Largo faces production challenges amid tariffs and liquidity issues

TORONTO - Vanadium producer Largo Inc. (TSX:LGO) (NASDAQ:LGO), currently valued at $122.35 million, reported sustained production levels in the third quarter of 2025 while grappling with significant financial and operational challenges, according to a company press release. InvestingPro analysis reveals the company faces substantial headwinds, with revenue declining 31.7% over the last twelve months.

The company produced 931 tonnes of vanadium pentoxide in August and 856 tonnes in July, showing improvement from its operational turnaround program initiated earlier this year. Largo also produced 4,141 tonnes of ilmenite concentrate in July and 3,298 tonnes in August. Despite these production levels, InvestingPro data shows the company operating with negative gross margins and rapidly depleting cash reserves.

Largo is currently installing additional flotation cell circuits to expand its ilmenite production capacity from 42,000 to 115,000 metric tons annually, with commissioning targeted for late October 2025. The company maintains its 2025 ilmenite production guidance of 25,000 to 35,000 metric tons.

However, Largo faces substantial challenges on multiple fronts. Limited working capital has prevented the company from delivering products under certain contracts, as it has been unable to finance inventory during transit and ferrovanadium conversion. Financial metrics from InvestingPro underscore these concerns, with a concerning current ratio of 0.51 and short-term obligations exceeding liquid assets. Subscribers to InvestingPro can access 11 additional key insights about Largo’s financial health and market position through the comprehensive Pro Research Report.

The situation worsened when Executive Order 14323 increased tariffs on imports from Brazil to the U.S. from 10% to 50%, effective August 6, 2025. While this did not affect Largo’s ferrovanadium sales, it impacted high-purity vanadium sales to U.S. customers, resulting in delayed shipments and some contract defaults.

The company is lobbying the U.S. government to exempt its vanadium products from tariffs, arguing they are critical for the U.S. aerospace and defense industries.

Largo also disclosed that its operations risk disruption due to accounts payable owed to its mining contractor and other suppliers. The company is evaluating financing alternatives to address these issues.

As noted in its interim financial statements released on August 12, 2025, Largo requires additional financing to repay liabilities, support working capital, and continue as a going concern. The company’s Altman Z-Score of 1.17 indicates significant financial distress, while its debt-to-equity ratio stands at 0.58.

The company is also exploring opportunities to monetize its tungsten assets, which include the Northern Dancer project in Yukon, Canada and the Currais Novos project in Brazil.

In other recent news, Largo Resources reported significant developments in its vanadium production for the second quarter of 2025. The company produced 2,256 tonnes of vanadium pentoxide, marking a 74% increase from the first quarter, although this figure remains below the 2,689 tonnes produced in the same period last year. The global recovery rate improved to 84.9%, showing a 14% increase over the previous year. Total ore mined reached 485,687 tonnes, a 32% increase compared to the same period last year. H.C. Wainwright has reiterated its Buy rating for Largo Resources, maintaining a price target of $3.70, following these production results. This decision comes amid a notable 75% increase in vanadium pentoxide output in May and a 65% rise in ilmenite concentrate production. The production gains have been consistent, with monthly output increasing from 481 tonnes in April to 940 tonnes in June. These figures reflect a steady growth in Largo’s production capabilities, according to the company’s recent operational updates.

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