Largo Positioning to be a Key Player in the Global Energy Storage Market

Largo Incorporated:

1. Largo is the world's largest primary vanadium producer.
2. They operate a high-quality vanadium mine in Brazil and have recently acquired a battery business in the U.S. in late 2020.
3. The creation of Largo Physical Vanadium Company is expected to impact both their battery business competitiveness and vanadium supply fundamentals.

Transition to Energy Storage:

1. Largo is transitioning from primarily a vanadium miner to an energy storage company, emphasizing long-duration energy storage using vanadium redox flow batteries (VRFB).
2. VRFBs are designed for longer-term energy storage, making them ideal for bridging gaps in renewable energy production, like storing solar energy generated during the day for use at night.

Largo Physical Vanadium Corp (LPV):

1. LPV, functioning as an ETF, is designed to allow investors to invest in vanadium as a strategic metal for the new energy transition economy.
2. The creation of LPV aims to stabilize the erratic vanadium market, making it more predictable for battery manufacturers.

Mining Operations and Expansion:

1. Largo has extended the life of their Maracas mine in Brazil by 20 years and has plans to produce titanium as an additional revenue stream.
2. With the introduction of titanium production, the cost of vanadium production will be reduced, making Largo even more competitive in the market.‍

Financial Outlook:

1. Largo expects gross revenue of $1.4 billion generated as free cash flow by 2030 from their mining operations.
2. They aim to be profitable in both their mining and battery business segments, with a net present value for the mining business alone estimated at two billion dollars.

Largo - The Future of Vanadium?

Largo Inc. is positioning itself to be a key player in the global energy storage market by leveraging its position as the world's largest primary vanadium producer.

• Leading vanadium company based in Canada
• Owns the Maracás Menchen mine in Brazil, which is the highest-grade vanadium mine in the world
• Acquired VionX vanadium redox flow battery technology in 2020
• Recently launched Largo Physical Vanadium Corp. (LPV) to provide vanadium supply stability

Vanadium Mining Operations

• Flagship Maracás Menchen mine in Brazil is the highest-grade vanadium mine globally
• Mine life extended to over 20 years based on latest technical report
• Very low cash operating costs of $3.30/lb provide strong profit margins even at current vanadium prices of $11.45/lb
• Adding titanium dioxide production from existing feedstock to generate $280 million in additional annual operating profit
• Room to expand vanadium production by 2030

Growth into Vanadium Batteries

• Acquired established vanadium redox flow battery (VRFB) technology and patents from VionX
• VRFBs ideal for large-scale, long-duration energy storage (>6 hours)
• Key solution for grid-scale renewable energy storage as adoption increases
• VRFB demand expected to increase 30x by 2025 compared to Largo's production
• Largo positioning its "VCHARGE" branded VRFBs for large renewable energy projects and microgrids

New ETF Model for Vanadium Industry

• Created Largo Physical Vanadium (LPV) company to act as an ETF-like entity
• LPV provides vanadium supply stability for VRFB customers by eliminating price volatility
• LPV can own vanadium inventory and lease it to VRFB manufacturers
• Investors get exposure to vanadium prices through share ownership in LPV
• LPV buying from Largo improves vanadium demand fundamentals

Financial Snapshot

• Market cap around $600 million
• Vanadium mining operations alone worth estimated $2 billion NPV
• Targeting over $1.4 billion in free cash flow by 2030
• VRFB energy storage business provides additional upside not accounted for in the current valuation

The Investment Thesis for Largo

Leveraged to Vanadium Demand Growth

• Vanadium redox flow battery (VRFB) adoption is expected to surge 30x in the coming years. As the world's largest primary vanadium producer, Largo is well-positioned to benefit from rising vanadium demand. The company can supply vanadium for batteries through its mining operations and also capture upside through its own VRFB business.

Low-Cost Operations

• Largo's Maracás Menchen vanadium mine has best-in-class costs at $3.30/lb. This low-cost production ensures strong profitability for Largo even during periods of depressed vanadium pricing. The operational advantage provides resilience.

Long-Life, Low-Risk Asset Base

• The Maracás mine has a 20+ year lifespan with potential resource expansion possible. The world-class, low-cost asset provides Largo stable cash flows for decades, lowering operational risk.

New Titanium Revenue Stream

• Titanium dioxide production from existing ore feedstock can deliver $280 million in incremental annual revenue at high margins. This further strengthens Largo's cost position.

Energy Storage Upside

• Largo's VRFB business provides additional upside as the long-duration energy storage market grows. VRFB demand is expected to surge to support renewable expansion.

Undervalued Based on Mining Asset Alone

• Largo's mining operations alone are worth an estimated $2 billion NPV, significantly above its $600 million market cap. The VRFB business provides further upside not accounted for.

Largo could offer investors exposure to future vanadium demand, an attractive low-risk mining asset, and with a current valuation disconnect. For investors bullish on vanadium pricing and demand, and energy storage, Largo provides an intriguing option trading below the value of its core mining business. Investors should form a view of the direction of vanadium prices, in what has been an erratic pricing environment.