TORONTO, Jan. 29, 2016 /CNW/ - Largo Resources Ltd.
("Largo" or the "Company") is pleased to announce
today that (i) it has closed a first tranche of its US$26,500,000 (approximately CDN$39,000,000) non-brokered offering (the
"Offering") of Units (as defined below) previously announced
in the Company's news release dated January
19, 2016 (the "First Tranche"), and (ii) the Company
has signed a binding term sheet with its consortium of existing
commercial banks in Brazil
(collectively, the "Lenders") for a new debt facility (the
"New Facility") and the restructuring of its export credit
facilities (the "Export Facilities") for its Maracás Menchen
Mine.
Mark Smith, President and Chief
Executive Officer for Largo, stated: "We sincerely appreciate the
support of both our new and existing shareholders as well as our
Lenders, who all remain committed to the on-going success of Largo
and its Maracás Menchen Mine. Working together with all of
our stakeholders we have been able to push through a challenging
few months and are now more confident than ever in the future
success of the Maracás Menchen Mine."
Closing of the First Tranche of the Offering
The Company is very pleased to announce that the closing of the
First Tranche resulted in gross proceeds to the Company of
CDN$13,285,982 from the sale of
75,919,898 units of the Company (the "Units"). The proceeds
realized from the First Tranche will be used for ongoing working
capital requirements at the Company's Maracás Menchen Mine which is
a condition of the Company's restructuring of its existing Export
Facilities with the Lenders, and for general corporate and working
capital purposes. The remainder of the Offering is expected to
close in full on or about February 4,
2016 (the "Second Tranche").
Each Unit was sold at a price of CDN$0.175 and consists of one common share of the
Company (each, a "Common Shares"), and one-half of one
common share purchase warrant (each whole warrant, a
"Warrant"). Each Warrant will be exercisable into one Common
Share at a price of CDN$0.29 per
share for a period of five years from closing of the Offering.
Funds managed by Arias Resource Capital Management LP (the
"ARC Funds") purchased an aggregate of 62,176,283 Units in
the First Tranche for gross proceeds to the Company of CDN$10,880,849.53. The ARC Funds are a "Control
Person" of the Company (as defined in the TSX Venture Exchange
Corporate Finance Manual). Prior to the closing of the
Offering, the ARC Funds owned approximately 46.30% of the Company's
issued and outstanding Common Shares and following closing of the
First Tranche, the ARC Funds own approximately 55.98% of the
Company's then issued and outstanding Common Shares (or
approximately 64.72% of the Company's issued and outstanding Common
Shares in the event that the ARC Funds exercised all of the
convertible securities held by them). The Company anticipates that
the ARC Funds will subscribe for additional Units in the Second
Tranche. The shareholders of the Company approved the creation of
the ARC Funds as a Control Person of the Company at the annual and
special meeting of the shareholders of the Company held on
June 27, 2013. The ARC Funds'
participation in the Offering was conditional upon several
conditions, including the execution and delivery of an amendment to
the director nomination agreement entered into on May 22, 2015 pursuant to which Largo will permit
the ARC Funds to designate one additional person to be nominated
for election to Largo's board of directors by Largo shareholders,
including at the next annual meeting of Largo shareholders, for so
long as the ARC Funds, whether individually or together, own at
least 50% of the issued and outstanding Common Shares. These
nomination rights are in addition to the ARC Funds' existing
nomination rights more fully set out in the Company's press release
issued on May 22, 2015 and,
accordingly, assuming the ARC Funds ownership remains equal to or
above 50% of the issued and outstanding Common Shares, the ARC
Funds will designate four of the seven persons to be nominated for
election as directors at the next annual meeting of Largo's
shareholders.
In addition, Mr. Mark Smith,
President and Chief Executive Officer and a director of Largo,
subscribed for an aggregate of 2,500,000 Units in the First
Tranche.
The Offering was considered and approved by the board of directors
of the Company. J. Alberto Arias, a
director of Largo who is also the sole director of each of the
general partners of the ARC Funds and indirectly controls Arias
Resource Capital Management LP, Sam
Abraham, a director of Largo and an employee of Arias
Resource Capital Management LP, and Mark
Smith, President, Chief Executive Officer and a director of
Largo, each declared a conflict and recused themselves from voting
on the Offering. The remaining directors voted unanimously to
approve the Offering.
Pursuant to Multilateral Instrument 61-101 – Protection of
Minority Security Holders in Special Transactions ("MI
61-101"), the purchase by the ARC Funds of the Units under the
Offering is a "related party transaction". The Company is exempt
from the requirements to obtain a formal valuation or minority
shareholder approval in connection with the Offering in reliance on
section 5.5(g) of MI 61-101, as the Company is in serious financial
difficulty and the Company's board of directors, acting in good
faith, have all determined that (i) the Company in serious
financial difficulty, (ii) the Offering is designed to improve the
financial position of the Company, and (iii) the terms of the
Offering are reasonable in the circumstances of the Company. In
addition, the Company is currently not subject to any court
approval under bankruptcy or insolvency law or section 191 of the
Canada Business Corporations Act or any equivalent
legislation of another jurisdiction and the Company has one or more
independent directors in respect of the Offering. The material
change report is being filed less than 21 days before the closing
of the Offering as the Company requires the consideration it will
receive in connection with the Offering immediately for working
capital purposes.
Entering into of New Facility and the Restructuring of the
Export Facilities
Largo is pleased to announce that, further to its press release
dated December 17, 2015, it has
entered into a binding term sheet with the Lenders for its New
Facility and the restructuring of its Export Facilities. The terms
of the New Facility include:
- Working capital facility of up to R$104,596,000 (Brazilian reais), disbursed in 11
monthly payments over 2016 (the "Disbursement Date").
- Working capital facility of up to R$8,151,000 (Brazilian reais), disbursed in 11
monthly payments over 2016.
- Working capital facility in an amount equivalent to the
mark-to-market value of the swap contract applicable to one of the
Company's Export Facilities.
- Margin equal to the Interbank rate ("CDI") + 5.70% per
annum.
- Two-year grace period on the payment of interest and principal,
measured from the Disbursement Date. Quarterly repayment (in
arrears) of the New Facility commences after the end of the grace
period.
- Final maturity 84 months after the Disbursement Date.
- Use of proceeds strictly to pay interest and principal falling
due under the Company's existing construction debt facility and to
pay the swap settlements pertaining to one of the Company's Export
Facilities.
The restructuring of the Export Facilities includes the
amendment to set forth that the principal and interest installments
due for the 12 months after the Disbursement Date shall be payable
on the same payment terms of the New Facility. The binding term
sheet requires the Company to comply with various amended financial
and non-financial covenants during the term of the grace periods.
At the completion of the grace period, the Company will be
obligated to comply with the covenants set forth in the existing
debt facilities.
Mark Smith, President and Chief
Executive Officer for Largo, stated: "We believe the Maracas
Menchen Mine has now proven its technical merit and will benefit
greatly from any increase in Vanadium prices from the current
historic lows."
About Largo
Largo (TSX-V: LGO) is a growing strategic mineral company
focused on continuing the production of vanadium at its Vanadio de
Maracás Menchen Mine.
Vanadium is primarily used as an alloy to strengthen steel and
reduce its weight. Vanadium enhanced steels are used in a vast and
growing range of products that are used and encountered every day;
including, rebar, automobiles, transport infrastructure etc. With
consumption increasing at a compound annual growth rate of over 8%
for the past several years (Roskill, 2015), vanadium is a
bourgeoning commodity which lacks opportunities for investment in
the wider market place. As trends in the steel industry now demand
increasingly stronger and lighter products for advanced
applications, the use of vanadium is expected to continue this
growth over the medium and long term.
Largo also has interests in a portfolio of other projects,
including: a 100% interest in the Currais Novos Tungsten Tailings
Project in Brazil; a 100% interest
in the Campo Alegre de Lourdes Iron-Vanadium Project in
Brazil; and a 100% interest in the
Northern Dancer Tungsten-Molybdenum property in the Yukon Territory, Canada.
Largo is listed on the TSX Venture Exchange under the symbol
"LGO".
For more information please refer to Largo's website:
www.largoresources.com
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Disclaimer:
This press release contains forward-looking information under
Canadian securities legislation. Forward-looking information
includes, but is not limited to, statements with respect to
completion of any financings; Largo's development potential and
timetable of its operating, development and exploration assets;
Largo's ability to raise additional funds necessary; the future
price of vanadium, tungsten and molybdenum; the estimation of
mineral reserves and mineral resources; conclusions of economic
evaluation; the realization of mineral reserve estimates; the
timing and amount of estimated future production, development and
exploration; costs of future activities; capital and operating
expenditures; success of exploration activities; mining or
processing issues; currency exchange rates; government regulation
of mining operations; and environmental risks. Generally,
forward-looking statements can be identified by the use of
forward-looking terminology such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved". All
information contained in this news release, other than statements
of current and historical fact, is forward looking information.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Largo to be
materially different from those expressed or implied by such
forward-looking statements, including but not limited to those
risks described in the annual information form of Largo and in its
public documents filed on SEDAR from time to time.
Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made.
Although management of Largo has attempted to identify important
factors that could cause actual results to differ materially from
those contained in forward-looking statements, there may be other
factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove
to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements. Largo does not undertake to update any forward-looking
statements, except in accordance with applicable securities laws.
Readers should also review the risks and uncertainties sections of
Largo's annual and interim MD&As.
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SOURCE Largo Resources Ltd.