Good day and thank you for standing by. Welcome to Largo's First Quarter 2023 Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Alex Guthrie, Senior Manager of External Relations. Please go ahead.

Good morning, everyone, and thanks for joining our first quarter earnings conference webcast and call. As with previous calls, we have uploaded a supplemental webcast presentation, which is available on our website at largoinc.com. Our Q1 2023 financial statements related MD&A and most recent AF are also available on the website as well as on SEDAR and EDGAR. Before continuing the call today, I would like to remind you all that some of the information you will hear during today's discussion will consist of forward-looking statements, including, without limitation, those regarding future business outlook. Please refer to Slide 2 for a full description of the Company's cautionary notes. On the call today is Daniel Tellechea, Largo's Interim Chief Executive Officer and Director; Ernest Cleave, Largo's Chief Financial Officer; and Paul Vollant, Largo's Chief Commercial Officer. Following the delivery of our prepared remarks, we'll open the call for questions. We ask that participants restrict their questions to two and then re queue if there are additional questions to allow the others the opportunity to participate. So with that, I'll turn the call over to Daniel.

Thank you, Alex, and good day to everyone joining us today. Since taking over the role of Interim CEO of Largo in February, I have been committed to improving operating efficiencies as the Maracás Menchen Mine, including initiating cost reduction initiatives and conducting productivity assessments. During the first quarter, the Company produced 2,111 tons of V2O5 in accordance with this production guidance. And to our delight, we sold 2,849 tons of equivalent V2O5, which exceeded our quarterly sales guide for the first quarter of 2023. In addition, we produced a significant amount of high purity material in the first quarter, representing approximately half of the quarter's production. While we are pleased with this performance, we continue to navigate the effects caused by the heavy rainfall in December, which not only caused clotting in the Campbell pit and impacted operations, but also delayed the Company in field drilling campaign necessary to develop a company short-term mine model planning for years 2023 and 2024. Infield drilling is performing inside the Largo Campbell pit for further defined the ore body prior to mining. As a result of this process, a short-term mine model is developed which sets the stage for the ensuing year mining plant. In light of the heavy rains in late fourth quarter of 2022 and early first quarter of '23, this process was postponed. And as a result, we have to adjust our annual '23 production sales and cost guidance. An updated table referenced in the updated guidance on a quarterly basis is provided on the current slide. I would like to emphasize that returning to a more normalized production and cost scenario remains the top priority for all of us at Largo. And we work through this period of adjustment in our mining operation. In my first update to…

Thank you, Daniel. Thanks to those who have joined the call today. A brief overview of the Company's financial performance for the first quarter is presented on the current slide. The Company's revenues increased by 35% from $42.7 million in Q1 2022 to $57.4 million in Q1 2023, as a result of increase in quantity sold and improved realized pricing achieved during the current quarter. In Q1 2023, operating costs increase substantially by approximately 60% over Q1 2022. This is primarily due to increases in direct mining production costs, and these are particularly attributable to mining contractor costs and equipment rental costs. Additionally, a lack of production stability in the subsequent ramp up of operations following the previously discussed shutdown further negatively impact costs during the quarter. As touched on earlier, the Company also experienced cost increases in critical consumables in the quarter, including sodium carbonate, as well as an increase in the consumption of ammonium sulfate when compared to Q1 of last year. Our Q1 2023 cash cost performance was in line with our annual cost guidance range with cash operating costs, excluding royalties being $5.15 per pound sold compared to $3.97 per pound sold in Q1 of last year. However, due to the reasons previously noted, we have extended the higher end of our cash cross guidance range to $5.65 per pound sold. That's up from $5.25 previously. Due to the increases in operating costs during the quarter, we reported a net loss of 1.2 million for Q1 2023. I'll provide some additional color on some of the other Q1 2023 costs, which includes a $1.6 million increase in other general and administrative expenses. This is mainly due to an increase in depreciation from the Company's software intangible asset as well as increased IT costs associated with the implementation of the Company's ERP system. We also saw increased cost at LCE, which were primarily related to increased logistics, as well as travel costs arising from installation activities associated with our VCHARGE battery deployment in Spain. In Q1 2023, the Company's share base payments decreased by $2.2 million, resulting in an expense recovery of $1.3 million. This is primarily due to reversals and share based payment expenditures on forfeited unvested stock options and RSUs as well as the reduced number of stock options in RSUs granted compared to Q1 of last year. The Company's finance costs in Q1 were $1.4 million for the quarter and that's up from $1.2 million as a result of increased debt as well as an initial financing fee on the Company's new debt facilities. Finally, the Company exited the quarter with approximately $62 million in cash and a debt of $65 million, and a net working capital surplus of $119 million. That concludes my remarks for today. I'll now turn the call over to Paul.

Thank you, Ernest, and good to speak with everyone who has joined today. We exceeded our Q1 quarterly sales targets with 2,849 tons sold inclusive of 245 tons of purchased material. And despite the Company's operational setbacks, during the quarter, we delivered on our commercial commitment. Following to Q1 2023, we had a great month of sales in April with 1,101 tons sold, including 78 tons of purchased material. However, as a result of the reasons mentioned earlier, we expect lower sales for the rest of the year. And we have adjusted our annual sales forecast for 2023 from 10,300 tons to 11,300 tons to 8,700 tons to 10,700 tons. This translates into adjustment to our quarterly guidance ranges, which are provided on the current slide. The vanadium market was strong in Q1 and prices increased continuously from the start of the year until mid March, supported by strong demand in the aerospace and energy storage industry. The average price for V2O5 in Europe was $10.39 in Q1 2023, down 3% from $10.72 in Q1 2022. And vanadium prices in Europe averaged $39.46 in Q1 2023, down 15% the average of $46.17 seen in Q1 2022. However, Largo achieved a higher average price in Q1, compared to the same period last year, thanks to a larger portion of our sales going into high purity applications. Since March, vanadium prices fell sharply, erasing all gains since the start of the year. We attribute this forward to lower demand and worsening sentiment from the steel sector in China. Yet, we continue to be bullish on vanadium medium and long-term fundamentals, thanks to considerable expected demand growth in the energy storage sector with anticipated gigawatt hour of VRFB deployments in China in the near and medium-term future. It's interesting to note that according to Vanitec, the global vanadium producers association, VRFB is now the second largest demand driver for vanadium and grew by almost 170% between 2020 and 2022. I'll stop there and turn it back over to Daniel.

Thanks, Paul. Since becoming interim CEO, I have been focused on improving overall performance at the Company through additional operational efficiencies. Executing of these initiatives an important part of our commitment to deliver safe, reliable operations and maintaining capital discipline, in order to preserve our status as one of the world's largest locals by now young producers. Largo has an unparalleled binary on assets with a business model that we believe is unmatched in the industry. The opportunity to leverage these competitive differentiators is expected to drive value for our shareholders more in the both in the short- and the long-term. And with that, this concludes our prepared remarks. And now, we will be happy to respond to any questions from participants on the call. Thank you.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Heiko Ihle at H.C. Wainwright. Please go ahead.

Your guidance for production has been taken from 11,000 tons to 12,000 tons to 9,000 tons to 11,000 tons. We're just going through your release, there's a couple of things you're planning kill maintenance is done. The transition to the mining contractor is done. There's probably more positives than negatives in your in your outlook. What am I missing here? And I guess what I'm saying is, can you quantify the decline in your outlook in what factors or making it go down by how much?

Well, let me try to respond that question. I think that the widening of our guidance is basically reflecting the fact that they were planning to end by the by the end of June, the infield drilling information that will be inputted into our short-term model in order to define for the second half of the year, how much as stripping, how much volumes to reproduce from masses banded and disseminated. You have to take in consideration that Largo is not a regular mining company like a copper or the thing that they were used to with. Largo mining operation is a blending operations, where we need to blend massive with disseminated or banded with disseminated in order to produce the necessary V2O5 in the nameplate capacity of around 1,100 tons per day. So I don't think we're missing any particular point. Only what they were trying to direct to market is that they were in the process of into in the infield drilling that we postponed because of the trailing. As you said the mining contractor is working exceeding our expectation just on the first quarter of the year, we moved 3.6 million tons that is one of the records on a quarterly basis for Largo. Just to give you a flavor last year in 2022 we had materials move of 3.1 million tons. So, we move in excess of 0.5 million tons in order to continue opening the pit. So, that is the basics of our reasons for the change in the guidance. In terms of course, we are taking the consideration of increasing the cash cost excluding the royalties because of the fact that the sodium carbonate especially and the ammonium sulfate has not reducing price. So, that's why we are moving into the cost initiatives, trying to compensate some of those increases in the price of the chemicals with additional efficiencies in running our operation. I hope that they will answer. This is a long answer to your question, but I try to give you the full flavor of what the -- why we're doing this.

No, that's fair. Earlier on this earnings call, you brought up the ilmenite concentration plant. I mean, obviously, it should be done quite soon, will be halfway through Q2 on this coming Monday. On a cash basis, how much cash flow do you think you still need to spend from today through the conclusion of ramp up and commissioning for this asset?

Let me take that as well. I think that the final capital expenditure that we project for the ilmenite plant is done. It might be additional -- additional expenditures in order to close some of the contracts, but really it will be I think a minimum size, the final CapEx is done in the ilmenite plant.

Daniel, let me jump in here on this one real quickly. If you are looking at a capitalized perspective, there is not much left, but if you look at the impact on cash, there's probably another 10 million to go on that ilmenite plant. So you will see the impact of that cash over the next sort of four, five months spread out.

And to be clear set 2 million U.S.

No 10.

Oh, sorry. Perfect got it. That makes more sense.

Thank you. The next question comes from Andrew Wong at RBC Capital Markets. Please go ahead.

So I mean the heavy rainfall in Brazil occurred back in December, and the 2023 production guidance, it was announced in January, and it was reiterated a couple of times since. So, I'm just kind of wondering, what happened and what changed over the past month to prompt such a drastic cut in your production guidance for the year? And then also, what impact do you expect this could have on 2024 production?

Well, as I said at the beginning, we didn't anticipate the effects of the not completing the infield drilling. As you very well know, when you are relying on larger spaces, all spaces of drilling in order to define a mine plant, you can reach the different surprises. And this particular area, we actually didn't anticipate that the effects of not counting with the closer information between drills, it was not going to affect us. And that's why we produced the last year by the beginning of this year the guidance for the full year that now we're adjusting. It was just that didn't anticipate it, that the changes were going to affect us in the rest of the year. Let me, however, do the following caveat. Once we have all the information for year 2023, by the end of June and we put it inside the model, then we will give you for more certainty, how the final numbers will show for the second half of the year.

Okay. And then does current mine area that you are in right now, is that why we are seeing the ore grade that's been trending lower for the past three quarters as well? Is that part of the issue?

It's part of the issue. Last year 2022, we had an average grade of around -- I think it was 0.91 B2 grade. And this first quarter was 0.81. So yes, we had an issue with the blending of the disseminated and the massive and that is the main reason of this decrease in grades.

Okay. Thank you. And then just maybe just last one or just the free cash flow kind of follow-up. And what are the free cash flow expectations for this year now with the new guidance?

So given how much uncertainty there is at this stage in terms of the actual production level pricing, even costs, it really is impossible to -- there could be so many different permutations. So, at this surge, we know we can't give good guidance in that regard, like we will try and do so later, especially after all this infill drilling in greater definition around the mine plan has been completed. At that point, we will try and attempt to credit in a more certainty around this issue.

The next question comes from [Mike Hine] at Noble Capital Management. Please go ahead.

Thanks. I had a couple of questions about the guidance change, but I feel like we have talked about that enough. Let me ask one about the ilmenite, you've talked about commissioning and ramp up and I think you might have heard some comments that ramp I might go to 2025. Can you just repeat those comments or maybe give answer the question as to how long it will take to actually get to sales?

Do you get that question, Ernest?

Yes, sure. At this stage, we are anticipating making some of our trial shipments in Q4. So, there would be some revenue is what our anticipation is during Q4. It's not going to be at significant size, but in and around that kind of timing is what we expect right now.

And do you have a sense when you might reach full capacity?

Full capacity in the production side?

Yes.

Yes. What my expectation is that the capacity or the nameplate capacity of Maracás will be reached in the third quarter of this year.

That means for the ilmenite clients. I think reason by Q4, we should be approaching a peak run rate, and if not, then certainly an earlier early part of next year. But the anticipation has to be at or above, at our run rate run about the Q4 timeframe.

I could ask one more question. It was kind of interested with the tax expense this year. Obviously, there was some very high numbers, a change in the deferred income tax. Can you just kind of explain what's going on and why that number was so high?

Sorry, the deferred income tax expense.

Correct.

Relatively consistent with last year, I don't see it as unusual and this I'm looking at a different number.

Well, I guess I'm looking at the total tax expense versus your pre-tax income, being you're actually expensing more than your pre-tax income, but that's what the explanation is looking for.

So, those would just the timing adjustments on deferred income tax, etc. So that it's not a one for one relationship, which is why you get the movement and deferred income tax, but it's pretty conventional.

[Operator Instructions] Next question comes from Steve Silver at Argus. Please go ahead.

Hi, everybody. Thanks for taking my questions. I've got a couple left. First, the press release mentions that production into the high purity market reached about 49% of production in Q1, which was up from about 42% in Q4 of last year. While I'm sure it's going to be a lumpy number over time, I'm just curious as to what your thoughts would be based on expected demand in terms of how high that percentage might go over the longer term into the high purity markets?

Well, thanks Steve. We saw a very strong increase in high purity demand in basically since Q4 last year, mainly in the aerospace industry, but also in the chemical industry. And obviously, in the energy storage industry that values high purity products. So, Largo has the capacity to produce the majority of its production into high purity. So when the market requires it will have the opportunity to produce more high purity and semi purity. There is no I think clear target for the coming quarters. Right now, we are already at a much higher level than we were a year ago. And where we permitted to grow this is market share for Largo and become the preferred supplier in this space.

Great and one more, if I may. Given the pullback in the price of vanadium over the last couple of months which has been pretty drastic, curious if you have any updated thoughts in terms of at least more broadly, the timeframe that it might take for the market to start recognizing a little bit more in terms of the demand for vanadium into the clean energy market says it looks like at the long term demand is still expected to out supply the current capacity of the industry. So just given the fact that the price remains so volatile on steel demand, just if you have any updated thoughts in terms of when the market might begin to recognize that demand for the clean energy side?

Yes, it's a good question. And as we say during the presentation, sentimental over the medium and long-term fundamental of energy market remain very strong. There are some great projects in China mainly for vanadium for batteries that should dramatically change the overall demand for the product globally. I think that the latest drop in price was really kind of a short-term demand decrease, specifically on steel sector in China. Steel sector in the rest of the world are doing much better. So, yes, I think it's a short-term bump on the road of the growth in fundamentals for vanadium. It's always very difficult to time any movement, but we remain very bullish on the medium and long-term fundamentals.

Thank you. There are no further questions. I'll now turn the call back over to Alex Guthrie for closing comments.

Thanks operator. And that concludes the question-and-answer session and our quarterly investor conference call. Have a great day. Take care.

Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.