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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and thank you for standing by. Welcome to Largo's First Quarter 2022 Webcast and Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Alex Guthrie, Senior Manager of External Relations. Please go ahead, sir.
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 our Clean Energy Division. To accompany the call today, we've uploaded a supplemental webcast presentation, which is also available at our website at largoinc.com. Our Q1 financial statements, related 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'll 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, EDGAR and on the company's website. Further information regarding Largo's use of non-GAAP measures and ratios are also available in our most recent earnings press release and 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 of 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 2 and then requeue if you have any additional questions to allow the others the opportunity to participate. And with that, I'll hand it over to Paulo.
Thank you, Alex, and good morning to everyone who has been able to join us on the call and online. We'd like to continue to restructure our earnings call to focus our 2-pillar business strategy as it relates through our first quarter progress. It's important to note that we strongly believe significant value creation exists within our core and profitable vanadium business with substantial upside opportunities through adding titanium products to our portfolio and our emerging Clean Energy business. Before we jump in, there are really 3 -- 4 key points to take away from this call. Firstly, we've had to make adjustments on our full year 2022 guidance upon factoring in the weaker first quarter, as well as continued global inflationary pressures, and the strengthening of the Brazilian real against the U.S. dollar. However, we are confident in our ability to reach these updated targets and are very focused on making additional improvements on its sales and production rates going forward. Our updated annual cash operating costs, excluding royalties guidance is now in the range of $3.90 to $4.30 per pound sold. Unfortunately, the inflationary environment is here, and it's something we are focused on mitigating the effects of the best of our business. Our V2O5 equivalent production guidance is now 11,600 tonnes to 12,400 tonnes, and our total V2O5 equivalent sales guidance is now 11,000 tonnes to 12,000 tonnes, which includes sales of up to 1,000 tonnes of purchased products eventually in order to face regulations problem. And on a positive note, despite navigating unprecedented global supply chain and logistical constraints, our sales team continued to perform well under the circumstances in the first quarter, and in April, sold approximately 1,250 tonnes of V2O5 equivalent. As we noted in the press release issued yesterday evening, we expect to perform a catch-up in the sales during the second half of the year following the improvements of logistical and supply chain constraints. Secondly, we continue to expect a bullish vanadium market for the remainder of the year, which is -- which we are focused capitalizing on, particularly as we remain a relatively low-cost producer in the commodity. 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 advantageous for us, especially as we increase sales of our produced products in the second half of the year. Ernest will provide an updated 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 [indiscernible] of vanadium demand that is expected from VRP going forward. We view our emerging Clean Energy business as a significant source of future value for the company, and we are excited by its potential given the advantages of Largo Physical Vanadium or LPV, something Paul will touch on a bit later. Thirdly, is the notable progress we've made on the strategic value-added projects the company has undertaken, namely the commencement of Phase 1 of our titanium projects and certain advancements made to LPV. In April, we began construction of the company's ilmenite concentration plant as part of our previously announced titanium projects. This is a very exciting moment for the company as we begin to execute on this project and risk as future benefits. It's important to understand that TiO2 content will be sourced from the existing vanadium ore created from the company's ongoing operation in Brazil. It doesn't require any new efforts on the mining tests. We believe this project will be quite aggressive for the company and will contribute to the company's 2-pillar business strategy as a low-cost vanadium supplier with an emerging vanadium battery business. On LPV, we announced an updated and previously announced proposed qualifying transaction. [Technical Difficulty]
This is the operator. One moment while we reconnect the speaker.
Yes, I think we've lost Paulo. But why don't you just pick up, Ernest?
Thank you all for your patience.
Yes, no problem. So as Paulo mentioned on LPV, we announced an update to the previously announced proposed qualifying transaction, and that included the raise of approximately $30 million. On completion of those qualifying transaction and applicable regulatory and stock exchange approvals, we believe LPV will offer potential investors 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 this strategy, vanadium used in our flow batteries will remain under a 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 takeaway is that we continue to focus our commitment to sustainability practices at Largo. We are 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 EcoVadis 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 0 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 improving 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 type of 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 are excited about the year ahead and look forward to delivering on our strategic value-add projects over the coming quarters. I will now transition to some of the financial statement updates. The financial results in the quarter reflect 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 higher vanadium prices achieved during the quarter. We generated approximately $43 million in revenues from the sale of 2,232 tonnes of V2O5 equivalent in Q1. That's $8.67 per pound sold. Looking at last year, we sold 2,783 tonnes of V2O5 equivalent, and that generated revenues of approximately $40 million or revenues per pound sold of $6.49. This really underscores our leverage to increases in vanadium prices, and it's why we remain enthused about the current vanadium market fundamentals. Moving on to costs, like most other companies today, we are also navigating global inflationary pressures within our business. As mentioned, we have increased our annual cost guidance from $3.90 to $4.30 per pound to reflect these impacts, along with impacts from a recently strengthening Brazilian real and lower overall production for fiscal 2022. We acknowledge 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 their ability. Even with these cost pressures, we are poised to end the year on a positive note. This is a good segue to discuss our cash position and future cash outlook. The first quarter is expected to be our 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 where vanadium prices will ultimately trend, I can provide a rough sense of year-end cash within the bounds of 2 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 $125 million, and that represents free cash flows of $41 million for 2022. Very importantly, such estimates, of course, take into account current cost guidance, the sales of produced materials within our guidance range of 11,000 tonnes to 12,000 tonnes, inclusive of sales of purchased product of 1,000 tonnes, and a Brazilian to U.S. dollar exchange rate that averages approximately 5:1 for 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 its intentions 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 in the coming weeks. With that, I will now pass the call over to Paul.
Thanks, Ernest. And let's jump right into it. We sold approximately 2,300 tonnes of V2O5 in Q1. In April, vanadium sales were 1,246 tonnes of V2O5 equivalent, of which 121 tonnes were purchased material. As mentioned before, we anticipate a sale catch-up for the remainder of the year following the expected improvement in production and stabilization of supply chain constraints. Regarding demand, all the company's key markets remained strong in Q1, which was reflected in a sharp price increase over the period. The average benchmark price per pound of V2O5 in Europe was $11.50 as of May 6, up approximately 31% since the start of 2022. Over the past quarter, the average Metal Bulletin price per pound of V2O5 in Europe was $10.72 versus an average of $8.30 in Q1 2021. The average price for 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 tonne of V2O5 equivalent in 2021. The current global geopolitical and logistical situations have the potential to exacerbate these tensions. Our focus remains on delivering positive sales results going forward, taking advantage of these 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 LPV as we announced the $30 million financing. We are proud to be the initial strategic investor and support this venture as we are confident it will bring significant long-term value to Largo's 2-pillar strategy, LPV investors and our entire industry. Stephen, over to you.
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 welcomed 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 and quantification of associated cost savings initiatives, as well as a comprehensive review of our competitiveness in the Long Duration Energy Storage Solutions marketplace. This is anticipated to take no longer than 3 months, which is expected to ensure our team puts forth a 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 VRFB 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 the call over to the operator for any questions from those on the line. Thank you.
[Operator Instructions] We'll take our first question from Carlos de Alba with Morgan Stanley.
So first question, if I may, Stephen, could you maybe provide a little bit more color as to how the visits of prospective customers went in May? How many of those customers showed up? And yes, what feedback were you hearing that 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 then that vanadium prices didn't go up that much in 2021?
Yes, let me start by answering your question. So Jane, George and Nancy have all visited us. We continue to invite host suppliers, prospects and partners to our facilities within the Wilmingtonne Mass facility. We are not in a position to disclose the names of our prospects or the customers that visit our facility on this call.
But maybe, Steve, can you comment as to what the key topics that you guys discuss, what are the main concerns that they express, if any?
Sure. The interest that we received from prospects on these visits and we discussed what Largo Clean Energy is offering in the marketplace really centered around a couple of differentiators. One is our staff -- the stack that we have patents and trade circuits -- trade secrets surrounding. And it gets a lot of attention because it has 5x the power density of traditional VRP stack. So there's always a lot of conversation and interest in that particular component of our Battery Energy Storage Solutions, but 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 VRP 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-power 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, and that's why I'm being a little evasive with respect to more detail. Thank you for asking the question.
Yes. And 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, it started to rise before the situation in Eastern Europe. So I think that you're seeing the consequence of that deficit already in 2022.
Understood. And maybe could you elaborate a little bit more on what you have seen in the last few weeks because of vanadium prices in China kind of started to come down? I mean 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?
Yes. No, you're correct. I mean, vanadium came off over the past few weeks, but it's more of a general sell-off in the market and no metals have 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 still are on pretty firm ground and well above historical average prices. So yes.
We'll take our next question from Andrew Wong with RBC Capital Market.
I just want to ask about the operations. It looks like sales and production have gotten back on track in April after just -- after a few challenging quarters. So can you just talk about some of the steps that Largo has taken to make sure we get steadier operations going forward on both production and sales?
Thank you, Andy. It's -- we have solved all the problems faced in the rain season by the end of last year. Also, the maintenance definitely, we have some problems in -- we faced in February, what's been solved. We have produced in the range of 1,000 tonnes in March and April. And we expect going forward, including May, that we're going to produce in the range of 1,025 tonnes and 1,100 tonnes, which is our nameplate capacity. So we are really very optimistic with the progress that we have all this recent month and really confident that we'll keep producing as much as we are forecasting, and we'll keep generating a very good results going forward.
Okay. Maybe I'll just ask about the NCIB. Is there anything you can 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 an opportunistic time to be doing that? And also are the repurchases mainly going to be coming from cash?
Yes. It's -- I will -- before passing to Ernest, he 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. So -- but let's have Ernest explain in more details about this process.
Andrew, could you just repeat the question, please?
Yes. Just around the NCIB, like could you -- is there anything you guys can provide about potential magnitude of a potential repurchase and timing? And will the repurchase be mostly coming from cash?
Yes. Look, we're constrained as was put out in the press release, just about 3 million shares there. So at today's prices, you could not do much more than $37 million. We're not obviously committing to do that. I think the purchases would be in the initial period. So the first couple of months, you would see it. And we'd like to believe that Largo's share price would improve over time, yes. It would be from cash. So we would be purchasing from cash. What part of the question did I not answer to?
No, that's okay. I was just wondering like the magnitude, I mean, obviously, you can have issues might be, but if that's completed, you can always issue another one. So I was just wondering like the appetite from the Board and the management team for like how much are we talking about for potential purchase?
Yes. Look, we just want to be -- candidly, just want to be opportunistic here. So to the extent that this dichotomy of the actual share price and where we think the valuation persist, we would like to go into market and purchase. So the other market limitation, as I said, we would not be able to do more than $37 million worth. So the answer is somewhere between $0 million and $37 million. And I don't mean to be facetious when I say that.
No, that's okay.
But we would look to -- yes, we would look to sort of stick handle it as we go and try and be opportunistic.
Okay. No, that's fair. And then maybe just last one on LCE. The strategic review, I was kind of curious like 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?
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 VRP 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. So 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.
We'll take our next question from Lee Cooperman with Omega Family Office.
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 that I haven't read everything. But you're waiting to June 1, I assume because you have to get regulatory approval, and there is nothing else to be read into that? And secondly, and more importantly, you have a 43% shareholder in Arias. Is he agreed to tend to pro rata or are you running the risk of increasing his ownership? I have some other questions, well, let's take that one.
Yes. Sure. So yes, you're correct, Lee, on the first part. So the June 1 is just pure regulatory approval and getting everything set up the bureaucracy around it. So we just estimate 3 weeks. As to the ownership of our most significant shareholder, and there are certain mechanisms under NCIB where you could sell blocks from such an entity, there are certain prerequisites. So the intention is not to increase that ownership. But Arias Resource Capital will make their own decisions based on what they believe is the right thing to do. So -- 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.
Well, you're looking to buy back what 5% or 10% of the company? You're -- and...
Yes. So we're limited to 10% of the float. So -- but we would want to put some...
Yes, but that takes him up from 43 to 48 if he has intended?
Correct, correct. But that is still not on the level of control above the 50. So we we're not obviously concerned about it. But again, Arias Resource Capital makes their decisions according to their own fundamentals. So I'm not going to speak to that.
Well, I would recommend you have an agreement with him to attend to pro rata, because I don't think his presence has been a particularly positive thing for us, not negative, but not positive either.
Yes.
Secondly, you mentioned your free cash flow for the year and what your cash position is. The -- did you account for the 10% buyback or - and the $41 million of free cash flow or that would basically put you into a negative free cash flow?
That's a great question. So all those numbers assume nothing for the NCIB. We don't know where it's going to land. So that's a very astute question, so no.
Okay. And most importantly, what is the projected profitability of the titanium dioxide business you're entering?
Right. So if you -- and I'll invite Paulo to weigh on this as well. But if you look at year 4 onwards, the projected EBITDA in that business are in the high-200s, sort of $280 million to $290 million depending. So it becomes a very, very significant contributor to Largo's EBITDA. So it's -- I think it's not a well-understood contributor to our future success, but it's very significant. Paulo, do you want to elaborate a little bit more on that?
Yes. The titanium profitability fundamentals is we produced the feedstock, the ilmenite in a very low cost, [ $37 ] per tonne. And that's -- and in fact that the current price of the ilmenite is $400. We consider $210 in our technical report. And the -- when you look at the costs that we are expecting to produce pigment around $1,500 per tonne, the price that we consider in the long run in our technical report is 38 -- in the range of $3,800 per tonne. So it give us how good margin we will generate in this business. And we are very optimistic with this business, very profitable.
Right, right. The -- can you, Ernest, at $9 and at $12, what is the EBITDA, the basic business is expected to earn this year and next year?
Yes. So if you just look at...
In terms of EBITDA?
Yes, this year, so at $9, you're looking at about $80 million, and at $12, you're looking at just over $100 million, 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 $20 million and $41 million free cash flow.
What you're saying is in 3 years' time, you'd expect this company to be having in excess of $400 million of EBITDA. So if you have $280 million to $290 million in titanium dioxide and you have $101 million at $12, and I assume that's going to grow over time that this is an enterprise that would have about $400 million EBITDA?
Yes.
Okay. And last question -- last question, I think your credibility has been hurt by this big Battery Day 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?
I'm going to hand that difficult question to Steve.
Yes, Lee, I understand the question. I would anticipate that we'll sign a couple commercial transactions in the current year involving our batteries. So I think we -- you will see commercial transacting in the current year with our battery offering.
We'll take our next question from Heiko Ihle with H.C. Wainwright.
So with all the inflationary pressures that we're seeing, can you maybe walk us through a biggest cost impact? I mean you're taking guidance from $3.20 to $3.40 to $3.90 to $4.30. Is there any way you can break that out into the raw material costs or currency? And also maybe like what are you seeing with fuel costs or other input costs?
Let me start before I get to sort of into the vagaries of the different increases in consumable costs, which Paulo can briefly lead to. I just want to give a breakdown of going from the $3.30 to the $3.90 to understand where some of that movement is coming from. So broadly speaking, the biggest impact was actually foreign exchange. So there's about a $0.34 movement that contributes to that delta. Then the next largest is increases in consumable cost, which increases our production cost, that's about $0.25. And then you're looking at the impact of lower sales because, again, our COGS are recognized on sales is about $0.11 there, so that takes you to the $3.90. To go from the $3.90 up to the upper end of our guidance, that contemplates if we were to, for instance, experience very, very low sales up to the lowest end of our guidance, you would be adding another $0.39, and there would be a foreign exchange difference that we factored in as well if the reais, for instance, were to -- was to trend down to a 4.8 average for the year, which is potentially feasible because it has been very bucolic bouncing around all over the place, that would be another $0.11. But that's the sort of worst case scenario for us. So that's -- that gives you the balance of how we got to the different prices. But I'll hand it over to Paulo to pick up on some of the items that give rise to consumable cost increases.
Yes. Thank you, Ernest. We just do have an overview about our raw material costs. It represents 53% of total costs that we had in Maracas. I'll 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, yes, all those oil derivates have been increased almost double from last year. And if we look at the -- from the end of last year, it means a very short period, it's basically 50%. So those costs, we -- it's very difficult to mitigate. We have another cost, which represents 20% of our total raw material, it's ammonium sulphate. It has -- it increased about 44% from November last year. It shows that how people have been dealing with all those inflation. So free cash as well. It's at the same amount because it's related to the amounts to fix well. And in the short term, we are ensuring the supply of all those raw materials. And we are doing some actions to mitigate the inflation, reduce the cost in any other area that it's important to mitigate 100%. So just to have an idea on the raw material and the FX, our budget was proceeding BRL 5.50. Recently, the reais base, tax base $4 -- BRL 4.60, that was in a range of BRL 5, but it shows how stable is the market today. We hope we can normalize in the future, but we cannot consider that this year will be different until the end of the year.
Fair. I mean Brazil's inflation came in at 12.1% earlier today, what are you seeing with labor costs?
Labor is not the big cost we have. As we -- just to give our estimate, labor represents about 13% of our total cost, is not the big one as -- I mean, sorry, sorry, it's -- yes, it's about 11%, 12%. Another cost is everyone think it's really material power, it's not, because most of our energy comes from the HFO. So power is about 6% only. So the main cost driven is the raw materials.
We'll take our next question from Jim Young with Midwest Investments.
I've got a couple of questions here for you. You mentioned that you sold 1,200 tonnes in April, but at what price did those sales take place at, please? In your first quarter, you said that was [indiscernible] 867?
Yes, Jim. If you give me a couple of second, I can give you the exact number, but I remember it was over $10.5.
Yes. I have the number for you, Paul. Yes, it's $10.98.
Yes. $10.98, that was the average for the V2O5 for sales in April. One thing, Jim, that maybe we'd have to understand is the vast majority of our sales are done on long-term contracts, right? And long-term contracts are structured in a way where the quotation period, so the benchmark price that we use for a delivery is most of the time based on the prior month's price, right, average price. So what I mean here is that when prices are increasing fast, we are trailing behind, right, with -- but over the long run, everything gets -- it equilibrates, right? It doesn't matter over time. But if you look at it from a specific month point of view in a fast increasing market, you're trailing because you are pricing in material from the month's prior average.
I see. Okay. So I would assume then that the sales in the first couple of weeks of May were at even higher prices than what you sold in April?
Yes, yes, because April price for most of the [indiscernible] were higher. Yes, that's correct.
Okay. Good. And secondly, that in the -- what was the global recovery rate for the month of April? In your first quarter 2022, it was 77.5%. And could you just give us a sense as to how is the recoveries proceeding in April, please?
Paulo, did you want to take that question on recovery?
Yes. Sorry, sorry. Jim, recovery, we -- it's really related to the stability of the kilns the steps the whole operation, in fact. So we could improve in February. We -- it reduced in March, April due to a little bit high content of silica and the concentrate. But it's just a matter of getting stable operation 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 not any problem that not to achieve those numbers.
So did I hear that you said that the recovery rate would -- should trend towards 80% for the remainder of 2022?
Yes, going forward in the range of 80%.
Okay. All right. Great. Well, those are the 2 primary questions I have for you right now. Well, I see, if I -- Paulo, if I could add one more question in. Regarding the LCE business, can you help us understand what's your capacity for the electrolyte in liters, please?
I will pass this -- the answer to Stephen. Please, Stephen.
Yes, right now, we're ramping the electrolyte production around the delivery of the Enel project. This is the first battery at Largo Clean Energy will have built since the acquisition of the assets from VionX. So I don't know the exact liter rate. But I would have to say that the capacity will meet those project demands between now and December. But we are definitely investigating -- and we have a supplier network to fulfill that, including leveraging our own team in that process. But 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 Enel, and we're investigating means to increase that capacity beyond Enel based on a regional strategy.
Okay. I've got several more questions on the LCE business, but if I could follow up with you offline, Stephen, that would be great.
Always willing to have that call.
[Operator Instructions] We'll take a call from Lee Cooperman with Omega Family Office.
Yes, I missed to ask you a simple foolish question, foolish. Have you guys -- any schmuck could buy back stock, the question is to buy it back what is cheap. Are you guys highly confident that this normal course issuer bid makes the most sense for the company, given its size, et cetera, that you've done all your homework and you feel very, very comfortable that you're making the right decision?
Yes. Let me make a couple of quick comments, Lee. It seems clear to us that excluding even the -- going back to our discussions around the EBITDAs for the titanium business, but just for the vanadium business alone on a stand-alone basis, we think a very reasonable valuation is probably in excess of $20 just for that business alone per share. So to the extent that we're on a massive discount to such a number that excludes even our titanium business, we think that there -- that it makes sense to do so. Our plan is really to -- and I don't believe bringing this point, but to stick handle it 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.
Just to help you add a little bit, and 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 it's 4 considerations in stock repurchase. Consideration number one is most companies and definitely yours have 2 values, so-called public market value, which is the price you and I pay for 100 shares or 1,000 shares and so-called private market value, the price of strategic or financial investment pay for the entire company. You have a better understanding of that than I do, but it seems to me if you pick up the phone and decide to sell the company, what would the company fetch either to a strategic investor or to a financial investor? If that number is not at least 20% above the market, you're not doing yourself a favor by buying back stock. The second consideration is you put your 5-year budget into a dividend discount model with reasonable assumptions in the specific value of X. And I got to believe if there's a [ $400 million ] EBITDA number out in the future, in the next 3 years, the stock is very cheap. So that test probably would be in favor of the repurchase. Third, which is a no-brainer 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 and where multiples are, that's a no-brainer. And the fourth thing is let's make no mistake about it, buying back stock weakens a company. You have less cash, more debt relative to equity, and don't buy back so much stock to radically change the risk profile of the corporation unless you're going all the way and taking 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'm seeing 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, because 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 all [indiscernible].
Thank you. And that does conclude the question-and-answer session of Largo's quarterly investor conference call. Have a great day, everyone.