Largo may cancel calcine deal as purchaser fails to pay

Executive Summary

• Largo Inc. has notified the counterparty of a $56-million iron ore calcine sale agreement that the initial payment has not been received, putting the contract at risk of termination if the cure period expires on Feb. 20, 2026.
• The company is observing a significant divergence in ferrovanadium (FeV) prices, with U.S. prices rising approximately 30-40% year-to-date to a premium of over 50% compared to European markets, driven by structural supply constraints and tariffs.
• Largo remains well-positioned to supply the U.S. market but faces a 50% tariff on direct Brazilian imports, limiting its ability to directly supply FeV and high-purity vanadium products to U.S. steel and defense customers.

Key Details

• Iron Ore Calcine Transaction Status:
  • The definitive agreement announced on Jan. 20, 2026, covers the sale of up to 4.5 million tonnes of iron ore calcine.
  • The first payment of $2.9 million (U.S.) was due Jan. 30, 2026, but was deferred to the week of Feb. 9, 2026.
  • The second payment of $1.9 million (U.S.) is due by Feb. 16, 2026.
  • Largo has provided a cure period until Feb. 20, 2026. If the first payment is not received by this date, the agreement will be terminated.
  • No delivery of material has been made under the agreement.
  • Largo intends to review legal remedies for damages resulting from the breach and may pursue alternative transactions.
  • Largo states it has ample cash on hand to offset this potential near-term setback.
• U.S. Ferrovanadium (FeV) Market Update:
  • U.S. FeV prices have risen from the mid-$13/lb range to approximately the mid-$17/lb range over the past month (approx. 30% increase).
  • Year-to-date, U.S. prices have risen from $13.25/lb on Jan. 1 to $18.0–$18.5/lb currently (approx. 36-40% increase).
  • U.S. prices now trade at a premium of more than 50% to European prices (approx. $37–$38/kg vs. $25.6–$25.83/kg).
• Market Structural Constraints:
  • U.S. FeV 80 supply is limited due to conversion capacity constraints; Canadian conversion capacity is operating at or near capacity.
  • Access to alternative origins is restricted by anti-dumping rulings (China, South Africa) and sanctions on Russian-origin material.
  • These factors have reduced supply elasticity and contributed to price acceleration.
• Tariff Impact:
  • Largo is subject to a 50% tariff on direct Brazilian imports of vanadium pentoxide and FeV into the United States.
  • Largo currently supplies the North American market primarily through its Canadian conversion partner to avoid these tariffs under the USMCA agreement.
  • The company argues that removing tariff constraints would allow it to directly supply FeV and high-purity vanadium products to U.S. steel mills and defense applications, helping to close the supply gap.

Notable Quotes

• "Since the beginning of the year, we have seen a clear and accelerating divergence between the North American and European FeV markets. U.S. prices have risen approximately 36 to 40 per cent year to date... The U.S. market is now trading at a premium of more than 50 per cent to Europe, reflecting ongoing structural tightness, constrained conversion capacity and restricted access to alternative supply." — Francesco D'Alessio, Chief Commercial Officer
• "Largo is ready and fully capable of helping close this growing supply gap. However, the 50-per-cent tariff imposed on Brazilian-origin material continues to restrict direct supply of both FeV 80 to U.S. steel mills and high-purity vanadium products critical for defence applications." — Francesco D'Alessio