RE: Lovely Q3 Update24 Nov 2020 14:25
Interesting RNS and even more interesting broker note.
The Nomad target has reduced quite a bit to 37.3p but not explanation - perhaps they factor in the funding, wider longer term structural debt and also dilution but just don't say it. In any case, 38p over the next 6-12 months is perfectly solid and achievable and a great return from where we are.
I am less bothered by the disrupted production due to weather, Covid and power outage. The way it is phrased, there is clearly something a bit more significant about it, but the mini-grid (which again quietly increased in size recently will surely help. Ultimately next year CV19 effects will subside as large scale vaccinations happen.
The YoY increases are headline grabbing and as they now include Vanchem, but with increased refurbish work at Vametco and now at Vanchem from the funding, the aspiration of knocking 4,000-4,500mtv total next year ought to be on course, and an extra 1,000mtv next year with lower costs and higher margins is lots of operating margin extra.
Very positive cash flow - sales up, costs down (more rand related), but as production increases, will reduce further, so a very healthy $10+ operating margin and growing (based on current sale and costs)
I don't remember the calculations done before, but I thought less Vanadium was needed per MW and 5t, but non the less, very nice ... I wonder if that is coming out of Vanchem ?
Interesting comment on the Oxford Hub - leased Vanadium .. look forward to some numbers on that eventually.
From the RNS
"However, we expect increased deployment of VRFBs demand, as governments focus on accelerating the energy transition to a low-carbon energy future, which will increase vanadium demand. "
From SPAngel
"substantial new demand for vanadium to come through new grid-scale battery instillations next year. This new demand looks likely to tighten the supply / demand balance with potential to significantly raise vanadium prices from here"
All very positive, and whilst Largo have largely manipulated the Vanadium pricing over the years, supply/demand balance now changing with both infrastructure AND Renewable's accelerating. Unless a new large supply floods the market it seems hard to see how Vanadium pricing will not substantially rise next year: Every extra $1/kg margin next year will generate at least $4M in extra operating profit. Just on increased production, costs lowering to $17, sales to $35 the operating profit heads north over $70M (and that is just back of a fag-packet) ... not hard to see where we are going.
Whilst I feel frustrations over comms and dithering about listings, FM has put the company in an absolutely front runner place irrespective of whether we get any Eskom at all.
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