Winning from higher vanadium prices, Largo Resources expands into the clean energy storage (VRFB production) market

US energy storage installations grew a massive 182% QoQ in Q4 2020. BloombergNEF forecasts a 122x increase in global energy storage from 2018 to 2040. WoodMac forecasts global energy storage capacity to grow at a CAGR of 31% through 2030. One of the more exciting areas of energy storage is vanadium redox flow batteries (VRFB) as they are able to hold a longer duration of energy storage for aggressive cycling as well as lasting longer (>20 years or > 10,000 cycles) and are ideally suited for large scale utility style energy storage typically combined with a wind or solar farm.

As the vanadium price continues to recover (Europe Vanadium Pentoxide (V2O5) now at US$9.70) the vanadium miners are starting to do very well again. One key area for the vanadium miners to gain a greater share of the profits is by moving into value-add products such as making energy storage products such as vanadium redox flow batteries (VRFB).

Today’s company is doing just that.

Largo Resources Ltd. (TSX: LGO | NASDAQ: LGO) (“Largo”) is best known for its successful very low cost vanadium producing Maracás Menchen mine in Brazil. The Maracás Menchen mine has industry leading grades of 1.17% vanadium pentoxide (V2O5). Production in Q2, 2021 achieved 3,070 tonnes of V2O5. At that run rate, Largo is on track to hit its 2021 guidance of 12-12,500 tonnes pa in 2021. Costs are guided at US$3.30–3.50/lb V2O5 and are also on track.

Largo Resources is on track to meet their 2021 guidance on costs, production, and sales

Source: Largo Resources website

Largo has recently begun commissioning of the Company’s vanadium trioxide (V2O3) processing plant and production is expected by the end of Q3, 2021. V2O3 is an important high purity material required in the manufacturing of master alloys, chemical products and electrolyte used in VRFB.

Largo Clean Energy (“LCE”)

Largo Clean Energy plans to become a leading supplier of safe, durable, long-duration grid-scale vanadium redox flow batteries (VRFB) for the fast growing global energy storage market.

On July 20, 2021, the Company announced that LCE entered into its first VCHARGE± VRFB system sales contract with Enel Green Power España (EGPE). Under the contract, LCE is obligated to deliver a 5 hour 6.1 MWh VCHARGE± system for a project in Spain with expected commissioning in Q4 2022, subject to receipt of notice to proceed from EGPE within the next 180 days. Note that the notice to proceed has now been issued.

Largo’s updated report on their Clean Energy division states:

During Q2 2021, Largo Clean Energy Corp. (“LCE”) remained focused on obtaining certification of its VCHARGE± VRFB system under UL1973 and UL9540 requirements to support expected 2022 project deployments. In addition, building modifications of its product development and stack manufacturing center are expected to commence shortly which will enable the installation and commissioning of stack manufacturing capacity and test equipment. The Company continues the hiring of additional personnel to support the achievement of its set targets and timelines.”

Largo Clean Energy creates a vertically integrated energy storage provider for the growing renewable energy storage market

Source: Largo Clean Energy

Regarding the Enel contract and Largo Clean Energy business, Paulo Misk, President and Chief Executive Officer of Largo, stated: “We are excited to have been selected by Enel Green Power España as the preferred energy storage solution partner on this project. Integrating Largo’s leading high purity vanadium production with the disruptive capabilities of our VCHARGE± system, including superior performance, long life, optimal cost structure and proven durability, should position Largo as an emerging leader in the VRFB industry……The world is in need of clean and safe long-duration energy storage and we believe our VCHARGE± system can be a significant part of this solution going forward. We look forward to the successful deployment of this system.”

Closing remarks

Largo Resources continues to fire on all cylinders. V2O5 production and cost guidance are on track in 2021 which should lead to a very profitable year boosted by rising V2O5 prices in 2021.

Furthermore, Largo’s expansion into clean energy storage (VRFB production) is already starting to potentially deliver results with a large contract to supply Enel Green Power in Spain with Largo’s VCHARGE± VRFB system. As time goes by this will potentially add a second value-add revenue for Largo, assuming the initial success with Enel continues. Largo did also state that “advanced discussions with additional energy storage customers ongoing”.

Largo Resources trades on a market cap of C$1.3 billion and the future looks very bright indeed, especially if VRFBs become increasingly more popular. It looks likely VRFBs will be needed in order to meet the BNEF forecast 122x increase in global energy storage demand from 2018 to 2040 and the global move towards renewable energy and zero emissions targets. Don’t miss this one.