10,275 )   (19%)  
                         
Operating costs   (42,580 )   (45,602 )   3,022     (7%)  
Direct mine and production costs   (24,366 )   (24,655 )   289     (1%)  
Professional, consulting and management fees   (5,975 )   (7,246 )   1,271     (18%)  
Foreign exchange (loss) gain   (606 )   967     (1,573 )   (163%)  
Other general and administrative expenses   (3,125 )   (4,108 )   983     (24%)  
Share-based payments   (336 )   (131 )   (205 )   156%  
Finance costs   (3,454 )   (296 )   (3,158 )   1,067%  
Interest income   546     401     145     36%  
Technology start-up costs   (903 )   303     (1,206 )   (398%)  
Exploration and evaluation costs   (2,294 )   (506 )   (1,788 )   353%  
    (58,727 )   (56,218 )   (2,509 )   4%  
Net loss before tax   (14,744 )   (1,960 )   (12,784 )   652%  
Income tax expense   (10 )   (1,307 )   1,297     (99%)  
Deferred income tax recovery
Net loss
  2,870     666     2,204     331%  
$ (11,884 ) $ (2,601 ) $ (9,283 )   357%  
                         
Unrealized loss on foreign currency translation   (7,144 )   (6,702 )   (442 )   7%  
Comprehensive loss
$ (19,028 ) $ (9,303 ) $ (9,725 )   105%  
                         
Basic loss per share $ (0.19 ) $ (0.04 ) $ (0.15 )   375%  
Diluted loss per share $ (0.19 ) $ (0.04 )