Mr. Daniel Tellechea reports

LARGO REPORTS FIRST QUARTER 2023 FINANCIAL RESULTS AND PROVIDES UPDATE TO 2023 OPERATIONAL AND SALES OUTLOOK

Largo Inc. has released financial and operating results for the three months ended March 31, 2023. The company reported quarterly vanadium pentoxide (V2O5) equivalent sales of 2,849 tonnes at a cash operating cost excluding royalties per pound sold of $5.15. (All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated.)

Daniel Tellechea, interim chief executive officer and director of Largo, stated: "While first quarter results were in line with our annual 2023 guidance, we have revised our 2023 production, sales and cost guidance due to heavy rain in December causing the company to delay its infill drilling campaign for 2023, which is required for further refinement of the company's short-term mining model. Returning to normalized production levels remains the top priority for Largo as we work through this period of adjustment in our mining operations."

He continued: "However, we should not overlook the upcoming catalysts for the company in 2023. We continued to progress with the construction of our ilmenite concentration plant during the first quarter and expect to complete construction in [second quarter] 2023, with commissioning and ramp-up following shortly thereafter. In addition, installation of our 6.1-megawatt-hour vanadium battery in Spain continued during Q1 2023 with final provisional acceptance scheduled for [third quarter] 2023."

He concluded: "As for the market, vanadium prices decreased approximately 6 per cent in April, 2023, as a result of lower short-term steel demand. Despite this, we believe vanadium's long-term and medium-term fundamentals remain strong, with considerable demand growth expected in the future from battery applications."

Q1 2023 financial highlights:

• During Q1 2023, the company recognized revenues of $57.4-million from sales of 2,849 tonnes of V2O5 equivalent (Q1 2022: 2,232 tonnes). This represents a 35-per-cent increase in revenues over Q1 2022 ($42.7-million) and is mainly due to greater sales quantities at a higher revenue per pound sold.
• Operating costs of $45.9-million in Q1 2023 (Q1 2022: $29.0-million) include direct mine and production costs of $28.4-million (Q1 2022: $17.6-million), conversion costs of $1.9-million (Q1 2022: $1.8-million), product acquisition costs of $4.2-million (Q1 2022: $1.6-million), royalties of $2.4-million (Q1 2022: $2.0-million), distribution costs of $1.4-million (Q1 2022: $1.4-million), depreciation and amortization of $7.3-million (Q1 2022: $4.3-million), and iron ore costs of $300,000 (Q1 2022: $200,000). The increase in direct mine and production costs is attributable to low ore availability due in part to the heavy rains in December, 2022, as well as a shutdown for the completion of the planned maintenance and refractory refurbishment in the kiln. Higher mining costs, the lack of production stability and the ramp-up following the shutdown negatively impacted costs in Q1 2023. In addition, as compared with Q1 2022, the company experienced cost increases in critical consumables, including sodium carbonate, as well as increased consumption of ammonium sulphate.
• Cash operating costs excluding royalties per pound sold were $5.15 in Q1 2023, compared with $3.97 in Q1 2022. The increase seen in Q1 2023 compared with Q1 2022 is largely due to the reasons noted above for operating costs, with the previously noted plant shutdowns negatively impacting operational and financial performance for the quarter.
• Professional, consulting and management fees were $5.5-million in Q1 2023, compared with $5.9-million in Q1 2022, representing a 6-per-cent decrease. The decrease is primarily due to lower costs incurred for Largo Physical Vanadium Corp. (LPV) in Q1 2023 than in the previous comparative quarter.
• Other general and administrative expenses were $3.3-million in Q1 2023, compared with $1.7-million in Q1 2022. The increase is primarily attributable to increased depreciation in Q1 2023 from the company's software intangible asset, as well as increased information-technology-related costs in support of the company's enterprise resource planning (ERP) software implementation. The company also saw increased costs at LCE (Largo Clean Energy), which are primarily related to increased travel costs arising from its battery installation activities in Spain.
• Share-based payments in Q1 2023 decreased from Q1 2022 by 266 per cent to an expense recovery of $1.3-million. The decrease was attributable to the reversal of share-based payment expenditures on forfeited unvested stock options and restricted share units (RSUs), as well as a reduced number of stock options and RSUs granted in Q1 2023, as compared with Q1 2022.
• Finance costs were $1.4-million in Q1 2023, compared with $200,000 in Q1 2022. The increase is attributable to increased debt, as well as an initial financing fee on the company's new debt facilities.
• Technology start-up costs were $2.8-million in Q1 2023, representing a 7-per-cent decrease over Q1 2022. These costs relate to activities at LCE focused on the deployment of its initial Vcharge VRFB system in Spain with the quarter seeing increased activity by the field service team and higher transportation and installation costs.
• Cash provided by financing activities in Q1 2023 increased from cash provided by financing activities in Q1 2022 by $24.9-million. The movement is primarily due to the receipt of debt of $25.0-million.
• Cash used in investing activities in Q1 2023 of $23.4-million is an increase from the $4.3-million seen in Q1 2022. This is primarily due to capital expenditures for the ilmenite project and purchases of vanadium assets by LPV of $8.6-million.

Additional corporate updates:

• Q1 2023 production overview: Production of 2,111 tonnes of V2O5 in Q1 2023 was 14 per cent lower than the 2,442 tonnes of V2O5 produced in Q1 2022. In Q1 2023, the company experienced reduced massive ore inventory arising from the heavy rainfall in December, 2022. The planned kiln maintenance and refractory refurbishment initially scheduled for February was completed in January during the stoppage in operations. In Q1 2023, the transition in mining contractor was completed, and 341,967 tonnes of ore were mined with an effective grade of 0.81 per cent of V2O5. The ore mined in Q1 2023 was 13 per cent higher than in Q1 2022. The company produced 78,695 tonnes of concentrate with an effective grade of 2.99 per cent. The global recovery achieved in Q1 2023 was 83.0 per cent, an increase of 7.1 per cent from the 77.5 per cent achieved in Q1 2022 and 11.1 per cent higher than the 74.7 per cent achieved in fourth quarter 2022. The global recovery in January was 83.1 per cent, with 82.9 per cent achieved in February and 82.7 per cent achieved in March. Subsequent to Q1 2023, production in April, 2023, was 676 tonnes of V2O5 equivalent.
• Q1 2023 high-purity production: In Q1 2023, the company produced 1,041 V2O5 equivalent tonnes of high-purity products, including 813 tonnes of high-purity V2O5 and 228 tonnes of high-purity vanadium trioxide (V2O3). This represented 49 per cent of the total quarterly production.
• Q1 2023 sales overview and outlook: In Q1 2023, the company sold 2,849 tonnes of V2O5 equivalent (Q1 2022: 2,232 tonnes), including 245 tonnes of purchased products (Q1 2022: 79 tonnes). Logistical challenges and transport costs have eased from their highs, and the company expects further improvements in the coming quarters, and the company continued to deliver on all its commercial commitments. The company has also committed to the purchase of 60 tonnes per month of V2O5 from third parties for the rest of the year. Subsequent to Q1 2023, sales in April, 2023, were 1,101 tonnes of V2O5 equivalent, including 78 tonnes of purchased material.
• Stack manufacturing facility improvements at LCE: All building improvements at Largo Clean Energy's facility in Wilmington, Mass., were completed during Q1 2023. Stack manufacturing has moved into its final location, and LCE will begin the process of restarting and scaling up the capacity to 12.5 megawatts by the end of the year, with an ultimate capacity of 100 MW by the end of 2025. The subscale and chemistry teams have moved into their new lab, which, following an upgrade over the next two quarters, will increase the material and core technology testing capacity to support new vendors and performance improvements.
• Promotion of Paul Vollant to chief commercial officer: Effective May 9, 2023, Largo has promoted Mr. Vollant to chief commercial officer to oversee all sales and strategic business development efforts related to the commodity division of the company. His promotion reflects an unwavering commitment and support of the company's sales efforts to date, including the establishment and oversight of Largo's sales and trading department. Mr. Vollant is highly experienced in the sales and marketing of metals and minerals, and has specialized in strategic metals, particularly vanadium and titanium. Mr. Vollant joined Largo in 2019 as director of sales and trading, and was subsequently promoted to vice-president of commercial in 2021.

Update of 2023 production and sales strategy outlook

The company is in the process of reviewing its short-term mine model to incorporate continuing infill drilling at the Campbell pit. Based on results to date and expected future results, the company has adjusted its annual 2023 production, sales and cash cost guidance.

Q1 2023 webcast and conference call information

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Conference call details

Date:  Thursday, May 11, 2023

Time:  1 p.m. ET

Dial-in number:  local: 1-416-764-8650 or North American toll-free: 1-888-664-6383

Conference ID:  09350530

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Website:  To view press releases or any additional financial information, please visit the investor resources section of the company's website.

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The information provided within this release should be read in conjunction with Largo's unaudited condensed interim financial statements for the three months ended March 31, 2023, and 2022, and its management's discussion and analysis for the three months ended March 31, 2023, which are available on its website or on the company's respective profiles at SEDAR and the Securities and Exchange Commission website.

About Largo Inc.

Largo has a long and successful history as one of the world's preferred vanadium companies through the supply of its Vpure and Vpure+ products, which are sourced from one of the world's highest-grade vanadium deposits at the company's Maracas Menchen mine in Brazil. Aiming to enhance value creation at Largo, the company is in the process of implementing an ilmenite concentration plant using feedstock sourced from its existing operations in addition to advancing its United States-based clean energy division with its Vcharge vanadium batteries. Largo's Vcharge vanadium batteries contain a variety of innovations, enabling an efficient, safe and environmental, social and governance aligned long-duration solution that is fully recyclable at the end of its 25-plus-year lifespan. Producing some of the world's highest-quality vanadium, Largo has a strategic business plan based on two pillars: (1) leading vanadium supplier with an outlined growth plan; and (2) United States-based energy storage business supporting a low carbon future.

Largo's common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol LGO.

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