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You’d think if we were going to get a another, good old can kicking delay to Q2 we’d have had it by now. Also, if I was Brian, I’d have got any bad news out of the way before all the recent progress being announced by #HMI, it would be better for the mind. So am hopeful of some news soon even if it’s not today.
Tronox Brazil (the only part of the Tronox group not wholly owned, with its own listing in Brazil) has also just announced its results. Sadly they seem to have stopped publishing an English version of the narrative, but doesn’t take long to google translate certain sections.
https://www.tronox-ri.com.br/en/financial-information/results-center/
Still no clear statement as to how they will replenish the source of ore. This is a translation of one section: “The plant in Bahia uses titanium ore, or ilmenite, as its main raw material. As evidenced in the topic of "Recent Events", the Guajú Mine, located in the Municipality of Mataraca - PB, completely closed its activities in December 2021, also ending the employment contracts, only remaining on-site stock of ilmenite . Production of Zirconite, Rutile and Kianite, in turn, had already ended in 2020. The process of closing down mining activities follows a strategic and legal plan, established by regulatory and environmental protection agencies. The Company expects that the supply of ilmenite to the factory in Bahia should be maintained by the existing stock until the end of 2023. After that date, the factory in Bahia will be supplied by an alternative source, which may include importation by one of the Tronox Global branches.”
Having been the dominant local player, you’d think they’d have a preference for a locally sourced supply longer term especially if Largo will soon be able to sell TiO2 with the made/sourced in Brazil tag. Maybe a link up here is not the best option but interesting to keep eye on what they are doing.
Given the #HMI PR/comms have recently gone into overdrive, it’s not difficult to conclude we’re in a period of self enforced radio silence (for whatever reason). But when the time allows for more comms, Brian must hopefully now see the benefit of it.
Brian uses the word sales liberally for both orders and sales IMO. Just be careful. I don’t think customers are building inventory, but they might be putting orders in earlier than normal - perhaps to beat the price increase (typical marketing trick to appease customers upset by a price increase, give them a short time window to still order at the old price and don’t need to take immediate delivery).
BBN, I think Brian was probably talking to sales orders not sales revenue when making the 50x comment. The Q&A on the investor meet presentation today supports this possibility. For example a customer may have bulk ordered a full year of shipment supply early in the year (when last year they ordered in smaller quantities). Who knows the detail, but that’s my guess. That said, it’s undoubtedly a positive comment.
Good to see a much expanded list of shareholders in the latest annual confirmation statement filing.
https://find-and-update.company-information.service.gov.uk/company/09362025/filing-history
Looks like the main new share issue was last April (am guessing funds were partly applied to the environmental licence application work) alongside some sort of bonus issue to existing holders. Followed by a smaller share issue in November. Might also have been some off market buys and sells too. #JAN’s % interest seems to have ticked up fractionally.
Really surprised there has been so little on the news front about the Highveld pilot plant, but now there are many more individuals with a vested interest in this business being successful which is good IMO. Just wish they’d get a move on and be more open about progress.
Some comfort that if there is some half decent news, the market makers don’t seem to be sitting on piles of stock. I added a small amount this afternoon but there was only 25K available (from only one broker) at the time.
Noticed Brian did an interview with Proactive for HMI - hoping he did a 2 for the price of one deal! Like it was Andrew Scott, personally think he adds credibility.
The other thing that is relevant here I think is that Largo’s original capex plan included various tailings ponds/dams, but because they didn’t sell the iron ore tailings (which now seems to me to likely be because they couldn’t), that storage capacity ran out in 2016 so a new tailings pond was needed (based on info set out in a 2016 technical report).
So aside from not getting the iron ore by-product revenue they originally expected (and perhaps foolishly re-raising expectations in the market they might still get earlier this year) and spending more money on new tailings ponds, from an ESG point of view it can’t be good to have an ever growing amount of unsold iron ore tailings lying around. So they must be looking hard for solutions to this issue.
I know others have said it long before me, but having read up much more on Largo now, longer term some sort of partnership is screaming out ever louder to me to process/beneficiate all this material with the optimal amount of capex relative to volumes processed.
OAW, your question actually piqued my interest to know more about whether this is unique to Largo or could apply to us, so I have spent more time going through Largo’s past filings to see if I can find more info. Really interesting actually to learn more of Largo’s history, and some of the technical reports are not as hard to read as I feared.
From what I can see, whilst there are trace amounts of Sodium Oxide (Na20) in their ore, Largo’s chosen process flow in their chemical plant adds Sodium (either sulphate or carbonate) so as to specifically separate out the Vanadium – by doing so they get the Vanadium to react and form Sodium Vanadate which is a water soluble salt so they can then separate (“leach”) this liquid out from the non-soluble stuff and onward process to get to the purer vanadium product.
The non-soluble residue from this leaching process includes the iron ore, but the report says that the residue “…..will contain, regardless of the effectiveness of the leaching and filtering processes, some residues of vanadium and sodium salts soluble in the form of sodium vanadate”. Perhaps some of the added unreacted Sodium carbonate/sulphate comes through too if the dosage is not exactly right.
So it seems the sodium is there because they put it there, and the issue is somewhat self-inflicted. Since Largo reckoned on quite a bit of iron ore tailing by-product revenue in their PEA (~20% of their total LOM revenues) all the way back in 2013, this point was presumably not fully appreciated back then. If this is (at least now) a known issue, I have to assume the Jangada technical consultant’s will not put together a process flow that risks introducing too much Sodium in with the iron ore.
It just goes to show how sensitive that process flow can be. In that sense, I am quite happy if our DFS takes a bit longer to make sure it’s exactly right. Although a bit more news flow would be nice!
If you want to read the source material, you can find Largo’s original main technical report/PEA document in their Canadian SEDAR filings here (https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00005504), if you scroll down to the Technical Report issued on 4 March 2013. Type Sodium or Iron Ore in the search box and you’ll very quickly come to some of the relevant sections.
From what i can see (trusting translation) on the Ceara website, seems they already have the environmental licence for the extraction of ore, but not yet the on site processing side of things (although that licence has been applied for). Seems there are various steps, but moving in right direction!
Actually now I think of it, I think the Largo interview said the iron ore tailings also included titanium so the tailings may just all be one lot after they have extracted the Vanadium they sell. I have no idea if they do a magnetic separation. Sodium was mentioned in the context of not being able to sell the (iron ore containing) tailings, to customers who want to buy iron ore, without further processing. For the TiO2, Largo know they would need to make a sizeable investment to beneficiate the TiO2. Think I’ll stop there, I’m no chemist or anything like that. I was merely trying to suggest Largo may have reasons to be interested in partnering with other organisations too.
Interesting I think to listen to some of the Largo results webcasts, especially the most recent one for Q2 2021.
https://www.largoresources.com/English/investor-resources/financial-reports-and-filings/default.aspx
It’s not often I hear analysts being so openly challenging, with a few questions on their vertical integration strategy for Vanadium batteries. But more relevant to us, I think Largo may now be under more pressure to exploit their TiO2 opportunity having raised expectations on this previously. Back in 2020, they said they would come forward with a study on TiO2 earlier this year (on the Q2 2020 call, about 44 mins in, they indicated it would require a $124m investment and have a great IRR but gave no further detail on capacity etc.). They are behind schedule on this study now. Then separately earlier this year, they raised expectations they could sell their 2m+ tonnes of iron ore tailings but in the most recent Q2 2021 webcast (about 35 – 43 mins, 2 questions one after the other) there is a really quite long explanation as to why they can’t, basically it contains too much sodium. So neither expectation yet fulfilled. $124m investment even for Largo is not a trivial sum. Easy to think we might be the main one keen on having a partner, but they might be too.
Although frustrating, perversely I find the delay update reassuring.
The original PEA came in Q1 and originally there was to be an update in Q2 which was then pushed back (partly because the drilling was delayed, partly because it was a DFS not PEA) to Q3. I know there is more work involved in a DFS than a PEA, but I think the “additional work has been undertaken” comment more likely means more value is being engineered into the study than was inherent in the original PEA, otherwise I'm convinced it would be finished by now.
The final paragraph of the update today is totally unnecessary – so why include it, and especially the last sentence, if what we will ultimately get in Q4 will not be worth the extra wait. Even though the DFS is not finished, I strongly suspect they know already the general shape of it – “further strengthen these…. economics” is a pretty clear statement on the direction.
Yes, first production has been gradually shifting from Q1 to Q2 and now “mid 2022” – this matters more than the delay in the report, but we’ve already missed the spike in iron ore prices so I’m not sure it’s a major issue. More important the DFS demonstrates as much value as possible when it comes and can be relied upon to raise whatever funding is needed to move forward.
Just need to look away from the short term share price being buffeted by fairly small volumes.