Good day, and thank you for standing by. Welcome to Largo's Third 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.
Good morning, everyone. Thanks for joining our third quarter earnings conference call and webcast. On the call today is Paulo Misk, Largo's President and CEO, Ernest Cleave, Largo's Chief Financial Officer, and Paul Vollant, Largo's VP of Commercial. To accompany the call today, we've uploaded a supplemental webcast presentation, which is available on our website at largoinc.com. Our Q3 2022 financial statements related MD&A and most recent AIF are also available on the website as well as on SEDAR and EDGAR.
Before continuing the call today, I would like to remind you all that some of the information you will hear during today's discussion will consist of forward-looking statements, including, without limitation, those regarding future business outlook. Please refer to slide two for a full description of the company's cautionary notes. The agenda for our call today is as follows.
Paulo will provide an update on the company's third quarter progress, followed by Ernest, who will provide an overview of our third quarter financial results. Paul will close the call with an update on the company's sales and trading progress, the vanadium market, and an update on Largo Physical Vanadium. Following these updates, we will then open the call for questions. We ask that participants restrict their questions to two and then requeue if there are additional questions to allow others the opportunity to participate. With that, I'll turn it over to Paulo.
Thank you, Alex, and thanks to everyone for joining for our call today. First, I'd like to provide a few highlights of our operational performance this quarter, as well as some further updates on the company's two pillars business strategy. As noted in our production sales update in October, we encountered some operational challenges this quarter, with production in July being impacted by a refractory refurbish in the kiln and cooler, and September production being impacted by lower quantities of ore mined as we transitioned to the new mining contractor. We also experienced lower sales this quarter due to ongoing shipment delays and decrease in spot market demand. For the last nine months, we have produced approximately 8,400 tons and sold 8,300 tons of V2O5 equivalent, which includes approximately 1,000 tons of purchased material.
We expect to land between the low end and midpoint of our production and sales guidance range of 11,000 tons and 12,000 tons for the year. Subsequent to Q3, we produced approximately 800 tons of V2O5 equivalent in October, with impacts mainly stemming from the effect of the mining contract transition and corrective maintenance in the deammoniation area. Just like many of our peers, we continue to navigate similar global market uncertainties such as inflationary pressure and challenging supply chain environment this quarter, which when combined with the previously noted impacts, contribute negatively to our financial performance in Q3.
On the positive note, the company produced a significant amount of high purity material this quarter with 962 tons of high purity V2O5 equivalent being produced, representing the highest quarterly amount of high purity material produced by the company to date. This comes at an opportune time as high purity vanadium demands continue to increase in the aerospace and chemical sectors. Moving on, I'd like to discuss some additional progress we have made into our two pillar strategy in Q3. Let's begin with the mining pillar. As you'll note in the photo on the left, we have made considerable progress on the construction of our ilmenite concentration plant located in our mine site in Brazil. We've received all required metallic flotation structures and building of the desliming, flotation, filtration, warehouse, and pipe rack structures.
Commissioning of this plant is expected to be completed in Q2 of next year. On the clean energy pillar, we made additional progress towards the installation of our 6.1 MWh VRFB installation for Enel Green Power in Spain. We've completed the required stacks manufacturing for the battery system. Think of the stack as the heart of the battery. We have begun shipping them to deployment site in Spain, along with some storage tanks, components and electrolytes. The battery deployment site is now under construction, and we expect to begin equipment installation this month. Unfortunately, we continue to experience a number of shipping and logistical delays related to certain components of this system. We now expect the completion of the commissioning to be pushed into very beginning of the Q2 of next year.
I will also note that we've also commissioned and grid connected a small demonstration VRFB in Q3 that was previously installed by VionX Energy, the company we purchased our VRFB technology from in late 2020. This 3 MWh demonstration system is located not far from our manufacturing facility in Wilmington, and will be used by the company to further optimize performance of solar shifting application. To quickly cap off clean energy pillar update, during the last update call, we discussed the signing of a non-binding MoU with Saudi Green Tech to negotiate the formation of a joint venture for the manufacturing and commercial deployment of VRFBs in Europe, Africa, and Middle East power generation markets. We believe that if successful, the potential JV could address identified needs in the European energy sector, which are being compounded by the ongoing geopolitical conflicts.
However, we are limited in what we can discuss. I can say that the negotiations remain ongoing, and we will look to provide an update when appropriate. Lastly, I'm very pleased to report that Largo published its inaugural 2021 Task Force on Climate-Related Financial Disclosures climate report in October. Our initial climate report is largely qualitative, but it demonstrates that the company understand its current market and client expectation for climate-related transparency and underscores its commitment to improving Largo's ESG strategy. You can download this report through the sustainability section on our website. Additionally, we are very proud to announce that we are the recipient of the company of the year in the mining sector for Largo's work in social governance given by Brasil Mineral magazine.
This recognition is the result of our team's dedication to fulfilling our social responsibility policy, focused on sustainable development, mainly in the areas of education, culture, employment and income, sports and leisure. To close out, despite next term uncertainties, the long-term fundamentals for vanadium and our outlined growth opportunities remain highly attractive. Though we remain quite undervalued compared to our mining and energy peers, I'm very optimistic that as global conditions improves and we further execute our strategy, we expect that upsides from our two pillar strategy will create positive momentum for new and existing Largo shareholders. Now I'll turn the call over to our CFO, Ernest Cleave, to review our financial performance. Ernest, please.
Thanks, Paulo. Slide eight provides a brief summary of the company's third quarter financial performance. As Paulo mentioned, production issues, increased costs, and lower sales impacted the financial performance of the company this quarter. In Q3, we generated approximately $54 million in revenues from sales of 2,796 tons of V2O5 equivalent, or $8.80 per pound. Revenues in Q3 2022 were largely in line with revenues of $53.9 million in Q3 2021, while revenues per pound sold decreased approximately 3% year-over-year. Operating costs increased 42% to approximately $46 million in Q3 2022, largely driven by increases in direct mine and production costs and product acquisition costs. The increase in product acquisition costs reflects the company realizing costs from the sale of purchased vanadium material in Q3.
With lower sales of our produced material, cash operating costs excluding royalties were $4.86 per pound in Q3 2022, compared with $3.53 for Q3 2021. This increase is primarily attributable to production impacts during the quarter and cost increases in critical consumables, mainly sodium carbonate and heavy fuel oil. For the nine months ended September 30th 2022, cash operating costs excluding royalties were $4.36 per pound sold. As we've stated before, we continue to actively review and evaluate opportunities for cost reduction, but it is likely that on a unit cost basis, we will land in the upper range of our cash cost guidance of $4.10-$4.50 per pound sold for the year.
Other G&A expenses were $4.1 million in Q3 2022, with $1 million in Q3 2021, which is primarily attributable to a further $2 million increase in legal provisions. Professional consulting and management fees were $7.2 million in Q3 2022, compared with $4.9 million in Q3 of last year. This increase is primarily attributable to costs incurred in Q3 2022 in connection with Largo Clean Energy, which was not fully operational in Q3 2021, as well as transaction and listing related costs incurred by Largo Physical Vanadium in connection with the completion of its qualifying transaction. With that being said, the company recorded a net loss of $2.6 million in Q3 2022, or a basic loss per share of $0.04.
I'll note that this is inclusive of approximately $3 million in non-recurring expenditures, such as legal and listing costs for LPV, as well as an increase in legal provisions. Moving on to the balance sheet, cash at the quarter end was approximately $63 million, and the company had a net working capital surplus of $114 million. I'll note that vanadium held by LPV will now appear as a non-current asset on the balance sheet, and you will see it flow through investing activities on the cash flow statement. Cash used in investing activities was $17.7 million in Q3 2022, compared with $6.1 million for Q3 2021. The increase in expenditures primarily relate to the ilmenite project, costs associated with software implementation and cash outflows for vanadium assets.
Far this year, we've spent approximately $9 million in ilmenite planned CapEx and expect to spend another $9 million by year's end. Next year, we expect to spend approximately $17 million to complete the project. In October 2022, the company secured an additional debt facility of $20 million from the bank in Brazil. The facility is for three years with equal principal repayments due after 18, 24, 30, and 36 months. If necessary, the new facility allows the company to repay its existing debt facility and provide some additional flexibility to its working capital position going forward.
Looking ahead, if we consider a vanadium price of $8 per pound, our sales and cost guidance, no LPV purchases of vanadium assets, a Brazilian to U.S. dollar exchange rate that averages approximately 5 to 1, as well as the latest debt facilities, we estimate exiting the year with a cash balance of approximately $75 million-$80 million. On a net debt basis, that is a range of $40 million-$45 million. Importantly, I highlight again that these cash estimates assume no purchases of vanadium assets. Cash with an LPV at the end of September 2022 was approximately $22 million. The company's intention is to spend most of this cash on vanadium assets before the end of this year. Should that actually transpire, Largo's overall cash would be reduced by the amount of the spend.
I'll close out by mentioning that the company has been actively exploring opportunities to avail itself to portions of the recently passed Inflation Reduction Act in the U.S., which includes approximately $60 billion of clean energy manufacturing tax credits and $30 billion of tax credits for state and electric utilities to adopt clean energy and energy storage. Well, although this is by no means guaranteed, we believe that our U.S.-based clean energy business is a suitable candidate to qualify for some of these credits, and we will look to provide additional updates on our efforts as they progress. I will now turn the call over to our VP of Commercial, Paul Vollant.
Thanks, Ernest, and thanks everyone for joining today. We sold 2,796 tons of V2O5 equivalent in Q3, which included 351 tons of purchased products. We continue to deliver both standard grade and high purity V2O5, as well as ferrovanadium to customers and completed our first high purity V2O3 sales this quarter. Sales are up slightly over the same period last year, but were lower than expectations due to ongoing shipment delays and lower spot demand. Purchased product sales increased this quarter, are expected to decrease in the fourth quarter as tensions are easing. Subsequent to Q3, we sold 1,056 tons of V2O5 equivalent in October, which included 74 tons of purchased products. Demand in the steel market softened in Q3 2022 due to geopolitical uncertainties and concerns over energy prices and availability, most notably in Europe.
However, I'm pleased to report that high purity demand continues to recover from the lows of 2020, supported by renewed optimism in the travel and aerospace industries. Vanadium prices also softened this quarter compared to the same period last year, with the average benchmark price per pound of V2O5 in Europe being $8.23 in Q3, as compared to $9.40 in Q3 2021. This also marks a 26% decrease from the average of $11.08 seen in Q2 2022. On the ferrovanadium side, the average benchmark price per kilogram of ferrovanadium in Europe was $33.85 in Q3, a 12% decrease from Q3 2021, and a 24% decrease from the average of $44.22 seen in Q2 2022.
However, we continue to see healthy demand in our materials as we navigate through the final stretch of long-term contracting season. Lastly, I'm excited to report that Largo Physical Vanadium commence trading on the TSX Venture Exchange in September under the symbol VAND. LPV's business model is an important innovation in the vanadium and long duration energy storage industry by solving one of the biggest challenge for the commercialization of VRBs, the high cost and volatility of vanadium prices. With LPV, we can solve this problem by segregating and maintaining ownership of vanadium used in the VRBs. To date, LPV has purchased contracts for approximately 950 tons of V2O5 equivalent, and we continue to purchase additional units when possible. We launched a new website for LPV that includes weekly NAV calculation and displays quantities of held vanadium. You can access this at www.lpvanadium.com.
I'll stop there and turn it over to the operator for questions from our analysts.
Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one if you would like to signal with questions. Please limit yourself to two questions at a time and then re-queue for additional questions. Our first question will come from Alex Jackson with RBC Capital Markets.
Yeah. Afternoon, guys. Thanks for taking my question. My first one is just on the ramp-up of the new mining contractor at your operation. I was wondering if you could talk to how that's going and if you expect you know, sales and shipments to sort of maintain at the levels that they were in October and November, December. Thanks.
Thank you, Alex. Regarding the mining contractor, it was a concern that we were facing during the year. We are very happy with the performance with this company in the first month. You know, the transition started in September. In October already, it produced more than we planned. We are very happy with the performance of the new contractor and expecting that we'll have no problem at all with ore supply along the year and next year going forward. Paul, could you take this the shipment question, please?
Yes. On the shipment side, the good news is that we are seeing an improvement across the board in availability, pricing. All the logistics side, it's definitely a better picture than where we were six months ago. Although still recovering to get back on track to previous situation before COVID.
Thanks. That's helpful. The other one I had was just on the ilmenite plant. I was curious if you could provide any details on kind of a ramp-up timeline. I know you've outlined that commissioning would be sort of complete in Q2. I was wondering if there's any sort of production that you might be able to provide us a cadence of production throughout next year. Thanks.
Yeah. Ilmenite concentration plant is our first step of the titanium business. We expect to conclude that plant in Q2, specifically May. We start ramp up. We are expecting to have 3 months-4 months of ramp up until reaching 145,000 tons of ilmenite being produced. As we are running about two years with the pilot plant at site with the current material that we have been mining. We have already trained our employees. We have a very good knowledge on all the technical issues. I'm expecting a very smooth commissioning and ramp up for this production. I think it's really material, you know, to start developing our titanium project, which will optimize the mining asset in Maracás.
Understood. Thanks a lot for that. That's all for me.
Thank you.
Thank you once again. Once again, if you would like to signal with questions, please press star one. Again, that is star one if you would like to signal with questions. Our next question will come from Gordon Lawson with Paradigm Capital.
Hey, guys. Thanks for taking my call. Can you please elaborate on the high volume of vanadium trioxide in terms of if production is simply limited to contract demand from your aerospace and chemical customers, or is there a plant capacity limit?
Thank you, Gordon. I will take Paul Vollant to answer your question because it's primarily regarding sales. Paul, please.
Yes. Hi, Gordon. Today, the limiting factor is our contracting ability. We only started commercial production this year. As you know, vanadium contracts are done on a yearly basis for the following year, usually in Q4. We're actively negotiating at this very moment for contracts in 2023. However, as I said earlier, we delivered our first quantities in Q3, and we're also very hopeful for Q4 this year. There is a very good demand, and the market is received extremely well, the Largo coming to this market. We're hopeful that this sales campaign will be successful for next year volume and we can increase high purity V2O3 sales next year.
The $4 premium is in line with expectations?
Sorry?
The $4 premium over the V2O5, is that in line with expectations?
I'm not sure we've mentioned $4 premium. That's out of the market. It's not. Yeah, we're not getting $4 premium on V2O3.
Well, I'm switching over to ferrovanadium. I mean, obviously price has decreased, but they're still healthy versus previous quarters. Can you provide some color on your European buyers and what you're expecting in terms of volumes for 2023?
Yeah, sure. It's a good question. Ferrovanadium is in and around the long-term historical average if you account for inflation. We're actually a little bit below it. We all know about the latest strong inflation that has impacted, you know, everyone in our industry from in terms of cost and, you know, energy is an important input cost for ferrovanadium. I expect prices to be well supported in the coming quarters for ferrovanadium. For Largo, we, you know, the steel industry is always our largest sales sector for our products. We expect to continue to sell good quantities in ferrovanadium form.
Okay, thank you very much.
Thank you.
Thank you.
That does conclude the question and answer session. I'll now turn the conference back over to Alex Guthrie for any additional remarks.
Great, thanks. That concludes the Q&A session, everyone, and our quarterly investor conference call. Have a great day. Bye now.
Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.