Largo Inc. (LGO) on Q1 2022 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to Largo's First-Quarter 2022 Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speakers 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 sir.
Alex Guthrie: Good morning, everyone. And thanks for joining our first-quarter earnings conference call. On the call today is Paulo Misk, our President and CEO, Ernest Cleave, our CFO, Paul Vollant, our VP of Commercial, and Stephen Prince, the President of Clean Energy division. To accompany the call today, we have uploaded a supplemental webcast presentation, which is also available at our website at largoinc.com. Our Q1 financial statements relate to MD&A and most recent AIF are also available on the website, on SEDAR, and on EDGAR. Before continuing the call today, I would like to remind you that some of the information you will hear during today's call will consist of forward-looking statements, including without limitation, those regarding future business outlook. In addition, non-GAAP financial measures and ratios such as cash operating costs, cash operating costs excluding royalties per pound, and revenues per pound sold will also be discussed during this conference call. These have no standard meaning under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Actual results discussed during today's call could differ materially from those anticipated and risk factors that could affect results are detailed in the company's latest AIF and other public filings, which are also available on SEDAR, at EDGAR, and on the company's website. For the information regarding Largo recent non-GAAP measures and ratios are also available in our most recent earnings press release in the company's latest MD&A, which are all available on our website, SEDAR and EDGAR. Lastly, market and industry data contained and incorporated by reference during this call concerning economic and industry trends is based upon good faith estimates of our management or derived from information provided by industry sources. We believe that such market and industry data is accurate and the sources from which it has been obtained are reliable. However, we cannot guarantee the accuracy of such information and we have not independently verified the assumptions upon which projections our future trends are based. The agenda for our call this morning is as follows; Paulo will provide an update on the company's first quarter progress. Ernest will follow with an overview of our Q1 financial results. Paul will provide an update on the company's sales and trading, the vanadium market, and on Largo Physical Vanadium. And Stephen will close with a progress update from our Clean Energy division. Finally, we'll then open the call for questions. We kindly ask that you restrict your questions to two and then re-queue if you have any additional questions to allow the others the opportunity to participate. And with that, I'll hand it over to Paulo.
Paulo Misk: Thank you, Alex and good morning to everyone who has been able to join us on the call and online. I would like to continue to restructure our earnings call to focus our two pillar business strategy as it relates to our first-quarter progress. The important to note that we strongly believe value creation exist within our core and profitable Vanadium business. We have substantial upside opportunity through adding Titanium products to our portfolio and our emerging Clean Energy business. Before we jump in, there are really three -- four key points to take away from this call. Firstly, we've had to make adjustments on our full-year 2022 guidance up from factoring in the weaker first quarter, as well as continuous global inflationary pressures. And the strengthening of the Brazilian real payout against the U.S. dollars. However, we are confident in our ability to reach these update targets and are very focused on making additional improvements on its sales and production rates going forward. Our updated annual cash operating costs, excluding rayos guidance, is now in the range of $3.90 to $4.30 per pound so. Unfortunately, the pleasure narrowing environment figure, and it's something we are focused on mitigating the effects of the best of our ability. Our V2O5 equivalent production guidance is now 11,003 Kansas to 12,000 per 100 tons. And our total V2O5 equivalent sales guidance is now, 11,000 to 12,000 tones, which includes sales of up to thousand tons of per case products eventually in order to face single-digits problems. In our positive note, despite navigating unprecedent global supply chain and logistical constraints, our sales team continued to perform well under disciplines. In the first-quarter and in APIO sold approximately a 1200 tons of V2O5 equivalent. As we noted in the press release issued yesterday evening, we expect to perform, but catch-up in the sales during the second half of the year following improvements of logistical and supply chain constraints. Secondly, we continue to expect a bullish vanadium market for the remainder of the year, which we are focused capitalizing on, particularly as we remain a relatively low cost producer in the commodities. Paul will provide a more detailed overview of what's happening in the market. But as we have alluded in our previous call, the elevated price environment is quite advantage for us especially, as we increased sales of our producer products in the second half of the year. Ernest will provide an update gas forecast for the year ahead later in the call as well. But I am encouraged to say that we will end the year on a positive note. I also would like to highlight that after attending the annual Vanitec vanadium producer association conference last month. I am energized by the recent data on demand that is expected from the going forward. We feel our emerging Clean Energy business is a significance source of future value for the company and we are excited by its potential, given this ventures of Largo Physical Vanadium or LPV, something Paul will touch on a bit later. Thirdly, with the notable progress we've made on the strategic value added projects the company has undertaken mainly the commencements of Phase I of our titanium projects and certain advancement made to LPV. In April, we began construction of the company's ilmenite concentration plant as part of our previous announced titanium projects. It's a very exciting moment for the company as we begin to execute on this project and reap us future benefit. It was important to understand that content will be sourced from the existing Vanadium or created from the company's ongoing operation in Brazil. It doesn't require any new efforts on the mining set. We believe this project will be quite aggressive for the company and will contribute to the company's two pillar business strategy as a low cost vanadium supplier with the emerging vanadium battery business. On LPV, we announced an updated and previous announced proposed qualifying transactions.
Operator: This is the Operator. One moment while we reconnect the speaker.
Alex Guthrie: I think we've lost Paul, but we want to just pick up with Ernest.
Operator: Thank you all again for your patience.
Ernest Cleave: Yeah. No problem. As Paulo mentioned on LPV, we announced an update to the previously announced proposed qualifying transaction, and that included the raise of approximately Canadian $30 million. In completion of those qualifying transaction and applicable regulatory and Stock Exchange approvals, we believe LPV will also potential in business direct exposure to the attractive opportunity presented by the long-term fundamentals of vanadium, a key transition metal for greener steel, strategic and energy storage industries in an environment of tightening supply and increasing demand. It's important to note that under the strategy, vanadium use on our flow batteries will remain under full ownership of LPV and will not be part of the upfront installation capital taken on by our customers, dramatically reducing the cost of our batteries. The fourth and final takeaways that we continue to focus our commitment to sustainability practices with Largo. We're all proud of our team and would like to note some of the progress made today, which is reflected in improved ratings and scores received for 2021, such as MSCI, improved from BBB to A and our Eco Vadis score, which improved from 44 out of 100 to 60 out of 100, which awarded Largo a silver sustainability rating. We also began our journey towards net zero by identifying the main sources of greenhouse gas emissions, and reporting on scope 1 and scope 2 and we continue to explore opportunities for further reduction. You can expect our 2021 sustainability report to be released in late June or early July. I would like to stress that our main focus is on premium production rates, and selling as much material as we can to capitalize on the strong vanadium market fundamentals. We are aware of what a strong vanadium price translates into for Largo, as we've been in this position before. And we want to deliver those top results for our shareholders again. As it stands currently, our valuation remains significantly undervalued in comparison to our latest technical report. And it's important to note that this report used an average vanadium price of approximately $8.50 a pound. We're excited about the year ahead and look forward to delivering on our strategic value-added projects over the coming quarters. On our transition to some of the financial statements updates, the financial results in the quarter reflects the impacts of both temporary maintenance and global logistical constraints, which negatively impacted most financial metrics and the company's liquidity. The exception to such impacts was the increase in revenues per pound sold in Q1 which was 34% higher than Q1 last year due to a high of vanadium prices achieved during the quarter. we generated approximately $43 million in revenues from the sale of 2, 232 tons of V2O5 equivalent in 2001. That's $8.67 per pound sold. Looking at last year, we sold 2, 783 tons of V2O5 equivalent, and that generated revenues of approximately $40 million of revenues per pound sold of $6.49. This really underscores our leverage to increases on vanadium process and is why we remain enthused about the current Vanadium market fundamentals. Moving onto costs, like most other companies today, we're also navigating global inflationary pressures with our business. As mentioned, we've increased our annual cost guidance from $3.90 to $4.30 per pound, to reflect these impacts along with impacts from a recently strengthening Brazil and Real, and lower overall production for fiscal 2022. We acknowledged these pressures and we remain focused on them, but we do give credit to our operating team who have been actively managing these impacts to the best of durability. Even with these cost pressures, we're poised to end the year on a positive from it. This was a good sake to discuss our cash position and future cash outlook. The first quarter is expected to be are low point of cash for the year. And while we ended the quarter with cash of approximately $78 million, we anticipate increasing our cash position from Q2 onwards. Given the uncertainties around global geopolitics and the way vanadium prices will ultimately change, I can provide a rough sense of year-end cash within the balance of two different vanadium prices. At vanadium prices of $9 per pound for the May to December '22 time frame, we anticipate exiting the year with cash of approximately $104 million and that represents free cash flows of $20 million for fiscal 2022. At vanadium prices of $12 per pound for the same period, we would anticipate exiting the year with cash of approximately $325 million, and that represents free cash flows of $41 million for 2022. Very importantly, such estimates, of course, take into account current cost guidance for sales of produced materials within our guidance range of 11,000 to 12,000 tons, inclusive of sales or purchase product of 1,000 tons and the Brazilian to US dollar exchange rate that averages approximately five to one in fiscal 2022. Before I hand it over to Paul, we discussed the strategy of capital allocation during our last earnings call. We've just announced that the board has approved contentions to commence a normal course issuer bid as we believe that the current share price does not adequately reflect the underlying value of the company or our future projects as we previously touched on. We will look to provide additional updates as matters progress on the coming weeks. With that, I will now pass the call over to Paul.
Paul Vollant: Thanks, Ernest. And let's jump right into it. We sold approximately 2,300 tons of V2O5 in 2001. In April and vanadium sales were 1,246 tons of V2O5 equivalent of which 121 tons were purchased material. As mentioned before, we anticipate that same catch-up for the remainder of the year following the expected improvement in production, and stabilization of supply chain constraints. Regarding demand, or the company's key markets remains strong in Q1, which was reflected in the sharp price increase over the period. The average benchmark price that tons of V2O5 in Europe was $11.50 as of May 6th. Up approximately 31% since the start of 2022. Although the past quarter, the average Metal Bulletin price that pound of V2O5 in Europe was $10.72 versus an average of $8.30 in Q1 2021. The average price per Ferrovanadium in Europe was $46.17 per KgV, a 50% increase from the average of $30.87 in Q1 2021. We do not provide future pricing outlook, but I think it's safe to say that we expect prices to remain elevated in the medium-term. According to Vanitec, there was a supply deficit of more than 8,000 tons of V2O5 equivalent in 2021. The current global geopolitical and logistical situations have the potential to exacerbate detentions. Our focus remains on delivering positive sales results going forward taking advantage of this high prices. Before I hand it over to Stephen, I would like to mention that we are very pleased with the recent progress made on NPV, as we announced the 30 million Canadian dollar financing. We are proud to be the initial strategic investor and support the venture as we're confident, it would bring significant long-term value to Largo 2p strategy, LPV investors and our entire industry. Stephen, over to you.
Stephen Prince: Thanks, Paul. We continue to progress at our Clean Energy division during the first quarter which I'd like to highlight today. Our Clean Energy headquarter configuration, including our VRFB product development and stack manufacturing center in the state of Massachusetts in the United States is nearing completion, and we expect the formal completion of this configuration this month. We are very excited to announce that we began producing stacks and purifying electrolyte in this new facility in the first quarter and we welcome supplier and prospective customer visits this month. On the certification side, we proceeded with the CE certification of our VCHARGE product and ISO 9001 certification of our quality management system with audits scheduled later this month. Before we open the call to questions, we'd like to note that our Clean Energy division initiated a comprehensive review of costing and pricing practices, which began in March 2022. This process is expected to quantify the current cost estimates of our VRFB product offering, a future cost outlook in quantification of associated cost-savings initiative, as well as the comprehensive review of our competitiveness in the long-duration energy storage solutions marketplace. This is anticipated to take no longer than three months, which is expected to ensure our team puts forth the proposition that accurately reflects our capabilities and commitments. To close out, we remain diligently focused on advancing our Clean Energy division, as we believe we have the most advanced VRFBs technology and the muscle to back it up from our profitable vanadium business complemented by the expected advancement of LPV or Largo Physical Vanadium. This, of course, is compounded by the significant pull in the market for long-duration energy storage needs, as described by the Long Duration Energy Storage council and McKinsey. With that, I'll turn it -- the call over to the Operator for any questions from those on the line. Thank you.
Operator: Thank you. We'll take our first question from Carlos De Alba with Morgan Stanley.
Carlos De Alba : Thank you very much. Good morning, everyone. First question for me Stephen, could you maybe provide more color as to how the visits of perspective customers went in May. How many of those costumers short up, and yet what feedback where you're hitting, there will be quite interesting to hear. And then Paul, I just have a question. You mentioned that the market last year was an important deficit. What do you think Dan that vanadium prices didn't go up that much in 2021.
Stephen Prince : Let me start by answering your question. Jane, George, and Nancy have all visited us. We continue to invite host suppliers, prospects, and partners to our facilities within the Wilmington mask facility. We are not a position disclosed the names of our prospects, or the customers that visit our facility on this call. Thank you.
Carlos De Alba : But maybe Steve, can you comment as to what the key topics that you guys disclosed where the main concerns that they express, if any?
Stephen Prince : Sure, the interest that we received from prospects on these visits and we discussed what Largo Clean Energy is offering in the marketplace really center around a couple of differentiators. One is our stack. The stack that we have patents and trade circuits, trade secrets surrounding. And it gets a lot of attention because it has five times the power density of traditional VRFB stack. So there's always a lot of conversation and interest in that particular component of our battery energy storage solutions so that's one of the focal areas. I think the other thing is there's a lot of discussion about electrolyte. Supply of electrolyte and how can a fee battery company ensure that the quality of the electrolyte will result in performance. And because we have a unique purification approach, we have a tendency to discuss that and we're in a position to reassure customers that we can provide a high powered stack in a very cost-effective manner and provide electrolyte that's adequately purified both on an economic and quality basis so the battery will perform according to its standards and expectations. That's where a lot of these conversations go. And then the last thing I would say is there's always discussion around specific opportunities on a tactical basis. That's why I'm being a little evasive with respect to more detail. Thank you for asking the question.
Carlos De Alba : Thank you very much, sir.
Paulo Misk : Yes, Carlos. To your second question, yes, there was a big supply deficit in 2021. I think every year we see that there's a bit of downward pressure at the end of the year as companies try to finish the year with low stocks and prices did not translate really at the end of 2021 but as you saw prices rose sharply in beginning of 2022. So that's really a reflection of that supply deficit and by the way, started to rise before the situation in Eastern Europe. I think that you're seeing the consequence of that deficit already in 2022.
Carlos De Alba : Understood. And maybe could you elaborate a little bit more on what you have seen in the last few weeks because of vanadium price in China have start to come down. Everything is sort of coming down, but anything to highlight on the Chinese market, given the performance of the vanadium prices in the last few weeks.
Paulo Misk : Yes. You're correct. Vanadium prices came off over the past few weeks, but it's more a general set up in the market and no metal that really been immune to that. There are worries globally about the COVID situation in China, about potential disruption because of energy in Europe, but overall, prices have stabilized this week, and I think we will see down pretty firm ground and above historical average prices. So yes.
Carlos De Alba : Thank you, Paul.
Paulo Misk : Sure.
Operator: Thank you. Will take our next question from Andrew Wong with RBC Capital Markets.
Andrew Wong : Hey, good morning. I just want to ask about the operations. It looks like sales on production, run back on track in April after a few challenging quarters, so can you just talk about some of the steps that the Largo has taken to make sure, we get steadier operations going forward on both production and sales. Thanks.
Paulo Misk : Thank you, Andy. We have solved all the problems facing the rain season by the end of last year. Also the maintenance definitely we have some problems in pays in Feb where we want to been sold. We have produced a range of a 1,000 tons in March and April. And we expect going forward, including May, that we're going to produce in a range of the 1,025 storms, and the 1,100, which is our nameplate capacity. Though we are really very optimistic with the progress that we have. All this recent month and really confident that we will keep producing as much as we are forecasting. And we'll keep generating a very good results going forward.
Andrew Wong : May I ask about the NCIB? Is there anything to provide in terms of magnitude of a potential repurchase and timing? Obviously, with the shares, just broadly weaker along with the market, it seems like it's opportunistic time to be doing that. And also are the repurchases mainly going to be coming from cash?
Paulo Misk : Yes. It's -- I will before passing to Ernest can give more details about it. I think it shows that we are very confident in our future, in our results that we'll generate this year as well. But let's have Ernest explain more details about this process.
Ernest Cleave : Hi Andrew, could you just, just repeat the question please?
Andrew Wong : Yes. Just around the NCIB like could you -- is there anything you guys can provide about potential magnitude of a potential of our repurchase and timing and whether the repurchase be mostly coming from cash?
Ernest Cleave : Look, we're constrained as was put a compress and just above 3 million shares. And today Francis, you could look, do you much more than $37 million. We are not obviously committing to do that and I think the purchases would be an initial period. So the first couple of months you would see it and we'd like to like to believe that LGO shippers would improve over time here. If we'd be from cash. We would be purchasing from cash. What part of the Christians that I'm not answer there.
Andrew Wong : That's a value is wondering like the magnitude. I mean, obviously you can have a show IB, but if that's completely you've got all this issue, another one. So just wondering like Europe, the appetite from. part and management team for like, how much are we talking about for potential repurchase?
Ernest Cleave : Look, we just want to be candidly just want to be opportunistic to the extent that does like Cardiome of the actual share price on we, think the valuation for so we would like to go into market and purchase. So the other markets limitations as we would not be able to do more than $37 million worth. Sort of the answer somebody between 037 million don't mean to be facetious on a say that we would look to, we would look to we would look to sort of stick handle it as and try and be opportunistic.
Andrew Wong : Okay, that's fair. And then maybe just last one on LCE. The strategic review, I was kind of curious how much of that strategic review is also part of just looking at the competitive offerings primarily lithium ion alternatives and seeing the prices moving up on that side of the energy business like. Is that also factoring into the strategic review on pricing and things like that for LCE?
Ernest Cleave : Yes, absolutely. So as I mentioned earlier on the call, I think there's an inward look at what we're doing currently where we can improve our costs and our scalability around the VRFB solution, our specific solution. But we're also looking at the market and looking at competitors and seeing how we compare to those competitors and what we need to do to be able to capture greater market share. So we've made substantial progress understanding our costs and differentiators as we enter the marketplace. And with the launch of LPV, we anticipate being even more competitive and therefore see -- foresee commercial success in the current year. I think you can take that to say, progress has been good, comparisons to competitors has been encouraging, and the addition of LPV, we believe provides additional differentiation, and a lot of positive feelings about the business and how it'll progress in the current year and going forward.
Andrew Wong : Okay. Cool. Thanks.
Operator: Thank you. We'll take our next question from Leon Cooperman with Omega Family Office.
Leon Cooperman : Thank you. I have to admit I apologize if I ask you some questions that were addressed in the press release but I've had so many conference calls already this morning than I haven't read everything. But you're waiting to June 1st, I assume, because you have to get regulatory approval. There is nothing else to be read into that. And secondly, and more importantly, you have 43% shareholder in areas, is he agreeing to tend to pro rata, or you are running the risk of increasing his ownership? I have some other questions as well.
Paulo Misk : Sure. Yeah. You're correct you on the first part. So the June 1st is just pure regulatory approval and getting everything setting the bureaucracy around. So we just need to make three weeks. As to the ownership of our most significant shareholder, there are certain mechanisms under NCIB, where you could sell blocks from such an entity. There's certain prerequisite, so the intention is not to increase that ownership, but capital will make their own decisions based on what they believe is the right thing to do. But even within the parameters of this NCIB, it's not going to -- even if they did not participate, it would not increase the shareholding significantly overall.
Leon Cooperman : Were you looking to buy back 5% or 10% of the company?
Ernest Cleave : Yes, we're limited to 10% of the float. So but we --
Leon Cooperman : it takes up to 43 or 48 if you had intended.
Ernest Cleave : Correct. That is still not a level of controls above the 50, so we're not obviously concerned about it, but again, coupled mix their decisions according to their own fundamentals so we're going to stick to them.
Leon Cooperman : Well, I would recommend you have to agree with him to tend to pro rata because I don't think its presence has been a particularly positive thing for us, not negative but not positive either. Secondly, you mentioned your free cash flow for the year and where you cash position is. The -- did you account for the 10% buyback or in the $41 million of free cash flow or that would basically you went to a negative free cash flow?
Ernest Cleave : That's a great question. So all those numbers assume nothing for the . We don't know where it's going to land, so that's a very questions or not.
Leon Cooperman : Okay. And most importantly, what is the projected profitability of the titanium dioxide business you're entering?
Ernest Cleave : Right. So if you this as well. But if you look at year 4 onwards, the projected EBITDA business are in the high $200s. So $280 to $290 million depending. So it becomes a very significant contributor to our EBITDA. So I think it's not a well understood contributor to our future success, but it's very significant. Paulo, do you want to elaborate more on that?
Paulo Misk : Yes, and good morning, Leon.
Leon Cooperman : Good morning.
Paulo Misk : The titanium profitability from the metals is we produced the feedstock aluminate in a very low cost $7 per ton, and there's getting the current price of the aluminate is $400, we consider $210 in our tech report. And when you look at the cost that you are expecting to produce demand, around $1,500 per ton. That the price that we consider in the long run in our tech report is $38 in a range of $3,800 per ton. So it give us the how good margin we will generate in this business. And we are very, very optimistic this has been very profitable.
Leon Cooperman : All right. Great. Can you, Aaron, at $9 and at $12, what is the EBITDA, the basic business expected to earn this year and next year?
Ernest Cleave : If you just look at terms of --
Leon Cooperman : EBITDA.
Ernest Cleave : Yeah. This year sold $9. You're looking at about $80 million and at $12 you're looking at just over a 100 -- sort of like $101 million. So to get to the cash flow, you deduct CapEx and taxes about $60 million, which takes you back down to the between 241 free cash flow.
Leon Cooperman : What you're saying is in three-year years’ time, you'd expect this company to be having an excess of $4 million EBITDA? Because if you have 280 or 290 in titanium dioxide, and you have 101 million at $12 and I'll assume that's going to grow over time, that this is an enterprise that would have about $4 million EBITDA. Okay. And last question. Last question. I think your credibility has been hurt by this big battery that we had and so far we've not announced any new battery orders. What's going on there? I don't know. I'm not asking who, but do you expect to have new battery orders in the current year or you have no idea?
Ernest Cleave : I'm going to hand that difficult question to Steve.
Stephen Prince : Leon, I understand the question. I would anticipate that we'll sign a couple commercial transactions in the current year involving our batteries. I think you will see commercial transacting in the current year with our battery offering.
Leon Cooperman : Thank you. Appreciate the response and good luck everybody and stay healthy.
Operator: You take our next question from Marcus Giannini with H.C. Wainwright.
Marcus Giannini : Hey, there's a sense for taking my questions. It's only inflation pressures that we're seeing. Can you maybe walk us through biggest cost impact. And you're taking guidance from 320 to 340 to 390 and 430. Is there any way you can break that out into the raw material costs, their currency, and also maybe like what are you seeing with fuel costs or other input costs.
Ernest Cleave : Let me start. Before I get into the vagaries of the different increases in consumable costs, which product and briefly lead to, I just want to give a breakdown of the inflame from the 330 to 390 to understand where some of that movement is coming from. Broadly speaking, the biggest impactors, actually foreign exchange. There's a better $0.3,434 movement that contributes to that delta. In the next largest is increases in consumable costs, which increases our production costs. That's about $0.25. Then you're looking at the impact of lower sales because again, our COGS or recognized on sales is about 11 since. That takes you to the 3-90 to go from 3-90 up to the upper end of our guidance. That contemplates if we were to, for instance, experienced very, very low sales up to the lowest end of our guidance, you would be adding another $0.39 and they would be a foreign exchange difference at the affected and as well if high, for instance, was to trend down to a 4.8 average for the year, which is potentially feasible because it has been very bouncing around all over the replace. That would be another $0.11, but that's the worst-case scenario for us. So that gives you the balance of how got to the different process, but I'll hand it over to Paulo to pick up on some of the items that good for us to consumable cost increases.
Paulo Misk : Thank you, Ernest. We just don't have an overview about dollar raw material costs. It represents 53% of total costs that we had in Maracas. Are you -- are your comment just for the main ones, Sodium carbonate, which represents 43% of the raw materials. We -- the price increased 66% from last year to this year, 66%. When you look at the -- all the HFO, diesel, and all those had increased almost double from last year. And if we look at the -- from the end of last year means a very short period, it's basically 50% so those costs we -- is very difficult to mitigate. We have another cost which represents 20% of our total raw material with ammonium sulfate. It has -- it decreased about 44% from November last year. It shows that how Largo has been dealing with all sorts of inflation. Free cash as well is the same amount because it's related to the amount . And in the short-term, we are ensuring the supply of all those raw materials. We are doing some actions to mitigate the inflation and reduce costs in any other area of that. It's impossible to mitigate 100%. Just to have an idea on the raw material. In the FX, our budget was $5 percent. Recently, the FX was $4.60 and that was in the of five, but it shows how stable is the market today. We hope we can normalize the future but we cannot consider that this year will be different until the end of the year.
Marcus Giannini : Fair. Brazil's inflation came in at 12.1% earlier today, what are you see with labor costs?
Paulo Misk : Labor is not the big cost we have. If we -- I'll give a reference. Labor represents about 13% of our total cost. It's not the big one. Sorry. It's about 11%, 12%. Another cost is everyone that think it's really material followers, it's not because most of all the energy come from the HFO so power is about 6% only. So that the main cost driven is the raw materials.
Marcus Giannini : Got it. Okay. Thank you so much.
Paulo Misk : Thank you.
Operator: Thank you. We'll take our next question from Jim Young with Midwest Investments.
Jim Young : Yeah. Hi, I have a couple questions here for you. You mentioned that you sold 1,200 tonnes in April, but at what price did -- was those sales take place at please? your first quarter 867.
Paulo Misk : If you give me a couple of second I can give you the exact number, but I remember it was over $10.5 .
Jim Young : Can I read the number for you. It's 15.98.
Paulo Misk : was the average V2O5 for saving April. One thing Jim, that maybe would have to understand is divest majority of our sales, are down on long-term contracts, right? And long-term contracts are structured in a way where the quotation periods, so to the benchmark price that we use for a delivery is most of the time based on the prior months price, right? Average price. So what I mean here is that when the prices are increasing fast, we are trading behind right? With -- but over the long run, everything gets -- it equates right? Where we -- it doesn't matter overtime, but if you look at it from a specific month's point of view, in those increasing markets. Your trading because you're pricing your materials from the months prior average.
Jim Young : Thank you. net sales in the first several weeks of may, ready even higher prices then which you sold in April.
Paulo Misk : Yes. Because April price for most of -- were .
Jim Young : Thank you. And secondly, that in the -- what was the global recovery rate for the month of April? In your first-quarter of 2022, 77 1/2%, and can you give a sense as to how the recoveries proceeding in April, please?
Ernest Cleave : Paulo, did you want to take the accretion recovered?
Paulo Misk : Yeah, sorry. Jim, recovery we -- it's really related to the stability of the and the stability of the whole operation, in fact. So we could improve in February, we -- it reduced March, April due to a little bit high content of silica in the concentrate but it's just a matter of getting stable operations from now on, run steadily. And the recovery will go in the range of 80, for the remainder of the year. We are -- there is no any problem that not to achieve those numbers.
Jim Young : So did I hear that you said that the recovery rate would trend towards 80% for the remainder of 2022?
Paulo Misk : Yeah, going forward in the range of 80%.
Jim Young : Okay. Great. Well, those are the two primary question for you right now, thank you. Paulo, if I could have for more question then regarding the LCE business, can you help us understand what's your -- what's your capacity to the electrolyte in leaders, please.
Paulo Misk: I will pass this answer to Stephen. Please, Stephen.
Stephen Prince : Right now, we're ramping the electrolyte production around the delivery of the Enel project. This is the first battery that Largo Clean Energy will have built since the acquisition of the assets from via Onyx. So I don't know the exact leader rate, but I would have to say that capacity will meet. Those products project demands between now and December, but we're definitely investigating. And we have a supplier networks as to fulfill that, including leveraging our own team in that process. But we're in the process. We're in the process of investigating supply chain and means to increase that capacity significantly. We've discovered that it needs to be done regionally to be competitive. Because of the logistical impacts and shipping costs. So it's less. about our capacity within Largo Clean Energy, and the need for us to stand up an ecosystem that can reach the capacities we require in the regions that we're going to sell our transactions. So we're in the middle of that process. It's early days in that process. But we do have the capacity to fulfill that now and we're investigating means to increase that capacity beyond the based on a regional strategy.
Jim Young : I've got some more questions on the LCE business, but I could file to the offline, Stephen, that would be great. Thank you.
Stephen Prince : Always willing to have that call.
Paulo Misk : Thank you, Jim.
Operator: We'll take a follow-up from Leon Cooperman with Omega Family Office.
Leon Cooperman : Let me ask you a simple, foolish question, not foolish. Have you guys --any schmuck to buyback stock, the question is to buy back when it's cheap. Are you guys highly confident that this normal course issuer bid makes the most sense for the company given its size, etc and you've done all your homework and you feel very, very comfortable that you're making the right decision?
Stephen Prince : Let me make a couple of quick comments. It seems okay to us that excluding even the, going back to our discussions around the EBITDA for the titanium business, but just for the vanadium business alone on a standalone basis, we think a very reasonable valuation would be probably in excess of $20 just for that business one -- per share. So to the extent that we are massive discount to such a number that excludes even our titanium business, we think that their -- that it makes sense to do so. Our plan is really to, and I'm belaboring this point, but to as we go. But certainly at the current prices it seems somewhat of a no - brainer but we will rather focus on being opportunistic if that persists -- if this dichotomy persists.
Leon Cooperman : Just to help you out a little bit, and then I'm not -- I apologize if I sound like I'm lecturing. which I'm not and I think you're doing the right thing by the way. But I've always said is for considerations in stock repurchase. Consideration number 1 is most companies and definitely yours have two values, so-called public market value, which is the price you and I pay for a 100 shares to a 1,000 shares, and so-called private market value, the price is strategic of financial investment paid for your entire company. And you have a better understanding of that than I do, but it will seems to me if you pick up the phone and decide to sell the company, what will the company fetch either to a strategic investor or to a financial investor. If that number is now at least 20% above the market, you're not doing yourself a favor by buying back stock. The second consideration is you put your five-year budget to a different discount model with reasonable assumptions in the space set of value of X. I've got to believe if there's a $4 million EBITDA number out now future in the next three years, the stock is very cheap so that test probably would be in favor to repurchase. Third, which is a no brainier, is what does the buyback do to your earnings per share, dividend potential per share, cash flow per share and given where interest rates are on where multiples are, that's a no-brainier. And the fourth thing is let's make numbers take a better buying back stock weakens a company. You have less cash, more debt relative to the equity, and don't buy back so much stock has radically changed the risk profile of the corporation unless you're going all the way and take you private. So I think you're doing the right thing, but I want to make sure you're thinking it through, because a lot of companies have made mistakes about repurchases, but I've seen that we have a lot of latitude here. And the one thing I would try to understand is your largest shareholder, what he's going to do if you don't want to make his opportunity any greater than it already is in terms of doing anything that would not be in our interest? I agree with --
Ernest Cleave : Thank you for listening and all the best the best.
Paulo Misk : Next please.
End Of Q&A:
Operator: Thank you. That does conclude the question and answer session in Largo quarterly investor conference call. Have a great day, everyone.
Paulo Misk : Thank you.
