Largo recently spoke at the Grizzle Battery Metals CON, with Chairman Alberto Arias fielding questions from the interviewers and the audience. We watched it. If you didn’t, we’ll give you some details below.
What’s up with Largo?
Largo is all about vanadium. They produce about 7 percent of the world’s supply of vanadium with the highest grade among the major miners. Although Largo has a competitive advantage on the mining side, they looked to diversify with a clean energy division to: 1) bring additional value to shareholders and 2) contribute to a low carbon future.
There was a recent article from JP Morgan quoted that vanadium will play a big part in the future of renewable energy.
The company sees explosive growth in demand for long duration storage batteries. Alberto thinks that Vanadium Redox Flow Batteries (VRFBs) have key competitive advantages that position this technology to take a significant share of the renewable batteries business.
Guidehouse conducted a study that projects 33 GWh of storage for VRFBs by the 2031. If Guidehouse’s prediction is within a range of accuracy, this would represent a tasty 41% CAGR in those years. To give perspective, this kind of demand would require ten to 12 Largo’s. Largo ain’t small. Currently, Largo currently represents 7% of vanadium mining.
Scaling
Scaling is always an issue with new technologies. How can they manufacture VRFBs on a mass development range that will make the per unit cost affordable and appealing?
Largo’s looking at several scaling-focused milestones. They’re deploying their first battery in Majorca, Spain 6.1 MWH battery system. They’ve completed manufacturing of their stacks – shipping them to Marjorca with the electrolyte, the VRFB is expected to be up and running Q1 2023.
The announced an MOU with a leader in the combustion gas turbine manufacturing industry – Ansaldo based in Italy. This is a joint venture for the manufacturing and commercialization of the Battery System. The have great relationships with electric utilities.
A Vanadium ETF? No Way!
Largo Physical Vanadium (LPV) is a company established to uniquely store vanadium as an ETF-like structure. A gamechanger for the adoption of VRFBs. This segregates the cost of VRFBs from the volatility of vanadium. Vanadium is 40 percent of the cost of manufacturing the battery. The customer will now get the vanadium almost for free, via long term vanadium storage. Vanadium has a unique property – it doesn’t degrade over the life of the battery.
The vanadium is stored in the electrolyte in an aqueous form, so there’s no cross contamination. So, the actual battery becomes a functional store of vanadium. The physical vanadium is producing value for shareholders and society. This improves the economics of the battery and has ESG benefits.
This is generating returns for an investment instead of having the vanadium sitting in a vault somewhere as a store of value like other metals we like.
Free cash Flow
This is our one of our favorite 3-word terms. On just the mining division alone, Largo is experiencing growth of $200 million in EBITDA. This is projected to go up to $400 million in EBITDA by 2028. The ore in Largos’ mines also has hidden value with titanium deposits. That’s another story that we’ll start talking about as it further develops and we show you how to best capitalize on Largo’s discovery.
