Alvopetro Energy (ALVOF) – Second quarter results above expectations, price target raised


Friday, August 11, 2023

Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and our strategic midstream infrastructure.

Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Alvopetro reported financial results for the quarter ended June 30, 2023 that were above our expectations. Results reflect a decline in production volume which had been preannounced through monthly production releases and thus expected. Realized gas prices were above expectations. Favorable results also reflect a decline in royalty rates. Royalty rates for natural gas production are based on Henry Hub natural gas prices, not realized gas sales prices. Henry Hub prices have been weak relative to realized gas prices resulting in a lower rate per boe produced.

Alvopetro is taking steps to replace production. The decline in production began in April and reflect higher nominations claimed by Alvopetro’s partner in the Cabure Field. Higher partner nominations will mean Alvopetro will own more of future production when prices are expected to be higher. Meanwhile, Alvopetro has accelerated drilling in fields in which it has a 100% ownership. We believe production from these wells will replace the production decline and even has the potential to double production levels in the next four years using internally generated cash.


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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Release – Largo Reports Second Quarter 2023 Financial Results, Including Further Progress on its Cost Reduction Initiatives and Commissioning of its Ilmenite Production as a By-Product of its Vanadium Operations

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All dollar amounts expressed are in thousands of U.S. dollars unless otherwise indicated. 

Q2 2023 and Other Highlights

  • Revenues of $53.1 million vs. revenues of $84.8 million Q2 2022; Revenues per pound of V2O5 sold1 of $9.42 vs. $11.69 per pound sold in Q2 2022, mainly driven by a sharp decrease in V2O5 prices during the quarter, which was partially offset by an increase in the Company’s high purity vanadium sales
  • Operating costs of $43.0 million vs. $50.7 million in Q2 2022; Cash operating costs excluding royalties per pound1 of V2O5 equivalent sold of $5.18 vs. $4.23 in Q2 2022
  • Net loss of $6.0 million vs. net income of $18.0 million in Q2 2022; Basic loss per share of $0.09
  • Cash provided before working capital items of $3.8 million vs. $25.4 million in Q2 2022; Cash provided by operating activities of $18.1 million vs. $2.9 million in Q2 2022
  • Cash balance of $64.0 million, net working capital2 surplus of $103.1 million and debt of $65.0 million exiting Q2 2023
  • V2O5 production 2,639 tonnes (5.8 million lbs3) vs. 3,084 tonnes in Q2 2022 and 2,111 tonnes in Q1 2023; V2O5 equivalent sales of 2,557 tonnes vs. 3,291 tonnes in Q2 2022
  • Commissioning of the Company’s ilmenite concentration plant has commenced and is expected to be completed in Q3 2023, at which point a gradual ramp-up of ilmenite production in Q4 2023; Ilmenite concentrate will become a by-product of the Company’s vanadium operations in Brazil
  • Hot commissioning of Largo Clean Energy’s (“LCE”) 6.1 megawatt-hour (“MWh”) Enel Green Power España (“EGPE”) vanadium redox flow battery (“VRFB”) deployment remains ongoing, with provisional acceptance by EGPE expected in Q3 2023
  • The Company published its 2022 Sustainability Report entitled: “Building a low-carbon future together” highlighting the development and improvement of its ongoing sustainability programs
  • Q2 2023 results conference call: Thursday, August 10th at 1:00 p.m. ET 

Vanadium Market Update4

  • The average benchmark price per lb of V2O5 in Europe was $8.46 in Q2 2023, a 19% decrease from the average of $10.39 seen in Q1 2023 and a 24% decrease from the average of $11.08 seen in Q2 2022; The average benchmark price per kg of ferrovanadium in Europe was $33.47 in Q2 2023, a 15% decrease from the average of $39.46 seen in Q1 2023 and a 24% decrease from the average of $43.83 seen in Q2 2022
  • Lower vanadium prices can be attributed to weaker demand in the Chinese construction market; however, these prices been partially offset by higher VRFB deployments in China and increased aerospace demand
  • The average European benchmark V2O5 price at June 30, 2023 was approximately $7.98 per lb, compared with approximately $10.13 per lb at March 31, 2023 and $9.15 per lb at June 30, 2022
  • According to Vanitec, demand in energy storage applications has increased by 141% from Q1 2022 to Q1 2023

TORONTO–(BUSINESS WIRE)– Largo Inc. (“Largo” or the “Company“) (TSX: LGO) (NASDAQ: LGO) today released financial and operating results for the three and six months ended June 30, 2023. The Company reported revenues of $53.1 million from vanadium pentoxide (“V2O5”) equivalent sales of 2,557 tonnes.

Daniel Tellechea, Interim CEO and Director of Largo, stated: “A sharp decrease in V2O5 prices combined with lower sales in Q2 2023 impacted the Company’s financial performance for the quarter. Higher production at the end of the second quarter is positively impacting in-transit inventory and should support higher availability and sales in the coming months. Our primary focus continues to be on delivering production and sales targets safely, optimizing our mine plan, as well as implementing additional cost reduction measures at both the mine site and at LCE to support profit margins going forward. The Company is beginning to see a reduction in key consumable costs at its mine site and has implemented a cost reduction plan at LCE.”

He continued: “Chinese and European steel sector spot demand for vanadium was weaker in Q2 2023, however, strong demand from the aerospace industry offset this during the quarter. Importantly, recent estimates indicate that energy storage demand is expected to increase significantly in the future, driven primarily by new VRFB deployments to 2030, with a CAGR of 14%8.”

Financial Results

(thousands of U.S. dollars, except for basic earnings (loss) per share and diluted earnings (loss) per share)Three months endedSix months ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022
Revenues53,11084,804110,531127,492
Operating costs(43,029)(50,704)(88,960)(79,662)
Direct mine and production costs(24,976)(23,905)(53,395)(41,465)
Net income (loss) before tax(4,647)22,409(3,932)23,223
Income tax recovery (expense)295(7,115)(38)(7,717)
Deferred income tax (expense) recovery(1,614)2,671(3,203)505
Net income (loss)(5,966)17,965(7,173)16,011
Basic earnings (loss) per share(0.09)0.28(0.11)0.25
Diluted earnings (loss) per share(0.09)0.28(0.11)0.25
     
Cash provided before non-cash working capital items3,84125,40011,99131,151
Net cash provided by (used in) operating activities18,0572,90223,010(1,148)
Net cash (used in) provided by financing activities(1,756)(15,679)23,549(15,294)
Net cash used in investing activities(14,283)(11,383)(37,689)(15,651)
Net change in cash2,405(25,516)9,509(30,912)
 As at
 June 30, 2023December 31, 2022
Cash63,98054,471
Debt65,00040,000
Working capital2103,147115,171
 

Maracás Menchen Mine Operational and Sales Results

 Q2 2023Q2 2022
   
Total Ore Mined (tonnes)489,892378,273
Ore Grade Mined – Effective Grade5 (%)0.861.18
Total Mined – Dry Basis (tonnes)3,671,8422,503,696
   
Concentrate Produced (tonnes)99,083124,317
Grade of Concentrate (%)3.343.28
Global Recovery6 (%)81.081.8
   
V2O5 Produced (Flake + Powder) (tonnes)2,6393,084
High purity V2O5 equivalent produced (tonnes)983587
V2O5 produced (equivalent pounds 3 )5,817,9926,799,048
V2O5 Equivalent Sold (tonnes)2,5573,291
Produced V2O5 equivalent sold (tonnes)2,2682,783
Purchased V2O5 equivalent sold (tonnes)289508
   
Cash Operating Costs Excluding Royalties per pound ($/lb)15.184.23
Revenues per pound sold ($/lb)19.4211.69

Q2 2023 Financial Highlights

  • The Company recognized revenues of $53.1 million from sales of 2,557 tonnes of V2O5 equivalent (Q2 2022 – 2,849 tonnes) in Q2 2023. This represents a 37% decrease in revenues over Q2 2022 ($84.8 million) mainly due to lower sales and vanadium prices for the quarter. Reconciliation of the Company’s revenues per pound sold1 and total quantities sold of each product are provided in the “Non-GAAP7 Measures” section of this press release.
  • Operating costs of $43.0 million (Q2 2022 – $50.7 million) include direct mine and production costs of $25.0 million (Q2 2022 – $23.9 million), conversion costs of $2.2 million (Q2 2022 – $2.3 million), product acquisition costs of $3.8 million (Q2 2022 – $9.6 million), royalties of $2.5 million (Q2 2022 – $3.7 million), distribution costs of $2.5 million (Q2 2022 – $2.9 million), inventory write-down of $0.7 million (Q2 2022 – $2.3 million), depreciation and amortization of $6.2 million (Q2 2022 – $5.5 million) and iron ore costs of $0.2 million (Q2 2022 – $0.2 million). The increase in direct mine and production costs is attributable to an increase in total ore mined and the move to a new mining contractor in Q3 2022. Higher mining costs, the change in production levels across the period and the ramp up following the challenges experienced in the prior quarter negatively impacted costs. In addition, as compared with Q2 2022, the Company continued to experience elevated costs in critical consumables. The Company is actively working to manage its usage of these consumables and is also starting to see a softening in consumable prices.
  • Cash operating costs excluding royalties1 per pound sold were $5.18 per lb, compared with $4.23 for Q2 2022. The increase seen in Q2 2023 compared with Q2 2022 is largely due to the reasons noted above.
  • Professional, consulting and management fees of $5.8 million decreased from Q2 2022 by 9%. The decrease was mainly due to lower expenses incurred in the mine properties segment in Q2 2023 over Q2 2022, which is primarily attributable to additional compensation costs incurred in Q2 2022.
  • Other general and administrative expenses of $3.3 million decreased from Q2 2022 by 35% (or $1.8 million), which is primarily attributable to the increase in legal provisions recognized in Q2 2022 in the mine properties segment.
  • Finance costs of $2.0 million in Q2 2023 increased by $1.7 million from Q2 2022, which is primarily attributable to interest on the increased debt level in Q2 2023 as compared with Q2 2022, as well as a write-down of vanadium assets of $0.2 million.
  • Exploration and evaluation costs of $1.3 million in Q2 2023 increased by $1.1 million from Q2 2022. This was driven by infill drilling and geological model work at the Maracás Menchen Mine and diamond drilling at Campo Alegre de Lourdes.
  • Following the completion of its short-term infill drilling program in the Campbell Pit, the resulting geological model update and the decision to prioritize operating flexibility in the near-term mine planning, the Company has decided to accelerate its pre-stripping mining rates. Accordingly, it has revised its guidance for capitalized waste stripping costs for 2023. Expenditures of $11.7 million were capitalized during the six months ended June 30, 2023, and the Company now plans to incur approximately $15.0 million in the remainder of 2023. The Company believes that increased operating flexibility at its open pit mine will, amongst other things, assist in preventing weather related disruptions at the mine.
  • Cash provided by operating activities continues to be impacted by expenditures at LCE, with a net loss of $5.3 million recognized in Q2 2023 (Q2 2022 – $5.4 million).

Additional Corporate Updates

  • Production: V2O5 production in April, May and June 2023 was 676 tonnes, 945 tonnes and 1,018 tonnes, respectively, for a total of 2,639 tonnes of V2O5 produced in Q2 2023.
    • The Company completed its 2023 infill drilling campaign, which resulted in a further refinement of the Company’s short-term mining model. The Company achieved a normalized production level in June following the completion of upgrades to the crushing circuit and an improvement in mining performance as compared with Q1 2023. These upgrades are expected to reduce operational maintenance costs and provide more flexibility in the blending of ores to stabilize V2O5 production.
    • In Q2 2023, the Company produced 983 V2O5 equivalent tonnes of high purity products, including 706 tonnes of high purity V2O5 and 277 tonnes of high purity vanadium trioxide (“V2O3“). This represented 37% of the Company’s total quarterly production.
    • The global recovery6 achieved in Q2 2023 was 81.0%, a decrease of 1.0% from the 81.8% achieved in Q2 2022 and 2.4% lower than the 83.0% achieved in Q1 2023. The global recovery6 in April, May and June 2023 was 81.3%, 80.4%, 81.3%, respectively.
    • The total material moved in the mine in June was a record 1,349,405 tonnes of waste and 108,104 tonnes of ore (dry basis). In Q2 2023, 489,892 tonnes of ore were mined with an effective grade5 of 0.86% of V2O5. The ore mined in Q2 2023 was 30% higher than in Q2 2022. The Company produced 99,083 tonnes of concentrate with an effective grade5 of 3.34%.
    • Subsequent to Q2 2023, production in July 2023 was 644 tonnes of V2O5 equivalent as a result of process restrictions following the accident in July at its chemical plant. However, the Company accumulated intermediate stocks of vanadium material that is expected to be processed in August, offsetting a portion of weaker July V2O5 output.
  • Sales: In Q2 2023, the Company sold 2,557 tonnes of V2O5 equivalent (Q2 2022 – 3,291 tonnes), including 289 tonnes of purchased products (Q2 2022 – 508 tonnes). Produced V2O5 equivalent sold decreased, with 2,268 tonnes sold in Q2 2023, as compared with 2,783 tonnes in Q2 2022. The Company delivered both standard grade and high purity V2O5, as well as vanadium trioxide (“V2O3”) and ferrovanadium (“FeV”) to customers globally. Subsequent to Q2 2023, sales in July 2023 were 860 tonnes of V2O5 equivalent.
  • Largo Clean Energy: During Q2 2023, LCE continued to make progress on the delivery of the EGPE contract, which remains a priority focus. LCE finalized the pumping of electrolyte for EGPE’s VCHARGE VRFB deployment and completed cold commissioning of the system in June. The battery system was also successfully interconnected with the grid and the system inverter was successfully utilized to form the chemistry. The battery is currently performing charge-discharge cycles as part of the ongoing hot commissioning phase, which is anticipated to be completed in Q3 2023, along with provisional acceptance of the system by EGPE.
    • During Q2 2023, Mr. Francesco D’Alessio was appointed as President of LCE. The Company continues to evaluate all strategic options for LCE in order to fully maximize its unique value proposition in the energy storage sector. This includes but is not limited to the potential strengthening and formalization of existing industry and commercial relationships, developing additional collaborative partnerships, evaluating alternative deployment strategies, and performing a comprehensive review of cost reduction measures.
    • In accordance with this strategic evaluation, LCE has implemented a cost reduction plan and expects to realize savings of approximately 50% in its expenditures at LCE going forward.
  • Ilmenite Plant: Construction of the ilmenite concentration plant was completed in Q2 2023. Commissioning of this new facility has commenced and is expected to be completed in Q3 2023. A gradual ramp-up of ilmenite concentrate production will occur in Q4 2023.
  • Exploration: During Q2 2023, the Company completed approximately 5,000 metres of reverse circulation (“RC”) infill drilling in the Campbell Pit and 3,500 metres of diamond drilling in the near mine deep drilling program. The Campbell Pit geological model was updated in Q2 2023 and delivered to the mine planning team. This model will continue to be updated quarterly and will assist with mine planning activities going forward.
  • Largo Physical Vanadium Corp. (“LPV”): LPV continued its acquisition of vanadium assets, with $1.5 million spent during Q2 2023. LPV has deployed over 90% of its capital and is focussed on marketing and strategic initiatives to establish its business model.

Q2 2023 Webcast and Conference Call Information

The Company will host a webcast and conference call on Thursday, August 10th at 1:00 p.m. ET, to discuss its second quarter 2023 results and progress.

Webcast and Conference Call Details:

Details of the webcast and conference call are listed below:

Conference Call Details
Date:Thursday, August 10, 2023
Time:1:00 p.m. ET
Dial-in Number:Local: +1 (416) 764-8650
North American Toll Free: +1 (888) 664-6383
Conference ID:72903885
Webcast Registration Link:https://app.webinar.net/YkB4eW6Ey1v
RapidConnect Linkhttps://emportal.ink/3rk2Eqz
Replay Number:Local / International: + 1 (416) 764-8677
North American Toll Free: +1 (888) 390-0541
Replay Passcode: 903885#
Website:To view press releases or any additional financial information, please visit the Investor Resources section of the Company’s website at: www.largoinc.com/English/investor-resources

A playback recording will be available on the Company’s website for a period of 60-days following the conference call.

The information provided within this release should be read in conjunction with Largo’s unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2023 and 2022, and its management’s discussion and analysis for the three and six months ended June 30, 2023, which are available on our website at www.largoinc.com or on the Company’s respective profiles at www.sedar.com and www.sec.gov.

About Largo

Largo has a long and successful history as one of the world’s preferred vanadium companies through the supply of its VPURETM and VPURE+TM products, which are sourced from one of the world’s highest-grade vanadium deposits at the Company’s Maracás Menchen Mine in Brazil. Aiming to enhance value creation at Largo, the Company is in the process of implementing a titanium dioxide pigment plant using feedstock sourced from its existing operations in addition to advancing its U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s VCHARGE vanadium batteries contain a variety of innovations, enabling an efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its 25+ year lifespan. Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based on two pillars: 1.) vanadium production from its operations in Brazil and 2.) energy storage business in the U.S. to support a low carbon future through its clean energy division.

Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol “LGO”. For more information, please visit www.largoinc.com.

Cautionary Statement Regarding Forward-looking Information:

This press release contains “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and United States securities legislation. Forward‐looking information in this press release includes, but is not limited to, statements with respect to the timing and amount of estimated future production and sales; the future price of commodities; costs of future activities and operations, including, without limitation, the effect of inflation and exchange rates; the effect of unforeseen equipment maintenance or repairs on production; timing and cost related to the commissioning and ramp-up of the ilmenite plan, ilmenite production; the ability to sell ilmenite, V2O5 or other vanadium commodities on a profitable basis, the ability to produce high purity V2O5 and V2O3 according to customer specifications; the extent of capital and operating expenditures; the improvements to mine planning based on the results of drilling campaigns; the affect of the re-assay program results on measured and indicated resource estimates. Forward‐looking information in this press release also includes, but is not limited to, statements with respect to our ability to build, finance and successfully operate a VRFB business, the projected timing and cost of the completion of the EGPE project; our ability to protect and develop our technology, our ability to maintain our IP, the competitiveness of our product in an evolving market, our ability to market, sell and deliver our VCHARGE batteries on specification and at a competitive price, our ability to successfully deploy our VCHARGE batteries in foreign jurisdictions, the affect of the workforce reduction on operating costs, our ability to secure the required resources to build and deploy our VCHARGE batteries, and the adoption of VRFB technology generally in the market.

The following are some of the assumptions upon which forward-looking information is based: that general business and economic conditions will not change in a material adverse manner; demand for, and stable or improving price of V2O5, other vanadium products, ilmenite and titanium dioxide pigment; receipt of regulatory and governmental approvals, permits and renewals in a timely manner; that the Company will not experience any material accident, labour dispute or failure of plant or equipment or other material disruption in the Company’s operations at the Maracás Menchen Mine or relating to Largo Clean Energy, specially in respect of the installation and commissioning of the EGPE project; the availability of financing for operations and development; the availability of funding for future capital expenditures; the ability to replace current funding on terms satisfactory to the Company; the ability to mitigate the impact of heavy rainfall; the reliability of production, including, without limitation, access to massive ore, the Company’s ability to procure equipment, services and operating supplies in sufficient quantities and on a timely basis; that the estimates of the resources and reserves at the Maracás Menchen Mine are within reasonable bounds of accuracy (including with respect to size, grade and recovery and the operational and price assumptions on which such estimates are based); the accuracy of the Company’s mine plan at the Maracás Menchen Mine, the competitiveness of the Company’s VRFB technology; the ability to obtain funding through government grants and awards for the Green Energy sector, the accuracy of cost estimates and assumptions on future variations of VCHARGE battery system design, that the Company’s current plans for ilmenite and VRFBs can be achieved; the Company’s “two-pillar” business strategy will be successful; the Company’s sales and trading arrangements will not be affected by the evolving sanctions against Russia; and the Company’s ability to attract and retain skilled personnel and directors; the ability of management to execute strategic goals.

Forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. All information contained in this news release, other than statements of current and historical fact, is forward looking information. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Largo or Largo Clean Energy to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on www.sedar.com and available on www.sec.gov from time to time. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo’s annual and interim MD&As which also apply.

Trademarks are owned by Largo Inc.

Q2 2023 Net Income Reconciliation

  Q2 2023 
Total V2O5 equivalent sold000s lbs 5,637A
 Tonnesi 2,557 
    
Produced V2O5 equivalent sold000s lbs 5,000B
 Tonnesi 2,268 
    
Revenues per pound sold$/lb$9.42C
Cash operating costs per pound$/lb$5.67D
Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
  Q2 2023 
Revenues $53,110A x C 2,557 tonnes of V2O5 equivalent sold (Q2 2022 – 3,291 tonnes), with revenues per pound sold of $9.42 (Q2 2022 – $11.69)
Cash operating costs  (28,365)B x D Global recovery of 81.0% (Q2 2022 – 81.8%), impact of increased mining costs and cost increases for critical consumables
Other operating costs   
Conversion costs (costs incurred in converting V2O5 to FeV that are recognized on the sale of FeV)(2,220) Note 19 579 tonnes of FeV sold
Product acquisition costs (costs incurred in purchasing products from 3rd parties that are recognized on the sale of those products)(3,753) Note 19 289 tonnes of V2O5 equivalent of purchased products sold, compared with 508 tonnes in Q2 2022 with a cost of $9,568
Distribution costs(2,525) Note 19
Depreciation(6,202) Note 19
Inventory write-down(683) Note 19
Attributable to purchased FeV and V2O5 inventory
Increase in legal provisions(230) See “other general and administrative expenses” section on page 5
Iron ore costs(220) Note 19
   (15,833) 
Commercial & Corporate costs   
Professional, consulting and management fees(2,453) Note 15 (Sales & trading plus Corporate)
Other general and administrative expenses(1,332) 
Share-based payments(413) 
   (4,198) 
Largo Clean Energy  (5,236)Note 15 (excluding finance costs and foreign exchange) 2023 guidance between $13,500 and $14,500
 
Largo Physical Vanadium  (332)Note 15 (excluding finance costs and foreign exchange)
Titanium project  (174)Note 15 – “other”
Foreign exchange loss  (817) 
Finance costs  (1,981) 
Interest income  480 
Exploration and evaluation costs  (1,301) 
    
Net income before tax  (4,647) 
    
Income tax expense  295 
Deferred income tax expense  (1,614) 
    
Net income (loss) $(5,966) 

Note references in the table above refer to the note disclosures contained in the Q2 2023 unaudited condensed interim consolidated financial statements.

Non-GAAP Measures

The Company uses certain non-GAAP measures in its press release, which are described in the following section. Non-GAAP financial measures and non-GAAP ratios are not standardized financial measures under IFRS, the Company’s GAAP, and might not be comparable to similar financial measures disclosed by other issuers. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Revenues Per Pound

The Company’s press release refers to revenues per pound sold, V2O5 revenues per pound of V2O5 sold and FeV revenues per kg of FeV sold, which are non-GAAP financial measures that are used to provide investors with information about a key measure used by management to monitor performance of the Company.

These measures, along with cash operating costs, are considered to be key indicators of the Company’s ability to generate operating earnings and cash flow from its Maracás Menchen Mine and sales activities. These measures differ from measures determined in accordance with IFRS, and are not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

The following table provides a reconciliation of revenues per pound sold, V2O5 revenues per pound of V2O5 sold and FeV revenues per kg of FeV sold to revenues and the revenue information presented in note 18 as per the Q2 2022 unaudited condensed interim consolidated financial statements.

 Three months endedSix months ended
 June 30,
2023
June 30,
2022
June 30,
2023
June 30,
2022
Revenues – V2O5 producedi$30,558$45,976$ 65,084$67,790
V2O5 sold – produced (000s lb) 3,083 4,385  6,881 7,079
V2O5 revenues per pound of V2O5 sold – produced ($/lb)$9.91$10.48$ 9.46$9.58
     
Revenues – V2O5 purchasedi$2,937$1,143$ 5,465$1,529
V2O5 sold – purchased (000s lb) 396 88  705 132
V2O5 revenues per pound of V2O5 sold – purchased ($/lb)$7.42$12.99$ 7.75$11.58
     
Revenues – V2O5i$33,495$47,119$ 70,549$69,319
V2O5 sold (000s lb) 3,479 4,473  7,586 7,211
V2O5 revenues per pound of V2O5 sold ($/lb)$9.63$10.53$ 9.30$9.61
     
Revenues – V2O3i$2,358$47,119$ 3,841$69,319
V2O3 sold (000s lb) 177   311 
V2O3 revenues per pound of V2O3 sold ($/lb)$13.32$$ 12.35$
     
Revenues – FeV producedi$17,230$22,883$ 34,658$41,911
FeV sold – produced (000s kg) 579 550  1,147 1,182
FeV revenues per kg of FeV sold – produced ($/kg)$29.76$41.61$ 30.22$35.46
     
Revenues – FeV purchasedi$27$14,802$ 328$16,262
FeV sold – purchased (000s kg) 1 317  11 357
FeV revenues per kg of FeV sold – purchased ($/kg)$27.00$46.69$ 29.82$45.55
     
Revenues – FeVi$17,256$37,685$ 34,986$58,173
FeV sold (000s kg) 580 867  1,158 1,539
FeV revenues per kg of FeV sold ($/kg)$29.75$43.47$ 30.21$37.80
     
Revenuesi$53,110$84,804$ 110,531$127,492
V2O5 equivalent sold (000s lb) 5,637 7,255  11,918 12,176
Revenues per pound sold ($/lb)$9.42$11.69$ 9.27$10.47
  1. As per note 18 in the Company’s Q2 2023 unaudited condensed interim consolidated financial statements. 

Cash Operating Costs and Cash Operating Costs Excluding Royalties

The Company’s press release refers to cash operating costs per pound and cash operating costs excluding royalties per pound, which are non-GAAP ratios based on cash operating costs and cash operating costs excluding royalties, which are non-GAAP financial measures, in order to provide investors with information about a key measure used by management to monitor performance. This information is used to assess how well the Maracás Menchen Mine is performing compared to plan and prior periods, and also to assess its overall effectiveness and efficiency.

Cash operating costs includes mine site operating costs such as mining costs, plant and maintenance costs, sustainability costs, mine and plant administration costs, royalties and sales, general and administrative costs (all for the Mine properties segment), but excludes depreciation and amortization, share-based payments, foreign exchange gains or losses, commissions, reclamation, capital expenditures and exploration and evaluation costs. Operating costs not attributable to the Mine properties segment are also excluded, including conversion costs, product acquisition costs, distribution costs and inventory write-downs.

Cash operating costs excluding royalties is calculated as cash operating costs less royalties.

Cash operating costs per pound and cash operating costs excluding royalties per pound are obtained by dividing cash operating costs and cash operating costs excluding royalties, respectively, by the pounds of vanadium equivalent sold that were produced by the Maracás Menchen Mine.

Cash operating costs, cash operating costs excluding royalties, cash operating costs per pound and cash operating costs excluding royalties per pound, along with revenues, are considered to be key indicators of the Company’s ability to generate operating earnings and cash flow from its Maracás Menchen Mine. These measures differ from measures determined in accordance with IFRS, and are not necessarily indicative of net earnings or cash flow from operating activities as determined under IFRS.

The following table provides a reconciliation of cash operating costs and cash operating costs excluding royalties, cash operating costs per pound and cash operating costs excluding royalties per pound for the Maracás Menchen Mine to operating costs as per the Q2 2022 unaudited condensed interim consolidated financial statements.

 Three months endedSix months ended
 June 30,
2023
June 30,
2022
June 30,
2023
June 30,
2022
Operating costsi$43,029$50,704$88,960$79,662
Professional, consulting and management feesii 624 1,567 1,468 2,603
Other general and administrative expensesiii 315 209 624 476
Less: iron ore costsi (220) (222) (493) (437)
Less: conversion costsi (2,220) (2,337) (4,138) (4,184)
Less: product acquisition costsi (3,753) (9,568) (7,931) (11,118)
Less: distribution costsi (2,525) (2,851) (3,972) (4,306)
Less: inventory write-down (683) (2,285) (683) (2,285)
Less: depreciation and amortization expense1 (6,202) (5,507) (13,453) (9,812)
Cash operating costs 28,365 29,710 60,382 50,599
Less: royaltiesi (2,450) (3,742) (4,895) (5,768)
Cash operating costs excluding royalties 25,915 25,968 55,487 44,831
Produced V2O5 sold (000s lb) 5,000 6,135 10,741 10,882
Cash operating costs per pound ($/lb)$5.67$4.84$5.62$4.65
Cash operating costs excluding royalties per pound ($/lb)$5.18$4.23$5.17$4.12
  1. As per note 19 in the Company’s Q2 2023 unaudited condensed interim consolidated financial statements.
  2. As per the Mine properties segment in note 15 in the Company’s Q2 2023 unaudited condensed interim consolidated financial statements.
  3. As per the Mine properties segment in note 15, less the increase in legal provisions of $0.2 million (Q2 2023) and $0.3 million (for the six months ended June 30, 2023) as noted in the “other general and administrative expenses” section on page 6 of the Company’s Q2 2023 Management Discussion and Analysis.

______________________________________
1
 Revenues per pound sold and cash operating costs are non-GAAP financial measures, and cash operating costs per pound and cash operating costs excluding royalties per pound are non-GAAP ratios with no standard meaning under IFRS, and may not be comparable to similar financial measures disclosed by other issuers. Refer to the “Non-GAAP Measures” section of this press release.
2 Defined as current assets less current liabilities per the consolidated statements of financial position.
3 Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
4 Fastmarkets Metal Bulletin.
5 Effective grade represents the percentage of magnetic material mined multiplied by the percentage of V2O5 in the magnetic concentrate.
6 Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery.
7 GAAP – Generally Accepted Accounting Principles
8 RBC Capital Markets Vanadium Outlook (2023)

For further information, please contact:
Investor Relations
Alex Guthrie
Senior Manager, External Relations
+1.416.861.9778
aguthrie@largoinc.com

Source: Largo Inc.

Release – Alvopetro Announces Q2 2023 Financial Results and an Operational Update

Research News and Market Data on ALVOF

Aug 09, 2023

CALGARY, AB, Aug. 9, 2023 /CNW/ – Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) is pleased to announce financial results for the three and six months ended June 30, 2023 and an operational update.  

All references herein to $ refer to United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.

President & CEO, Corey C. Ruttan commented:

“We continue to post strong results, generating an operating netback of $69.61 per boe and $11 million in funds flow from operations, highlighting the strong profitability of our operations. Our 2023 capital program is focused on adding 100% interest production from our Murucututu natural gas project and our Bom Lugar oil field. We have had exciting early results with the stimulation of our 197(1) Murucututu well and drilling our first oil development well at Bom Lugar.”

Operational Update

Drilling operations continue on the 183-A3 well on our Murucututu natural gas field. The well was spud on July 11th and is targeting shallower exploration potential in the Caruaçu Formation and the Gomo member of the Candeias Formation. We expect drilling to be completed later this quarter. We also expect to complete our recently drilled Bom Lugar well (BL-06) and have the well on production in the third quarter.

Our natural gas price under our long-term gas sales agreement with Bahiagás was adjusted effective August 1st to BRL1.99/m3 or $13.25/Mcf, based on our average heat content to date, the July 31, 2023 BRL/USD foreign exchange rate of 4.74 and enhanced sales tax credits applicable in 2023. This new gas price is effective for all of our natural gas sales from both our Caburé and Murucututu fields as of August 1, 2023.

Financial and Operating Highlights – Second Quarter of 2023

  • Average daily sales decreased to 1,975 boepd (-29% from Q1 2023 and -16% from Q2 2022) due mainly to reduced production from our Caburé natural gas field as a result of higher nominated volumes from our partner.
  • Our average realized natural gas price increased to $12.86/Mcf, an 8% increase from Q2 2022 with the 3% increase in our contracted natural gas price and enhanced sales tax credits available in 2023. Compared to Q1 2023, our realized sales price increased 7% due mainly to the appreciation of the BRL to the USD in Q2. With the higher natural gas price, our overall realized price per boe increased to $77.41 (+6% from Q1 2023 and +5% from Q2 2022), despite lower Brent pricing on condensate sales.
  • Our natural gas, condensate and oil revenue was $13.9 million in Q2 2023, a decrease of $1.9 million compared to Q2 2022 (-12%) due to a 16% decrease in production partially offset by the increase in realized sales prices per boe.
  • Our operating netback improved to $69.61 per boe (+$3.00 per boe from Q1 2023 and +$5.65 per boe from Q2 2022) with a higher realized sales price and lower royalties, partially offset by the impact of fixed operating costs with lower sales volumes.
  • We generated funds flows from operations of $11.0 million ($0.30 per basic share and $0.29 per diluted share), a decrease of $1.4 million compared to Q2 2022 and $3.9 million compared to Q1 2023.
  • We reported net income of $9.9 million in Q2 2023, an increase of $3.2 million (+49%) compared to Q2 2022.
  • Capital expenditures totaled $8.5 million, including drilling cost for our BL-06 well on our Bom Lugar field, stimulation costs for our 197(1) well on our Murucututu field, and long-lead purchases for future capital projects.
  • Our working capital surplus was $18.1 million as of June 30, 2023, a decrease of $2.8 million from March 31, 2023, and an improvement of $3.4 million from December 31, 2022.

The following table provides a summary of Alvopetro’s financial and operating results for three and six months ended June 30, 2023 and June 30, 2022. The consolidated financial statements with the Management’s Discussion and Analysis (“MD&A”) are available on our website at www.alvopetro.com and will be available on the SEDAR+ website at www.sedarplus.ca.

As at and Three Months Ended June 30,As at and Six Months Ended June 30,
20232022Change20232022Change (%)
Financial
($000s, except where noted)
Natural gas, oil and condensate sales13,91415,787(12)32,07429,7598
Net income9,8526,6314922,05417,74624
      Per share – basic ($)(1)0.270.20350.600.5215
      Per share – diluted ($)(1)0.260.18440.590.4920
Cash flows from operating activities13,47312,997427,32921,33028
      Per share – basic ($)(1)0.370.38(3)0.750.6319
      Per share – diluted ($)(1)0.360.3530.730.5924
Funds flow from operations (2)11,04712,434(11)26,01923,33811
      Per share – basic ($)(1)0.300.37(19)0.710.693
      Per share – diluted ($)(1)0.290.34(15)0.690.648
Dividends declared5,1092,7288710,2135,44488
Per share(1)0.140.08750.280.1675
Capital expenditures8,5216,3383411,81210,13817
Cash and cash equivalents25,59813,6728725,59813,67287
Net working capital surplus(2)18,08411,6415518,08411,64155
Working capital, net of debt(2) 18,0849,0969918,0849,09699
Weighted average shares outstanding
      Basic (000s)(1)36,69733,973836,62733,9418
      Diluted (000s)(1)37,75536,637337,65736,4263
Operations
Natural gas, NGLs and crude oil sales:
      Natural gas (Mcfpd)11,26913,546(17)13,52013,940(3)
      NGLs – condensate (bopd)9297(5)1119813
      Oil (bopd)5558(38)
      Total (boepd)1,9752,359(16)2,3692,429(2)
Average realized prices(2):
      Natural gas ($/Mcf)12.8611.90812.4010.9413
      NGLs – condensate ($/bbl)83.35121.93(32)83.79114.11(27)
      Oil ($/bbl)63.9394.47(32)68.0083.90(19)
      Total ($/boe)77.4173.54574.8067.6811
Operating netback ($/boe)(2)
      Realized sales price77.4173.54574.8067.6811
      Royalties(1.97)(5.35)(63)(2.18)(4.84)(55)
      Production expenses(5.83)(4.23)38(4.75)(4.00)19
      Operating netback69.6163.96967.8758.8415
Operating netback margin(2)90 %87 %391 %87 %5
Notes:
(1)  Per share amounts are based on weighted average shares outstanding other than dividends per share, which is based on the number of common shares outstanding at each dividend record date. The weighted average number of diluted common shares outstanding in the computation of funds flow from operations and cash flows from operating activities per share is the same as for net income per share.
(2)  See “Non-GAAP and Other Financial Measures” section within this news release.

Q2 2023 Results Webcast

Alvopetro will host a live webcast to discuss our Q2 2023 financial results at 9:00 am Mountain time on Thursday August 10, 2023. Details for joining the event are as follows:

Date: August 10, 2023 Time: 9:00 AM Mountain/11:00 AM EasternLink:  https://us06web.zoom.us/j/83723796296 Dial-in numbers: https://us06web.zoom.us/u/kcmVqG8cd9 Webinar ID: 837 2379 6296

The webcast will include a question and answer period. Online participants will be able to ask questions through the Zoom portal. Dial-in participants can email questions directly to socialmedia@alvopetro.com.

Corporate Presentation

Alvopetro’s updated corporate presentation is available on our website at: http://www.alvopetro.com/corporate-presentation

Social Media

Follow Alvopetro on our social media channels at the following links: 

Twitter – https://twitter.com/AlvopetroEnergy Instagram – https://www.instagram.com/alvopetro/ LinkedIn – https://www.linkedin.com/company/alvopetro-energy-ltd

Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé and Murucututu natural gas fields and our strategic midstream infrastructure.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Abbreviations:

$000s                    =thousands of U.S. dollars 
bbls                        barrels
boepd                    =  barrels of oil equivalent (“boe”) per day
bopd                       =   barrels of oil and/or natural gas liquids (condensate) per day
BRL                         =   Brazilian Real
CAD                          =Canadian dollars
m3                                =cubic metre
Mcf                        thousand cubic feet
Mcfpd                     =   thousand cubic feet per day
MMcf                       =   million cubic feet
MMcfpd                    =  million cubic feet per day
NGLs                        =natural gas liquids
Q1 2023                     three months ended March 31, 2023
Q2 2022                      three months ended June 30, 2022
Q2 2023                      =three months ended June 30, 2023

Non-GAAP and Other Financial Measures

This news release contains references to various non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures as such terms are defined in National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure. Such measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. While these measures may be common in the oil and gas industry, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. The non-GAAP and other financial measures referred to in this report should not be considered an alternative to, or more meaningful than measures prescribed by IFRS and they are not meant to enhance the Company’s reported financial performance or position. These are complementary measures that are used by management in assessing the Company’s financial performance, efficiency and liquidity and they may be used by investors or other users of this document for the same purpose. Below is a description of the non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures used in this news release. For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the “Non-GAAP Measures and Other Financial Measures” section of the Company’s MD&A which may be accessed through the SEDAR+ website at www.sedarplus.ca.

Non-GAAP Financial Measures

Operating netback

Operating netback is calculated as natural gas, oil and condensate revenues less royalties and production expenses. This calculation is provided in the “Operating Netback” section of the Company’s MD&A using our IFRS measures. The Company’s MD&A may be accessed through the SEDAR+ website at www.sedarplus.ca. Operating netback is a common metric used in the oil and gas industry used to demonstrate profitability from operations.

Non-GAAP Financial Ratios

Operating netback per boe

Operating netback is calculated on a per unit basis, which is per barrel of oil equivalent (“boe”). It is a common non-GAAP measure used in the oil and gas industry and management believes this measurement assists in evaluating the operating performance of the Company. It is a measure of the economic quality of the Company’s producing assets and is useful for evaluating variable costs as it provides a reliable measure regardless of fluctuations in production. Alvopetro calculated operating netback per boe as operating netback divided by total sales volumes (barrels of oil equivalent). This calculation is provided in the “Operating Netback” section of the Company’s MD&A using our IFRS measures. The Company’s MD&A may be accessed through the SEDAR+ website at www.sedarplus.ca. Operating netback is a common metric used in the oil and gas industry used to demonstrate profitability from operations on a per unit basis (boe).

Operating netback margin

Operating netback margin is calculated as operating netback per boe divided by the realized sales price per boe. Operating netback margin is a measure of the profitability per boe relative to natural gas, oil and condensate sales revenues per boe and is calculated as follows:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Operating netback – $ per boe69.6163.9667.8758.84
Average realized price – $ per boe       77.4173.5474.8067.68
Operating netback margin90 %87 %91 %87 %

Funds Flow from Operations Per Share

Funds flow from operations per share is a non-GAAP ratio that includes all cash generated from operating activities and is calculated before changes in non-cash working capital, divided by the weighted the weighted average shares outstanding for the respective period. For the periods reported in this news release the cash flows from operating activities per share and funds flow from operations per share is as follows:

Three Months Ended June 30,Six Months Ended June 30,
$ per share2023202220232022
Per basic share:
Cash flows from operating activities0.370.380.750.63
Funds flow from operations0.300.370.710.69
Per diluted share:
Cash flows from operating activities0.360.350.730.59
Funds flow from operations0.290.340.690.64

Capital Management Measures

Funds Flow from Operations 

Funds flow from operations is a non-GAAP capital management measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. The most comparable GAAP measure to funds flow from operations is cash flows from operating activities. Management considers funds flow from operations important as it helps evaluate financial performance and demonstrates the Company’s ability to generate sufficient cash to fund future growth opportunities. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash flows from operating activities however management finds that the impact of working capital items on the cash flows reduces the comparability of the metric from period to period. A reconciliation of funds flow from operations to cash flows from operating activities is as follows:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cash flows from operating activities13,47312,99727,32921,330
(Deduct) add back changes in non-cash working capital(2,426)(563)(1,310)2,008
Funds flow from operations11,04712,43426,01923,338

Net Working Capital 

Net working capital is computed as current assets less current liabilities. Net working capital is a measure of liquidity, is used to evaluate financial resources, and is calculated as follows: 

As at June 30,
20232022
Total current assets32,80121,461
Total current liabilities(14,717)(9,820)
Net working capital surplus                                                                                    18,08411,641

Working Capital Net of Debt 

Working capital net of debt is computed as net working capital surplus decreased by the carrying amount of the Credit Facility. Working capital net of debt is used by management to assess the Company’s overall financial position.

As at June 30,
20232022
Net working capital surplus18,08411,641
Credit Facility, balance outstanding                                                                         (2,545)
Working capital, net of debt18,0849,096

Supplementary Financial Measures

Average realized natural gas price – $/Mcf” is comprised of natural gas sales as determined in accordance with IFRS, divided by the Company’s natural gas sales volumes.

Average realized NGL – condensate price – $/bbl” is comprised of condensate sales as determined in accordance with IFRS, divided by the Company’s NGL sales volumes from condensate.

Average realized oil price – $/bbl” is comprised of oil sales as determined in accordance with IFRS, divided by the Company’s oil sales volumes.

Average realized price – $/boe” is comprised of natural gas, condensate and oil sales as determined in accordance with IFRS, divided by the Company’s total natural gas, condensate and oil sales volumes (barrels of oil equivalent).

Dividends per share” is comprised of dividends declared, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.

Royalties per boe” is comprised of royalties, as determined in accordance with IFRS, divided by the total natural gas, condensate and oil sales volumes (barrels of oil equivalent).

Production expenses per boe” is comprised of production expenses, as determined in accordance with IFRS, divided by the total natural gas, condensate and oil sales volumes (barrels of oil equivalent).

BOE Disclosure

The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6 Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.

Forward-Looking Statements and Cautionary Language 

This news release contains forward-looking information within the meaning of applicable securities laws. The use of any of the words “will”, “expect”, “intend” and other similar words or expressions are intended to identify forward-looking information. Forward‐looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the expectations discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events. Accordingly, when relying on forward-looking statements to make decisions, Alvopetro cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. More particularly and without limitation, this news release contains forward-looking statements concerning concerning plans relating to the Company’s operational activities, proposed exploration development activities and the timing for such activities, exploration and development prospects of Alvopetro, capital spending levels, future capital and operating costs, future production and sales volumes, production allocations from the Caburé natural gas field, the expected natural gas price, gas sales and gas deliveries under Alvopetro’s long-term gas sales agreement, the expected timing of testing the BL-06 well and production commencement from the BL-06 well, anticipated duration of drilling operations for the 183-A3 well, anticipated timing for upcoming drilling and testing of other wells, projected financial results, the expected timing and outcomes of certain of Alvopetro’s testing activities, and sources and availability of capital. Forward-looking statements are necessarily based upon assumptions and judgments with respect to the future including, but not limited to, expectations and assumptions concerning the timing of regulatory licenses and approvals, equipment availability, the success of future drilling, completion, testing, recompletion and development activities and the timing of such activities, the performance of producing wells and reservoirs, well development and operating performance, expectations regarding Alvopetro’s working interest and the outcome of any redeterminations, environmental regulation, including regulation relating to hydraulic fracturing and stimulation, the ability to monetize hydrocarbons discovered, the outlook for commodity markets and ability to access capital markets, foreign exchange rates, general economic and business conditions, forecasted demand for oil and natural gas, the impact of global pandemics, weather and access to drilling locations, the availability and cost of labour and services, the regulatory and legal environment and other risks associated with oil and gas operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect.  Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. In addition, the declaration, timing, amount and payment of future dividends remain at the discretion of the Board of Directors. Although we believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, reliance on industry partners, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and foreign exchange rate fluctuations, market uncertainty associated with financial institution instability, and general economic conditions. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Although Alvopetro believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Alvopetro can give no assurance that it will prove to be correct. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on factors that could affect the operations or financial results of Alvopetro are included in our annual information form which may be accessed on Alvopetro’s SEDAR+ profile at www.sedarplus.ca. The forward-looking information contained in this news release is made as of the date hereof and Alvopetro undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

www.alvopetro.comTSX-V: ALV, OTCQX: ALVOF

SOURCE Alvopetro Energy Ltd.

Aug 09, 2023

CALGARY, AB, Aug. 9, 2023 /CNW/ – Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) is pleased to announce financial results for the three and six months ended June 30, 2023 and an operational update.  

All references herein to $ refer to United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.

President & CEO, Corey C. Ruttan commented:

“We continue to post strong results, generating an operating netback of $69.61 per boe and $11 million in funds flow from operations, highlighting the strong profitability of our operations. Our 2023 capital program is focused on adding 100% interest production from our Murucututu natural gas project and our Bom Lugar oil field. We have had exciting early results with the stimulation of our 197(1) Murucututu well and drilling our first oil development well at Bom Lugar.”

Operational Update

Drilling operations continue on the 183-A3 well on our Murucututu natural gas field. The well was spud on July 11th and is targeting shallower exploration potential in the Caruaçu Formation and the Gomo member of the Candeias Formation. We expect drilling to be completed later this quarter. We also expect to complete our recently drilled Bom Lugar well (BL-06) and have the well on production in the third quarter.

Our natural gas price under our long-term gas sales agreement with Bahiagás was adjusted effective August 1st to BRL1.99/m3 or $13.25/Mcf, based on our average heat content to date, the July 31, 2023 BRL/USD foreign exchange rate of 4.74 and enhanced sales tax credits applicable in 2023. This new gas price is effective for all of our natural gas sales from both our Caburé and Murucututu fields as of August 1, 2023.

Financial and Operating Highlights – Second Quarter of 2023

  • Average daily sales decreased to 1,975 boepd (-29% from Q1 2023 and -16% from Q2 2022) due mainly to reduced production from our Caburé natural gas field as a result of higher nominated volumes from our partner.
  • Our average realized natural gas price increased to $12.86/Mcf, an 8% increase from Q2 2022 with the 3% increase in our contracted natural gas price and enhanced sales tax credits available in 2023. Compared to Q1 2023, our realized sales price increased 7% due mainly to the appreciation of the BRL to the USD in Q2. With the higher natural gas price, our overall realized price per boe increased to $77.41 (+6% from Q1 2023 and +5% from Q2 2022), despite lower Brent pricing on condensate sales.
  • Our natural gas, condensate and oil revenue was $13.9 million in Q2 2023, a decrease of $1.9 million compared to Q2 2022 (-12%) due to a 16% decrease in production partially offset by the increase in realized sales prices per boe.
  • Our operating netback improved to $69.61 per boe (+$3.00 per boe from Q1 2023 and +$5.65 per boe from Q2 2022) with a higher realized sales price and lower royalties, partially offset by the impact of fixed operating costs with lower sales volumes.
  • We generated funds flows from operations of $11.0 million ($0.30 per basic share and $0.29 per diluted share), a decrease of $1.4 million compared to Q2 2022 and $3.9 million compared to Q1 2023.
  • We reported net income of $9.9 million in Q2 2023, an increase of $3.2 million (+49%) compared to Q2 2022.
  • Capital expenditures totaled $8.5 million, including drilling cost for our BL-06 well on our Bom Lugar field, stimulation costs for our 197(1) well on our Murucututu field, and long-lead purchases for future capital projects.
  • Our working capital surplus was $18.1 million as of June 30, 2023, a decrease of $2.8 million from March 31, 2023, and an improvement of $3.4 million from December 31, 2022.

The following table provides a summary of Alvopetro’s financial and operating results for three and six months ended June 30, 2023 and June 30, 2022. The consolidated financial statements with the Management’s Discussion and Analysis (“MD&A”) are available on our website at www.alvopetro.com and will be available on the SEDAR+ website at www.sedarplus.ca.

As at and Three Months Ended June 30,As at and Six Months Ended June 30,
20232022Change20232022Change (%)
Financial
($000s, except where noted)
Natural gas, oil and condensate sales13,91415,787(12)32,07429,7598
Net income9,8526,6314922,05417,74624
      Per share – basic ($)(1)0.270.20350.600.5215
      Per share – diluted ($)(1)0.260.18440.590.4920
Cash flows from operating activities13,47312,997427,32921,33028
      Per share – basic ($)(1)0.370.38(3)0.750.6319
      Per share – diluted ($)(1)0.360.3530.730.5924
Funds flow from operations (2)11,04712,434(11)26,01923,33811
      Per share – basic ($)(1)0.300.37(19)0.710.693
      Per share – diluted ($)(1)0.290.34(15)0.690.648
Dividends declared5,1092,7288710,2135,44488
Per share(1)0.140.08750.280.1675
Capital expenditures8,5216,3383411,81210,13817
Cash and cash equivalents25,59813,6728725,59813,67287
Net working capital surplus(2)18,08411,6415518,08411,64155
Working capital, net of debt(2) 18,0849,0969918,0849,09699
Weighted average shares outstanding
      Basic (000s)(1)36,69733,973836,62733,9418
      Diluted (000s)(1)37,75536,637337,65736,4263
Operations
Natural gas, NGLs and crude oil sales:
      Natural gas (Mcfpd)11,26913,546(17)13,52013,940(3)
      NGLs – condensate (bopd)9297(5)1119813
      Oil (bopd)5558(38)
      Total (boepd)1,9752,359(16)2,3692,429(2)
Average realized prices(2):
      Natural gas ($/Mcf)12.8611.90812.4010.9413
      NGLs – condensate ($/bbl)83.35121.93(32)83.79114.11(27)
      Oil ($/bbl)63.9394.47(32)68.0083.90(19)
      Total ($/boe)77.4173.54574.8067.6811
Operating netback ($/boe)(2)
      Realized sales price77.4173.54574.8067.6811
      Royalties(1.97)(5.35)(63)(2.18)(4.84)(55)
      Production expenses(5.83)(4.23)38(4.75)(4.00)19
      Operating netback69.6163.96967.8758.8415
Operating netback margin(2)90 %87 %391 %87 %5
Notes:
(1)  Per share amounts are based on weighted average shares outstanding other than dividends per share, which is based on the number of common shares outstanding at each dividend record date. The weighted average number of diluted common shares outstanding in the computation of funds flow from operations and cash flows from operating activities per share is the same as for net income per share.
(2)  See “Non-GAAP and Other Financial Measures” section within this news release.

Q2 2023 Results Webcast

Alvopetro will host a live webcast to discuss our Q2 2023 financial results at 9:00 am Mountain time on Thursday August 10, 2023. Details for joining the event are as follows:

Date: August 10, 2023 Time: 9:00 AM Mountain/11:00 AM EasternLink:  https://us06web.zoom.us/j/83723796296 Dial-in numbers: https://us06web.zoom.us/u/kcmVqG8cd9 Webinar ID: 837 2379 6296

The webcast will include a question and answer period. Online participants will be able to ask questions through the Zoom portal. Dial-in participants can email questions directly to socialmedia@alvopetro.com.

Corporate Presentation

Alvopetro’s updated corporate presentation is available on our website at: http://www.alvopetro.com/corporate-presentation

Social Media

Follow Alvopetro on our social media channels at the following links: 

Twitter – https://twitter.com/AlvopetroEnergy Instagram – https://www.instagram.com/alvopetro/ LinkedIn – https://www.linkedin.com/company/alvopetro-energy-ltd

Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé and Murucututu natural gas fields and our strategic midstream infrastructure.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Abbreviations:

$000s                    =thousands of U.S. dollars 
bbls                        barrels
boepd                    =  barrels of oil equivalent (“boe”) per day
bopd                       =   barrels of oil and/or natural gas liquids (condensate) per day
BRL                         =   Brazilian Real
CAD                          =Canadian dollars
m3                                =cubic metre
Mcf                        thousand cubic feet
Mcfpd                     =   thousand cubic feet per day
MMcf                       =   million cubic feet
MMcfpd                    =  million cubic feet per day
NGLs                        =natural gas liquids
Q1 2023                     three months ended March 31, 2023
Q2 2022                      three months ended June 30, 2022
Q2 2023                      =three months ended June 30, 2023

Non-GAAP and Other Financial Measures

This news release contains references to various non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures as such terms are defined in National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure. Such measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. While these measures may be common in the oil and gas industry, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. The non-GAAP and other financial measures referred to in this report should not be considered an alternative to, or more meaningful than measures prescribed by IFRS and they are not meant to enhance the Company’s reported financial performance or position. These are complementary measures that are used by management in assessing the Company’s financial performance, efficiency and liquidity and they may be used by investors or other users of this document for the same purpose. Below is a description of the non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures used in this news release. For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the “Non-GAAP Measures and Other Financial Measures” section of the Company’s MD&A which may be accessed through the SEDAR+ website at www.sedarplus.ca.

Non-GAAP Financial Measures

Operating netback

Operating netback is calculated as natural gas, oil and condensate revenues less royalties and production expenses. This calculation is provided in the “Operating Netback” section of the Company’s MD&A using our IFRS measures. The Company’s MD&A may be accessed through the SEDAR+ website at www.sedarplus.ca. Operating netback is a common metric used in the oil and gas industry used to demonstrate profitability from operations.

Non-GAAP Financial Ratios

Operating netback per boe

Operating netback is calculated on a per unit basis, which is per barrel of oil equivalent (“boe”). It is a common non-GAAP measure used in the oil and gas industry and management believes this measurement assists in evaluating the operating performance of the Company. It is a measure of the economic quality of the Company’s producing assets and is useful for evaluating variable costs as it provides a reliable measure regardless of fluctuations in production. Alvopetro calculated operating netback per boe as operating netback divided by total sales volumes (barrels of oil equivalent). This calculation is provided in the “Operating Netback” section of the Company’s MD&A using our IFRS measures. The Company’s MD&A may be accessed through the SEDAR+ website at www.sedarplus.ca. Operating netback is a common metric used in the oil and gas industry used to demonstrate profitability from operations on a per unit basis (boe).

Operating netback margin

Operating netback margin is calculated as operating netback per boe divided by the realized sales price per boe. Operating netback margin is a measure of the profitability per boe relative to natural gas, oil and condensate sales revenues per boe and is calculated as follows:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Operating netback – $ per boe69.6163.9667.8758.84
Average realized price – $ per boe       77.4173.5474.8067.68
Operating netback margin90 %87 %91 %87 %

Funds Flow from Operations Per Share

Funds flow from operations per share is a non-GAAP ratio that includes all cash generated from operating activities and is calculated before changes in non-cash working capital, divided by the weighted the weighted average shares outstanding for the respective period. For the periods reported in this news release the cash flows from operating activities per share and funds flow from operations per share is as follows:

Three Months Ended June 30,Six Months Ended June 30,
$ per share2023202220232022
Per basic share:
Cash flows from operating activities0.370.380.750.63
Funds flow from operations0.300.370.710.69
Per diluted share:
Cash flows from operating activities0.360.350.730.59
Funds flow from operations0.290.340.690.64

Capital Management Measures

Funds Flow from Operations 

Funds flow from operations is a non-GAAP capital management measure that includes all cash generated from operating activities and is calculated before changes in non-cash working capital. The most comparable GAAP measure to funds flow from operations is cash flows from operating activities. Management considers funds flow from operations important as it helps evaluate financial performance and demonstrates the Company’s ability to generate sufficient cash to fund future growth opportunities. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash flows from operating activities however management finds that the impact of working capital items on the cash flows reduces the comparability of the metric from period to period. A reconciliation of funds flow from operations to cash flows from operating activities is as follows:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cash flows from operating activities13,47312,99727,32921,330
(Deduct) add back changes in non-cash working capital(2,426)(563)(1,310)2,008
Funds flow from operations11,04712,43426,01923,338

Net Working Capital 

Net working capital is computed as current assets less current liabilities. Net working capital is a measure of liquidity, is used to evaluate financial resources, and is calculated as follows: 

As at June 30,
20232022
Total current assets32,80121,461
Total current liabilities(14,717)(9,820)
Net working capital surplus                                                                                    18,08411,641

Working Capital Net of Debt 

Working capital net of debt is computed as net working capital surplus decreased by the carrying amount of the Credit Facility. Working capital net of debt is used by management to assess the Company’s overall financial position.

As at June 30,
20232022
Net working capital surplus18,08411,641
Credit Facility, balance outstanding                                                                         (2,545)
Working capital, net of debt18,0849,096

Supplementary Financial Measures

Average realized natural gas price – $/Mcf” is comprised of natural gas sales as determined in accordance with IFRS, divided by the Company’s natural gas sales volumes.

Average realized NGL – condensate price – $/bbl” is comprised of condensate sales as determined in accordance with IFRS, divided by the Company’s NGL sales volumes from condensate.

Average realized oil price – $/bbl” is comprised of oil sales as determined in accordance with IFRS, divided by the Company’s oil sales volumes.

Average realized price – $/boe” is comprised of natural gas, condensate and oil sales as determined in accordance with IFRS, divided by the Company’s total natural gas, condensate and oil sales volumes (barrels of oil equivalent).

Dividends per share” is comprised of dividends declared, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.

Royalties per boe” is comprised of royalties, as determined in accordance with IFRS, divided by the total natural gas, condensate and oil sales volumes (barrels of oil equivalent).

Production expenses per boe” is comprised of production expenses, as determined in accordance with IFRS, divided by the total natural gas, condensate and oil sales volumes (barrels of oil equivalent).

BOE Disclosure

The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6 Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.

Forward-Looking Statements and Cautionary Language 

This news release contains forward-looking information within the meaning of applicable securities laws. The use of any of the words “will”, “expect”, “intend” and other similar words or expressions are intended to identify forward-looking information. Forward‐looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the expectations discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events. Accordingly, when relying on forward-looking statements to make decisions, Alvopetro cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. More particularly and without limitation, this news release contains forward-looking statements concerning concerning plans relating to the Company’s operational activities, proposed exploration development activities and the timing for such activities, exploration and development prospects of Alvopetro, capital spending levels, future capital and operating costs, future production and sales volumes, production allocations from the Caburé natural gas field, the expected natural gas price, gas sales and gas deliveries under Alvopetro’s long-term gas sales agreement, the expected timing of testing the BL-06 well and production commencement from the BL-06 well, anticipated duration of drilling operations for the 183-A3 well, anticipated timing for upcoming drilling and testing of other wells, projected financial results, the expected timing and outcomes of certain of Alvopetro’s testing activities, and sources and availability of capital. Forward-looking statements are necessarily based upon assumptions and judgments with respect to the future including, but not limited to, expectations and assumptions concerning the timing of regulatory licenses and approvals, equipment availability, the success of future drilling, completion, testing, recompletion and development activities and the timing of such activities, the performance of producing wells and reservoirs, well development and operating performance, expectations regarding Alvopetro’s working interest and the outcome of any redeterminations, environmental regulation, including regulation relating to hydraulic fracturing and stimulation, the ability to monetize hydrocarbons discovered, the outlook for commodity markets and ability to access capital markets, foreign exchange rates, general economic and business conditions, forecasted demand for oil and natural gas, the impact of global pandemics, weather and access to drilling locations, the availability and cost of labour and services, the regulatory and legal environment and other risks associated with oil and gas operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect.  Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. In addition, the declaration, timing, amount and payment of future dividends remain at the discretion of the Board of Directors. Although we believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, reliance on industry partners, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and foreign exchange rate fluctuations, market uncertainty associated with financial institution instability, and general economic conditions. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Although Alvopetro believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Alvopetro can give no assurance that it will prove to be correct. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on factors that could affect the operations or financial results of Alvopetro are included in our annual information form which may be accessed on Alvopetro’s SEDAR+ profile at www.sedarplus.ca. The forward-looking information contained in this news release is made as of the date hereof and Alvopetro undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

www.alvopetro.comTSX-V: ALV, OTCQX: ALVOF

SOURCE Alvopetro Energy Ltd.

Energy Fuels (UUUU) – Progress one quarter at a time


Tuesday, August 08, 2023

Energy Fuels is a leading U.S.-based uranium mining company, supplying U3O8 to major nuclear utilities. Energy Fuels also produces vanadium from certain of its projects, as market conditions warrant, and is ramping up commercial-scale production of REE carbonate. Its corporate offices are in Lakewood, Colorado, near Denver, and all its assets and employees are in the United States. Energy Fuels holds three of America’s key uranium production centers: the White Mesa Mill in Utah, the Nichols Ranch in-situ recovery (“ISR”) Project in Wyoming, and the Alta Mesa ISR Project in Texas. The White Mesa Mill is the only conventional uranium mill operating in the U.S. today, has a licensed capacity of over 8 million pounds of U3O8 per year, has the ability to produce vanadium when market conditions warrant, as well as REE carbonate from various uranium-bearing ores. The Nichols Ranch ISR Project is on standby and has a licensed capacity of 2 million pounds of U3O8 per year. The Alta Mesa ISR Project is also on standby and has a licensed capacity of 1.5 million pounds of U3O8 per year. In addition to the above production facilities, Energy Fuels also has one of the largest NI 43-101 compliant uranium resource portfolios in the U.S. and several uranium and uranium/vanadium mining projects on standby and in various stages of permitting and development. The primary trading market for Energy Fuels’ common shares is the NYSE American under the trading symbol “UUUU,” and the Company’s common shares are also listed on the Toronto Stock Exchange under the trading symbol “EFR.” Energy Fuels’ website is www.energyfuels.com.

Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Energy Fuels reported 2023-2Q results in line with expectations as rare earth element carbonite sales expand. Uranium sales to a major nuclear utility kicked in and rare earth carbonate sales accelerated. Of note, uranium sales were done at an operating cost of $26.40/lb. below the price in our models. Also notable was an increase in REE sales after several quarters of sales being limited by monzanite supply issues. 

With sales still in the early stages, operating line items were fairly predictable. Of course, the Energy Fuel story has never been about near-term results. Instead, the stock moves on corporate developments. And, while there have been some setbacks (REE supply issues, share dilution, foreign uranium supply competition), the company has made steady progress in recent quarters towards its goals. 


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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Different Impacts of Gasoline Price Volatility on Industries

Industries are Impacted in Multiple Ways by Rising Gas Prices

High gas prices have again become a consideration when planning a roadtrip. The rollercoaster ride of very highs, then lows, and back again to highs, since the beginning of the decade has been numbing.  The uncertainty of changing costs from one season to another has made it difficult for both businesses to plan, and for any individual driver, it all impacts decisions well beyond your weekend getaway.

Over the years, the price at the pump was driven up from factors such as geopolitical tensions, storms including hurricanes, a flood in Mississippi, and normal heightened demand during the summer driving season. On an individual level, increased gasoline costs translate to less disposable income for other necessities and luxuries. But, from an investor standpoint, the ramifications of soaring gas prices reach far beyond the service station, it deeply affect the broader economy and industry segments.

Conversely, plummeting gas prices mean lighter expenditures for households and businesses alike, relieving financial strains on transport-centric sectors such as airlines and trucking. However, these price drops also cast a shadow on some industries, especially the oil sector.

Below we highlight the direct and indirect adverse repercussions of high gas prices.

The Economic Ripples of Gas Prices

Employment

Job growth serves as a pivotal indicator of an economy’s recovery, and economists warn that surging gas prices could undermine hiring practices. Gas prices might prompt businesses to rethink their hiring plans, leading to a temporary hold as uncertainty about the economy’s well-being unfolds. Decreased discretionary spending and sales can influence a company’s hiring capacity.

Retailers

An indirect effect of soaring gas prices is a reduction in consumer discretionary spending due to a larger share of income being budgeted toward gasoline. Higher prices also induce consumers to drive less, even to places like malls and shopping centers. This is substantiated by both academic and industry studies, showing a direct correlation between driving miles and gas prices.

While shoppers might cut back on driving, they tend to increase online shopping when gas prices climb. Searches for online shopping surge in tandem with escalating gas prices.

Nonetheless, all retailers face added pressure to pass on the increased expenses they incur, particularly in shipping costs to consumers. Anything requiring transportation, from lumber to electronics, could incur higher costs due to surging gas prices. This holds true for products manufactured overseas or components sourced internationally. Moreover, products containing petroleum-derived materials or plastics also experience price hikes.

Auto Industry

Historically, the automobile industry responds to surging gas prices by producing smaller, more fuel-efficient vehicles, such as hybrids and all-electric cars capable of traveling long distances on a single charge. Consumers have shown robust support for this shift, evident from the upward trajectory of hybrid and all-electric vehicle sales in the United States since 2010, while sales of gas-guzzling trucks and SUVs lag.

Airlines

Fuel expenses are the single largest operational costs for airlines, constituting a substantial proportion of their overhead. Hence, fluctuations in oil prices significantly impact their bottom line. With rising gas prices, airlines are compelled to hike ticket prices, potentially discouraging non-essential air travel and burdening consumers financially.

To hedge against volatile oil costs, airlines often engage in fuel hedging, buying or selling expected future oil prices through various investment products. This strategy safeguards airlines from surging prices and sometimes even capitalizes on them.

New Jobs and Freelancers

Prospective job candidates must factor in commuting costs when evaluating potential positions. Some workers have had to decline job offers due to the exorbitant costs of commuting, consuming a significant chunk of their salary. Freelancers, most directly Uber and Lyft drivers,  also feel the impact of higher gas prices, limiting their geographical scope of business as commuting expenses render some gigs unprofitable.

Take Away

Rising gas prices usually parallel a growing pessimism about the economy. While economists and analysts may debate the precise degree to which gas prices affect the economy, there undeniably exists a connection between consumer confidence, spending behaviors, and gas prices. This mood and actual level of sales have an impact on stock market activity, depending on how long fuel prices are expected to stay high (or low).

Paul Hoffman

Managing Editor, Channelchek

Will Uranium Prices Continue Rising?

Image Credit: IAEA Imagebank

The Back Story on Why Uranium Investors Saw a Spike Up in Values

Nuclear energy now provides 10% of the world’s electricity. If a major supplier of uranium becomes unavailable, it could be very disruptive. For countries such as France that derives 68% of their electricity from nuclear power plants, it can become more than disruptive. This is why the coup in Niger, which provides 15% of of the uranium used in French power plants is generating so much concern.

Background

Over the past few days, a successful military coup in Niger has sparked concerns in the EU and especially in France regarding the potential ramifications on uranium imports crucial for powering the country’s nuclear plants. As a major supplier, Niger currently fulfills 15% of France’s uranium needs and holds a significant 20% share of the EU’s total uranium imports. French authorities, along with energy officials have been quick to address public concerns. While the short-term implications are minimal, long-term uranium requirements could become a challenge for France and other countries within the EU. The block of nations has already been engaged with efforts to reduce dependency on Russia, another prominent uranium supplier for European nuclear facilities.

France, is unusually reliant on nuclear power. Orano, the French state-controlled nuclear fuel producer, has maintained its operations in Niger despite the coup, with the company asserting its primary focus is on ensuring the safety of its employees in the region.

Existing uranium stocks are expected to sustain France’s uranium requirements for approximately two years. Therefore, the French government is confident that the current tensions in Niger will not immediately impact their uranium needs.

Long-Term Concerns for Europe’s Uranium Needs

While immediate disruptions seem improbable, Europe could face challenges in its uranium supply chain in the long run, particularly as the continent strives to diminish its reliance on Russian uranium. Niger, as the top uranium supplier to the EU in 2021, alongside Kazakhstan and Russia, play a critical role in sustaining Europe’s nuclear power sector.

Source: Koyfin

Uranium Investment Reactions

While it may seem cold to think of one’s investment portfolio when trouble befalls others, it is the flow of money in the capital markets that often helps allow for corrective actions that lessen the problem. The plot lines on the chart above represent Cameco (CCJ) a Canadian company that is one of the largest providers of uranium fuel. Energy Fuels (UUUU) which is the leading U.S. producer of uranium,  Sprott Uranium Miners (URNM) invests in an index designed to track the performance of companies that devote at least 50% of their assets to the uranium mining industry. The fourth plotline is the S&P 500.

The gap up after the news is unmistakable and suggests investors immediately expect reduced supply from the coup to cause current production to become more valuable as it meets unchanged demand.  

Take Away

The military coup in Niger has raised concerns that the supply of uranium to France and the EU may be disrupted. Officials have assured that short-term there is little need for concern, however there are still uncertainties in Europe’s as it was already reducing dependency on Russian uranium production. The evolving situation in Niger may influence the EU’s stance on sanctions against Russian uranium, and its long-term effects on the nuclear energy sector are still uncertain.

Investors may wish to look closer at energy stocks, including uranium producers as they determine whether or not the blip in stock price is the beginning of a trend or a reaction that may, in part, or fully unwind.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://world-nuclear.org/information-library/current-and-future-generation/nuclear-power-in-the-world-today.aspx#:~:text=Nuclear%20energy%20now%20provides%20about,of%20the%20total%20in%202020).

https://www.eia.gov/todayinenergy/detail.php?id=55259#:~:text=France%20has%20one%20of%20the,generation%20share%20in%20the%20world.

https://www.politico.eu/article/niger-coup-spark-concerns-france-uranium-dependency/

https://www.reuters.com/world/africa/pro-coup-protests-niger-west-african-leaders-meet-2023-07-30/

Release – Largo Publishes 2022 Sustainability Report

Research News and Market Data on LGO

TORONTO–(BUSINESS WIRE)– Largo Inc. (“Largo” or the “Company”) (TSX: LGO) (NASDAQ: LGO) is pleased to announce it has published its Sustainability Report for the year ended December 31, 2022, outlining its activities across its mining operation in Brazil and clean energy business in the United States.

Largo Publishes 2022 Sustainability Report (Photo: Business Wire)

J. Alberto Arias, Chairman of Largo commented: “We are immensely proud of Largo’s accomplishments in 2022, which are guided by sustainable development best practices. In Brazil, this progress has specifically benefited local communities near our operational site and our clean energy business is expected to bring global positive impacts to the economy, people and the environment as it continues development.”

He continued: “We issued our first climate change report in 2022, aligned with the Taskforce on Climate-related Financial Disclosures (TCFD). We have also enshrined our respect for human rights and diversity in a new People and Human Rights Policy and Board and Executive Diversity Policy, and will continue to formalize our commitments on critical sustainable topics such as biodiversity and procurement as we continue our ongoing sustainability efforts.”

He concluded: “As we move forward in the year ahead, focus on transparency and accountability to the highest standards of safety and sustainability remain paramount. We look forward to continuing the development of our sustainability programs, creating local, regional and global sustainable development.”

Largo’s 2022 Sustainability Report has been compiled in accordance with the Global Reporting Initiative (“GRI”) Standards, as well as Sustainability Accounting Standards Board (“SASB”) Metals & Mining Industry Standard requirements.

Download Largo’s 2022 Sustainability Report:
www.largoinc.com/sustainability/overview

Download Largo’s 2022 Taskforce on Climate-related Financial Disclosures Report:
www.largoinc.com/sustainability/reports-data

About Largo

Largo has a long and successful history as one of the world’s preferred vanadium companies through the supply of its VPURETM and VPURE+TM products, which are sourced from one of the world’s highest-grade vanadium deposits at the Company’s Maracás Menchen Mine in Brazil. Aiming to enhance value creation at Largo, the Company is in the process of implementing an ilmenite concentrate plant using feedstock sourced from its existing operations in addition to advancing its U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s VCHARGE vanadium batteries contain a variety of innovations, enabling an efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its 25+ year lifespan. Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based on two pillars: 1.) leading vanadium supplier with an outlined growth plan and 2.) U.S.-based energy storage business to support a low carbon future.

Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol “LGO”. For more information on the Company, please visit www.largoinc.com.

Cautionary Statement on Forward-looking Information:

This press release contains forward-looking information under applicable securities legislation (“forward-looking information”). Forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. All information contained in this news release, other than statements of current and historical fact, is forward looking information.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on www.sedar.com and www.sec.gov from time to time. Forward-looking information are based on the opinions and estimates of management as of the date such statements are made. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on Forward-looking information. Largo does not undertake to update any forward-looking information, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo’s annual and interim MD&As which also apply.

Trademarks are owned by Largo Inc.

For further information, please contact:

Investor Relations
Alex Guthrie
Senior Manager, External Relations
+1.416.861.9778
aguthrie@largoinc.com

Source: Largo Inc.

Multimedia Files:

Release – Largo to Release Second Quarter 2023 Financial Results on August 9, 2023

Research News and Market Data on LGO

TORONTO–(BUSINESS WIRE)– Largo Inc. (“Largo” or the “Company”) (TSX: LGO) (NASDAQ: LGO) will release its second quarter 2023 financial results on Wednesday, August 9, 2023 after the close of market trading. Additionally, the Company will host a webcast and conference call to discuss its second quarter 2023 results and other updates on Thursday, August 10 at 1:00 p.m. ET.

To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3rk2Eqz to receive an instant automated call back.

You may also dial direct to be entered to the call by an operator using the dial-in details provided below.

Conference Call Details
Date:Thursday, August 10, 2023
Time:1:00 p.m. ET
Dial-in Number:Local: +1 (416) 764-8650
North American Toll Free: +1 (888) 664-6383
Conference ID:72903885
Webcast Registration Link:https://app.webinar.net/YkB4eW6Ey1v
RapidConnect Linkhttps://emportal.ink/3rk2Eqz
Replay Number:Local / International: + 1 (416) 764-8677
North American Toll Free: +1 (888) 390-0541
Replay Passcode: 903885#
Website:To view press releases or any additional financial information, please visit the Investor Resources section of the Company’s website at: https://www.largoinc.com/investors/Overview

About Largo

Largo has a long and successful history as one of the world’s preferred vanadium companies through the supply of its VPURETM and VPURE+TM products, which are sourced from one of the world’s highest-grade vanadium deposits at the Company’s Maracás 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 U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s VCHARGE vanadium batteries contain a variety of innovations, enabling an efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its 25+ year lifespan. Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based on two pillars: 1.) leading vanadium supplier with an outlined growth plan and 2.) U.S.-based energy storage business to support a low carbon future.

Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol “LGO”. For more information on the Company, please visit www.largoinc.com.

For further information:

Investor Relations
Alex Guthrie
Senior Manager, External Relations
+1.416.861.9778
aguthrie@largoinc.com

Source: Largo Inc.

The Reasons for Warren Buffett’s Increased Oil and Gas Appetite

Berkshire Hathaway Finds ESG Concerns Are a Plus for Oil and Gas Investments

Warren Buffett’s Berkshire Hathaway is capitalizing on the current commodity price dip to expand its oil and gas sector stake. This year, Berkshire committed $3.3 billion to increase its ownership in a liquefied natural gas export terminal in Maryland. Additionally, it raised its stake in Occidental Petroleum Corp. by 15% and acquired more shares in five Japanese commodity traders. The company is also lobbying for increased financial support for natural gas power plants.

Warren Buffett, the Oracle of Omaha, demonstrated how he earned the “oracle” title during the most uncertain days of the pandemic, by investing heavily in oil and gas. The sector has had impressive returns as it posted record earnings in 2022. The 92-year-old Buffett is not booking the massive gains by selling; instead Buffett is selectively adding to positions.

Are Buffett’s investment moves classic bargain-hunting, with the energy sector possibly undervalued tied to environmental, social, and governance concerns, as well as an anticipation of declining demand for fossil fuels in the future? Based on standard metrics, the energy sector is undervalued. According to data from Bloomberg, energy now trades at the lowest price-to-earnings valuation among all sectors in the S&P 500 Index, at the same time it generates the most cash flow per share. And, as a help to the industry,  Berkshire’s energy division is actively lobbying for a bill that would allocate at least $10 billion to natural gas-fired power plants in Texas to support the state’s grid.

His approach in the sector is obviously deliberate and narrowly targeted. Despite Buffett’s interest in energy, his fossil fuel investments aren’t without nuances. For example, Berkshire remains the third-largest shareholder in Chevron Corp., even after it reduced its stake by about 21% in the first quarter. Each investment in companies like Occidental and Cove Point LNG has unique aspects that position them as valuable assets in the global energy landscape, regardless of the path that any U.S. or global energy transition takes.

Buffett believes that shale, a substantial part of U.S. oil production, is different and even preferred over conventional sources of oil in the Middle East and Russia. One difference is taking shale from the ground and into production can be done more quickly and have a shorter production lifespan. This provides flexibility for operators to adapt to changes in oil demand and prices. At Berkshire’s annual meeting in May, Buffett emphasized making rational decisions about energy production and criticized both extremes in the climate debate.

One of Buffett’s nuanced and targeted energy investments is Cove Point LNG. It not only exports liquefied gas but also has the rare capability to import gas, making it more versatile than other facilities along the Gulf Coast. With rising global LNG demand driven by Europe’s shift away from Russian gas and Asia’s use of gas for power generation, Cove Point’s long-term contracts with buyers, including Tokyo Gas Co. and Sumitomo Corp., make it appealing. Berkshire is Sumitomo’s second-largest shareholder after the Japanese government’s pension fund.

Outside of its stock holdings, Berkshire Hathaway Energy, under the leadership of Buffett’s expected successor Greg Abel, has been performing well. Earnings for the division hit a record high of $3.9 billion in 2022, nearly doubling over five years.

Take Away

The world’s appetite for energy, whether from fossil fuels or renewables, seems insatiable; even amid a global penchant to reduce fossil fuel use, oil demand is expected to continue rising throughout the decade. While environmental concerns have caused some investors to shy away from the energy sector, Buffett’s investments demonstrate his belief that ESG considerations are keeping oil and gas stocks attractively priced. Market participants prioritizing ESG, therefore, presents an opportunity for Berkshire to profit further from its strategic investments in the oil and gas sector.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.barrons.com/livecoverage/berkshire-hathaway-warren-buffett-annual-shareholder-meeting

https://www.bloomberg.com/news/articles/2023-07-25/buffett-lifts-fossil-fuel-bets-as-global-esg-push-mints-bargains

Release – Largo Reports Improvements to Production in Q2 2023 and Begins Commissioning of its Ilmenite Concentration Plant; Francesco D’Alessio Appointed as President of Largo Clean Energy

Research News and Market Data on LGO

July 19, 2023

Q2 2023 and Other Highlights

  • V2O5 production of 2,639 tonnes (5.8 million lbs1) in Q2 2023 vs. 3,084 tonnes produced in Q2 2022 and 25% above production in Q1 2023
  • V2O5 production of 676 tonnes in April, 945 tonnes in May and 1,018 tonnes in June
  • The Company achieved normalized production levels in June after completing the following actions in Q2 2023: the completion of its infill drilling campaign for 2023 resulting in a further refinement of the Company’s short-term mining model, the completion of upgrades to its crushing process as well as an improvement in its mining performance over levels seen in Q1 2023
  • The Company completed all planned upgrades to its crushing process in Q2 2023, including the installation of a new dry magnetic separator and updates to its crushing circuit, which is expected to reduce operational maintenance costs and provide more flexibility in the blending of different ores to stabilize V2O5 production going forward
  • Global V2O5 recovery rate3 of 81.0% in Q2 2023 vs. 81.8% in Q2 2022
  • The Company completed construction of its ilmenite concentration plant in June and subsequently began commissioning of the facility shortly thereafter; The Company expects to complete the commissioning phase in Q3 2023 and start a gradual ramp-up of ilmenite production in Q4 2023
  • V2O5 equivalent sales of 2,557 tonnes in Q2 2023 vs. 3,291 tonnes sold in Q2 2022 due to lower available inventory
  • During Q2 2023, the average benchmark price per lb of V2O5 in Europe was $8.46, a 24% decrease from the average of $11.08 seen in Q2 2022 following softer spot market demand during the quarter, primarily due to adverse conditions in the Chinese and European steel sectors
  • Francesco D’Alessio was appointed as President of Largo Clean Energy (“LCE”)
  • Cold commissioning of LCE’s Enel Green Power España (“EGPE”) vanadium redox flow battery (“VRFB”) was completed in Q2 2023; Hot commissioning and provisional acceptance by EGPE is expected in Q3 2023
  • 2023 production, sales, cost and capital expenditures guidance remain unchanged

TORONTO–(BUSINESS WIRE)– Largo Inc. (“Largo” or the “Company“) (TSX: LGO) (NASDAQ: LGO) today announces quarterly production of 2,639 tonnes (5.8 million lbs1) and sales of 2,557 tonnes of vanadium pentoxide (“V2O5”) equivalent, respectively, in Q2 2023.

Daniel Tellechea, Interim CEO and Director of Largo, stated: “We are pleased to report that key operational actions taken in Q2 2023 have resulted in improved production rates exiting the quarter, particularly in June with over 1,000 tonnes of V2O5 produced. He continued: “In Q2 2023, construction of the Company’s ilmenite concentration plant was completed, followed by the start of commissioning, marking a significant milestone for the Company. As we look forward to completing commissioning and ramp-up processes in the following quarters, we anticipate having sufficient stocks of produced ilmenite concentrate for sale by the start of 2024.”

Francesco D‘Alessio, President of LCE commented: “With this new role, I am fully committed to leading LCE with the immediate objective of evaluating all strategic options for this business in order to fully maximize its unique value proposition in the energy storage sector. This includes but is not limited to the potential strengthening and formalization of existing industry relationships, developing additional collaborative partnerships, evaluating alternative deployment strategies, and performing a comprehensive review of cost reduction measures. Going forward, I anticipate providing updates as this process continues to evolve.”

Maracás Menchen Mine Operational and Sales Results

Q2 2023Q1 2023Q2 2022
    
Total Ore Mined (tonnes)489,892341,967378,273
Ore Grade Mined – Effective Grade (%) 20.860.811.18
Total Mined – Dry Basis (tonnes)3,671,8423,523,6562,503,696
    
Concentrate Produced (tonnes)99,08378,695124,317
Grade of Concentrate (%)3.342.993.28
Global Recovery (%) 381.083.081.8
    
V2O5 produced (Flake + Powder) (tonnes)2,6392,1113,084
High purity V2O5 equivalent produced (%)35.847.818.7
V2O5 produced (equivalent pounds) 15,817,9924,653,9536,799,048
Total V2O5 equivalent sold (tonnes)2,5572,8493,291
Produced V2O5 equivalent sold (tonnes)2,2682,6042,783
Purchased V2O5 equivalent sold (tonnes)289245508
      

Q2 2023 Additional Highlights

  • Normalized Production Levels in June: V2O5 production from the Maracás Menchen Mine was 676 tonnes in April, 945 tonnes in May and 1,018 tonnes in June for a total of 2,639 tonnes produced in Q2 2023. In addition to certain mining performance and crushing process improvements made during the quarter, the Company also completed its 2023 infill drilling campaign in Q2 2023, resulting in a further refinement of the Company’s short-term mining model. In Q2 2023, global recoveries3 averaged 81.0%, largely in line with 81.8% averaged in Q2 2022. The Company mined 489,892 tonnes of ore with an effective V2O5 grade2 of 0.86% in Q2 2023 compared to 378,273 tonnes with an effective V2O5 grade2 of 1.18% in Q2 2022 and 341,967 tonnes with an effective V2O5 grade2 of 0.81% in Q1 2023, demonstrating a significant improvement in total ore mined over the prior quarter and prior comparative quarter. The increase in total ore mined as well as increased crushed and milled ore is a direct result of the Company’s strategy to successfully recover delays caused by the previously announced mine contractor transition in September 2022 and heavy rains experienced in December 2022.

  • Mine Site Cost Reduction Measures: The Company continues to focus on identifying and implementing various cost reduction measures at its Maracás Menchen Mine during the current period of sustained inflationary pressures. In addition to upgrading its crushing process to reduce operational maintenance costs, the Company has identified several other areas for cost reduction and is in the process of implementing the following initiatives: a reduction in sodium carbonate and other raw materials expenditures, a reduction of mining costs, with a primary focus on reducing rehandling activities and implementing an optimization of haulage distance and a reduction of equipment rental expenditures. The Company expects to begin realizing the benefits of these cost reduction measures in Q3 2023.

  • 2023 and 2024 Infill Drilling Campaigns: The Company has completed its 2023 infill drilling campaign and has completed approximately 90% of its 2024 infill drilling campaign. Data generated from infill drilling is expected to create greater accuracy and reliability of the short-and mid-term mining plan for the Maracás Menchen Mine. Going forward, the Company plans to conduct infill drilling on a bi-annual basis to create greater certainty and efficiency in its planning process. Largo expects that a consistent infill drilling campaign should assist the Company in improving the reliability and accuracy of its production guidance on a go forward basis.

  • Q2 2023 Sales In Line with Quarterly Target – Focus on High Purity Vanadium Demand: In Q2 2023, V2O5 equivalent sales of 2,557 tonnes (which includes 289 tonnes of purchase material sold) were in line with expectations for the quarter but represented a 22% decrease in tonnes sold over Q2 2022. In Q2 2023, the Company continued to experience strong aerospace demand for its products and focused on selling its high purity vanadium units to this market. The Company produced approximately 36% of its quarterly production as high purity in Q2 2023.

  • Cold Commissioning of Enel Green Power España VRFB Completed: During Q2 2023, LCE finalized the pumping of electrolyte for EGPE’s VCHARGE VRFB deployment and completed cold commissioning of the system in June. The battery system was also successfully interconnected with the grid and the system inverter was successfully utilized to form the chemistry in Q2 2023. The battery is currently performing charge-discharge cycles as part of the ongoing hot commissioning phase, which is anticipated to be completed in Q3 2023, along with provisional acceptance of the system by EGPE.

  • Appointment of Francesco D’Alessio as President of LCE: Mr. D’Alessio has over 15 years of experience in metals sales and trading, including overseeing sales and shipment of vanadium, as well as more recent experience in clean energy storage sales. Over the last three years, he has been actively involved in the overall sales strategy at Largo, contributing to the Company’s ongoing initiatives in the energy storage sector. Mr. D’Alessio began his tenure at Largo in 2019 as Head of Sales, Americas, and was subsequently promoted to the position of Commercial Director in 2022.

About Largo

Largo has a long and successful history as one of the world’s preferred vanadium companies through the supply of its VPURETM and VPURE+TM products, which are sourced from one of the world’s highest-grade vanadium deposits at the Company’s Maracás Menchen Mine in Brazil. Aiming to enhance value creation at Largo, the Company is in the process of implementing a ilmenite concentrate plant using feedstock sourced from its existing operations in addition to advancing its U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s VCHARGE vanadium batteries contain a variety of innovations, enabling an efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its 25+ year lifespan. Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based on two pillars: 1.) leading vanadium supplier with an outlined growth plan and 2.) U.S.-based energy storage business to support a low carbon future.

Largo’s common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol “LGO”. For more information on the Company, please visit www.largoinc.com.

Cautionary Statement Regarding Forward-looking Information:

This press release contains “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and United States securities legislation. Forward‐looking information in this press release includes, but is not limited to, statements with respect to the timing and amount of estimated future production and sales; the future price of commodities, ; costs of future activities and operations, including, without limitation, the effect of inflation and exchange rates; the timing and success of the commissioning and ramp up of the ilmenite plant,; the ability to sell ilmenite on a profitable basis, the successful vertical integration of the Company; the effect of unforeseen equipment maintenance or repairs on production; the ability to sufficiently reduce the cost of production through cost reduction measures;; the extent to which infill drilling data will create greater accuracy and reliability in the short-term mining plan and production guidance, the extent of capital and operating expenditures; the impact of globalprice increases on the Company’s global supply chain and future sales of vanadium products. Forward‐looking information in this press release also includes, but is not limited to, statements with respect to our ability to build, finance and operate a VRFB business, our ability to protect and develop our technology, our ability to maintain our IP, the competitiveness of our product in an evolving market, our ability to market, sell and deliver our VCHARGE batteries on specification and at a competitive price, our ability to secure the required production resources to build and deploy our VCHARGE batteries, our ability to attract partners, collaborators and/or investors to build the VRFB business on terms attractive to the Company, and the adoption of VRFB technology generally in the market. Forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. All information contained in this news release, other than statements of current and historical fact, is forward looking information. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Largo or Largo Clean Energy to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on www.sedar.com and available on www.sec.gov from time to time. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo’s annual and interim MD&As which also apply.

Trademarks are owned by Largo Inc.

1 Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
2 Effective grade represents the percentage of magnetic material mined multiplied by the percentage of V2O5 in the magnetic concentrate.
3 Global recovery is the product of crushing recovery, milling recovery, kiln recovery, leaching recovery and chemical plant recovery.

For further information:
Investor Relations
Alex Guthrie
Senior Manager, External Relations
+1.416.861.9778
aguthrie@largoinc.com

Source: Largo Inc.

Largo Inc. (LGO) – Finally some good news from Largo


Thursday, July 20, 2023

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 Maracás Menchen Mine in Brazil. Aiming to enhance value creation at Largo, the Company is in the process of implementing a titanium dioxide pigment plant using feedstock sourced from its existing operations in addition to advancing its U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s VCHARGE vanadium batteries contain a variety of innovations, enabling an efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its 25+ year lifespan. Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based on two pillars: 1.) leading vanadium supplier with an outlined growth plan and 2.) U.S.-based energy storage business support a low carbon future.

Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Largo reported 2023-2Q V2O5 production of 2,639 tonnes, ahead of guidance. At the end of 2023-1Q, management gave production guidance for the second quarter of 2,200-2,400 tonnes. Improved production comes after low production in the December quarter due to wet conditions and in the first quarter due to blending issues requiring infill drilling. Improved production comes after completing drilling and upgrading the crushing process and gives credence to claims that decreased production was due to temporary events.

Not only is production up, sales are up. Largo reports equivalent V2O5 sales of 2,557 tonnes in 2023-2Q ahead of guidance of 1,900-2,300 tonnes. Sales are well above the amount assumed in our models which was the 2,100 tonne midpoint of guidance. Unfortunately, the average benchmark price per lb. of V2O5 in Europe was $8.46, below the price received last year and the $10.00 price assumed in our models. Annual production and sales remain unchanged at 9,000-10,000 tonnes and 8.700-10,700 tonnes, respectively. We now have increased confidence the Largo will meet its annual projections.


Get the Full Report

Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 


Thursday, July 20, 2023

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 Maracás Menchen Mine in Brazil. Aiming to enhance value creation at Largo, the Company is in the process of implementing a titanium dioxide pigment plant using feedstock sourced from its existing operations in addition to advancing its U.S.-based clean energy division with its VCHARGE vanadium batteries. Largo’s VCHARGE vanadium batteries contain a variety of innovations, enabling an efficient, safe and ESG-aligned long duration solution that is fully recyclable at the end of its 25+ year lifespan. Producing some of the world’s highest quality vanadium, Largo’s strategic business plan is based on two pillars: 1.) leading vanadium supplier with an outlined growth plan and 2.) U.S.-based energy storage business support a low carbon future.

Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Largo reported 2023-2Q V2O5 production of 2,639 tonnes, ahead of guidance. At the end of 2023-1Q, management gave production guidance for the second quarter of 2,200-2,400 tonnes. Improved production comes after low production in the December quarter due to wet conditions and in the first quarter due to blending issues requiring infill drilling. Improved production comes after completing drilling and upgrading the crushing process and gives credence to claims that decreased production was due to temporary events.

Not only is production up, sales are up. Largo reports equivalent V2O5 sales of 2,557 tonnes in 2023-2Q ahead of guidance of 1,900-2,300 tonnes. Sales are well above the amount assumed in our models which was the 2,100 tonne midpoint of guidance. Unfortunately, the average benchmark price per lb. of V2O5 in Europe was $8.46, below the price received last year and the $10.00 price assumed in our models. Annual production and sales remain unchanged at 9,000-10,000 tonnes and 8.700-10,700 tonnes, respectively. We now have increased confidence the Largo will meet its annual projections.


Get the Full Report

Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Industry Groups that Could Prosper in a Recession

Why Diversify Your Portfolio Into Smaller Government Contractors

Will there be a recession, or will the Fed orchestrate a rare soft landing? Coming off a down year last year, with the stock market now up mid-year by 7%, which is the average expected return for a full year of the broader indexes, many investors find themselves straddling a fence. On one side of the fence is the fear of missing out (FOMO), and on the other is a money market rate that is higher than it has been in decades. In a weakening economy, investors don’t have to exit the stock market completely to find stocks that are not expected to be negatively impacted. Until there is more clarity, perhaps it is worth taking a portion of your holdings on a side trip, to look at government contractors.

When company earnings are dependent on the consumer, its stock price may be tied to the pace of the economy – it’s likely to at least be correlated to activity within its industry.  While many investment options are available, one often overlooked but potentially rewarding segment is companies that generate revenue through government contracts, not consumer sales or business-to-business. Let’s explore the benefits of investing in such companies, particularly smaller ones where a new contract is most impactful to the bottom line. These company’s still have above average growth potential but can be quite resilient during economic downturns.

Stable Revenue Streams

Companies that secure government contracts often enjoy stable and predictable revenue streams, they also are billing an entity that can tax and is not reliant on stable earnings itself. Government contracts typically involve long-term agreements that provide a consistent flow of income for the duration of the contract. This stability can be particularly beneficial for investors seeking reliable returns on their investments. Aerospace companies, for instance, often receive substantial contracts for the production and maintenance of military aircraft, providing a steady stream of income.

Reduced Vulnerability to Recessions

One of the key advantages of investing in companies with government contracts is their potential indifference to economic downturns. During recessions or periods of economic uncertainty, government spending has even been known to increase as a means to stimulate a weak economy. This increased spending often benefits companies with government contracts, as governments prioritize projects related to defense, infrastructure development, and public services. This makes aerospace and dredging companies, which are heavily involved in such projects, relatively impervious to recessions.

Long-Term Growth Opportunities

Government contracts often involve large-scale projects that span several years or even decades. This long-term nature provides companies with ample opportunities for growth and expansion. For example, aerospace companies may secure contracts to develop advanced military aircraft, including drones, or provide satellite-based communication systems. Similarly, dredging companies might be contracted for extensive port development projects. These opportunities allow companies to invest in research, development, and innovation, positioning them for sustained growth and profitability.

Competitive Advantage of Being Established

Government contracts typically involve rigorous bidding processes and stringent eligibility criteria. Companies that successfully secure these contracts gain a competitive advantage over their peers. Once established, they often become preferred suppliers for subsequent projects, further solidifying their market position. This advantage can translate into increased market share, higher profitability, and enhanced investor confidence, making these companies attractive for long-term investments.

Great Lakes Dredge & Dock Corporation (GLDD) would seem to fit the above criteria. It is the largest provider of dredging services in the United States, and is engaged in expanding its core business into the rapidly developing offshore wind energy industry. Great Lakes also has a history of securing significant international projects. GLDD has a 132-year history, has a market-cap of $542 million, and is up 37% year-to-date.

The most recent research note from Noble Capital Markets on GLDD is available here.

Kratos Defense & Security Solutions, Inc. (KTOS),  a military contractor that has admirable specialties compared to the large names that typically come to mind. Kratos is changing the way transformative breakthrough technology for the industry is rapidly brought to market through proven approaches, including proactive research and streamlined development processes. KTOS treats affordability as a technology that needs to be considered. It specializes in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. KTOS has a $1.72 billion market-cap and is up 31% year-to-date.

The most recent research note from Noble Capital Markets on KTOS is available here.

Year-to Date Perfromance

Source: Koyfin

Technological Advancements and Spin-Off Opportunities

Working on government contracts often requires companies to push the boundaries of technology and innovation. Aerospace companies, for example, are at the forefront of developing advanced defense systems, satellite technologies, and commercial aircraft. Similarly, dredging companies and those involved in wind energy may invest in state-of-the-art equipment and techniques to execute complex infrastructure projects. These advancements can lead to spin-off opportunities in commercial markets, expanding the company’s revenue streams beyond government contracts.

Take Away

Investing in companies that recieve revenue primarily through government contracts, particularly those that are small cap companies, may provide a recession-fearful investor with some comfort that the stock(s) they are investing in are less likely to suffer from consumers tightening their wallets, yet they have potential to grow.

As with all investing and forecasting the future, if it was easy, everyone would already be doing it. But, the two examples listed above may be a good start to help inspire discovering stocks that are situated differently than traditional consumer or business-to-business companies.  

Paul Hoffman

Managing Editor, Channelchek

Release – Alvopetro Announces June 2023 Sales Volumes

Research News and Market Data on ALVOF

Jul 06, 2023

CALGARY, AB, July 6, 2023 /CNW/ – Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) announces June 2023 average sales volumes of 2,068 boepd, including natural gas sales of 11.8 MMcfpd, associated natural gas liquids sales from condensate of 99 bopd, and oil sales of 6 bopd, based on field estimates. Overall, our sales volumes averaged 1,975 boepd in the second quarter of 2023.

Corporate Presentation

Alvopetro’s updated corporate presentation is available on our website at:http://www.alvopetro.com/corporate-presentation

Social Media

Follow Alvopetro on our social media channels at the following links:

Twitter – https://twitter.com/AlvopetroEnergyInstagram – https://www.instagram.com/alvopetro/LinkedIn – https://www.linkedin.com/company/alvopetro-energy-ltdYouTube – https://www.youtube.com/channel/UCgDn_igrQgdlj-maR6fWB0w

Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and our strategic midstream infrastructure.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

All amounts contained in this new release are in United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.

Abbreviations:
bbls=barrels
boepd=barrels of oil equivalent (“boe”) per day
bopd=barrels of oil and/or natural gas liquids (condensate) per day
MMcf=million cubic feet
MMcfpd=million cubic feet per day

BOE Disclosure. The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.

www.alvopetro.comTSX-V: ALV, OTCQX: ALVOF

SOURCE Alvopetro Energy Ltd.