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Symbol: LGO
(TSX.V)
• BNDES
to provide US$ 180 million facility
• Bank Itau
and Bank Votorantin to provide $30 million Bridge
Loan
• Company to raise additional $14
million in Equity
• Engages Runge Mining Ltd. to complete updated 43-101 technical
report to detail economics of the project
Largo
Resources Ltd. ("Largo" or the "Company")
is pleased to announce that the previously disclosed commitment for a debt
financing facility with the Business Development Bank of Brazil ("BNDES")
for its Maracas Project in Bahia, Brazil remains firmly
in place and is targeted for completion by the end of the First Quarter 2012
(see press release dated October 31, 2011). The BNDES and a consortium
of commercial banks, led by Banco Itau BBA S.A., acting as guarantors, are currently
finalizing terms and requirements of the agreement.
In order
to further development Largo's Vanadium project located in Maracas, Brazil (the
"Maracas Project") in the interim, Largo has negotiated a short
term secured bridge loan facility (the "Bridge Loan") from Banco Itau BBA S.A. and Banco Votorantim S.A. (collectively,
the "Banks"), for a principal amount of USD$30 million (see
details of the Bridge Loan below). In order to complete the BNDES financing
and the Bridge Loan, and as a consequence of projected cost increases due
mainly to inflation, the strength of the Brazilian currency and the
requirement for additional contingency funds, the Company additionally
announces that it will raise supplementary equity funding through a proposed
non-brokered private placement offering (the "Offering") of
up to 63,636,363 units (each a "Unit") of the Company at a
price of Cdn$0.22 per Unit for aggregate gross proceeds to
the Company of up toCdn$13,999,999.86 (see below for full details of the
Offering).
Mark
Brennan, President and Chief Executive Officer stated: "At each stage of
the engineering and financing process, we are becoming increasingly more
confident that we will bring the Maracas Project to fruition. We
are confident that the BNDES debt facility will conclude shortly and
believe that the Bridge Loan serves to indicate both Bank Itau and Bank Votorantim's commitment
to its closure and the development of the Maracas Project. "
Mr.
Brennan continued, "As we proceed through the engineering process
leading to construction, some capital expenditures have increased as a result
of general cost inflation and the strength of the Brazilian currency. That
said, the merits and profitability of this project
remain very strong. With Maracas in production Largo will be positioned to be
a leader in the vanadium market and in turn, provide significant returns to
our shareholders."
Additionally,
Largo announces that it has engaged Runge
Mining Ltd. to complete an updated NI 43-101 compliant Technical Report
to outline the revised economics of the project. The findings of this report
will be announced in a press release before the end of April 2012 with
the corresponding Technical Report to be filed on SEDAR within 45 days of the
release.
Bridge
Loan
The
Company has negotiated the Bridge Loan with the Banks for a principal amount
of USD$30 million. The principal under the Bridge Loan shall incur
interest at a rate of CDI+4.65% per year1 and shall mature on June
30, 2012. The principal amount shall be drawn down by the Company in two
tranches, the first tranche in the amount of US$12 million and the
second tranche in the amount of US$18 million. It is anticipated that
the first draw down will occur on or about March 9, 2012 and that
the second draw down will occur no later than March 31, 2012. Pursuant
to the terms of the Bridge Loan, Largo's subsidiaries, Companhia
de Maracás ("CDM")
and Vanadio de Maracas S.A., the holder and
operator of the Maracas Project, as the case may be, shall grant the
Banks (a) a security interest over the outstanding common shares of Vanadio de Maracas S.A. upon draw-down of the first
tranche of the Bridge Loan, and (b) a first priority mortgage over the Maracas
Project, a security interest over the mineral rights in the Maracas
Project and certain other security upon draw-down of the second tranche
of the Bridge Loan.
Conditions
precedent for the closing of the Bridge Loan include receipt by the Company
of a minimum additional equity investment of not less than US$11 Million (discussed
below) and extension of the Expiry Date of the Subscription Receipts (each as
defined below) of the Company to December 31, 2012.
Equity
Financing
In order
to facilitate the BNDES financing and the Bridge Loan, the Company also
announces the Offering which is expected to close on or about March 12,
2012. Each Unit under the Offering will be comprised of one common share in
the capital of the Company (each a "Common Share") and one
Common Share purchase warrant (each, a "Warrant") where each
Warrant will entitle the holder to acquire one further Common Share at a
price ofCdn$0.30, exercisable up until that date which is 48 months from the
date of issue.
Largo is
pleased to announce that each of Ashmore Cayman SPC
No. 2 Limited on behalf of and for the account of Largo Resources Segregated
Portfolio ("Ashmore"), Eton
Park Capital Management, L.P. on behalf of one or more funds managed by
it (the "Eton Park Funds"), Arias Resource Capital
Management L.P. on behalf of one or more funds managed by it (the "ARC
Funds") and Mackenzie Investments on behalf of one or more funds
managed by it ("Mackenzie") (each of Ashmore, the Eton Park Funds, the ARC Funds and Mackenzie
being a "Lead Investor", and collectively, the "Lead
Investors") have agreed to take-up all Units issued in connection
with the Offering.
The
securities issued pursuant to the Offering will all be subject to a 4 month
regulatory hold period commencing on the date of closing. The Offering
remains subject to TSX Venture Exchange acceptance of requisite regulatory
filings.
Amendment
of Existing Subscription Receipts
In
addition to the Offering and as a condition precedent to the Bridge Loan,
Largo has agreed with the overwhelming majority of holders (the "Amending
Holders") of subscription receipts (each a "Subscription
Receipt") of the Company, including the Lead Investors, to
amend (the "Amendments") the terms of 210,524,901
Subscription Receipts (the "Amended Subscription Receipts")
as further described below.
An
aggregate of 242,718,844 Subscription Receipts and 85,714,286 units (the
"April Offering Units") were issued and sold by Largo, for
aggregate gross proceeds to the Company of Cdn$114,951,595.50 pursuant
to the Company's non-brokered private placement (the "April Offering")
previously announced by Largo on April 11, 2011. The Lead Investors participated
as the lead orders in the April Offering and acquired a significant
proportion of the April Offering Units and Subscription Receipts issued in
the April Offering. Each April Offering Unit and Subscription Receipt
was originally offered at a price of Cdn$0.35 per April Offering
Unit or Subscription Receipt. Each Subscription Receipt was convertible into
one unit (each a "Subscription Receipt Unit") of the Company
until April 8, 2012 (the "Expiry Date"), with each
Subscription Receipt Unit comprised of one Common Share and one-third (1/3)
of one common share purchase warrant (each a "Subscription Receipt
Warrant"). Each Subscription Receipt Warrant entitled the holder to
acquire one further Common Share at a price of Cdn$0.50 for a
period of 48 months from the date of issuance.
An
aggregate of Cdn$84,951,595.40 (the "Escrowed Funds"),
being the gross proceeds from the issuance of the Subscription Receipts under
the April Offering, was placed into escrow pending the conversion of the
Subscription Receipts upon the satisfaction by the Company of certain escrow
release conditions (the "Escrow Release Conditions").
As
previously announced by Largo on December 9, 2011, certain holders of
Subscription Receipts subsequently agreed with the Company to exercise an
aggregate of 31,428,571 Subscription Receipts in advance of the satisfaction
by the Company of the Escrow Release Conditions. This partial release
resulted in the release from escrow of an aggregate of Cdn$10,999,999.85 (plus
interest earned thereon). Accordingly, as of the date hereof an aggregate of
211,290,273 Subscription Receipts remain issued and outstanding, with
Escrowed Funds remaining in the amount of Cdn$73,951,595.55.
Pursuant
to the Amendments: (a) the Expiry Date will be extended to December 31,
2012; (b) certain Escrow Release Conditions will be revised to add certain
additional terms (see Schedule "A" for complete revised Escrow
Release Conditions) to provide further certainty in the Escrow Release
Conditions and to remove certain rights previously provided to the Lead
Investors; (c) effective on the date of the Amendments, the number of
Subscription Receipts held by each Amending Holder shall increase by a factor
of 7/6, or an aggregate of 35,087,483 Subscription Receipts, resulting in an
aggregate of 246,377,756 Subscription Receipts being issued and outstanding
upon completion of the Amendments and resulting in an effective price of Cdn$0.30 per
Subscription Receipt Unit issuable upon conversion of the Amended Subscription
Receipts; (d) also effective on the date of the Amendments, the exercise
price of the Subscription Receipt Warrants shall be decreased from Cdn$0.50
to Cdn$0.40; (e) in the event the Escrow Release Conditions have not been met
on or before April 8, 2012, the number of Subscription Receipt Units
into which the Amended Subscription Receipts convert shall be increased by a
factor of 1.2, resulting in an aggregate of 294,734,862 Subscription Receipt
Units being issuable on conversion of the Amended Subscription Receipts on
and after such date and resulting in an effective price ofCdn$0.25 per
Subscription Receipt Unit; and (f) also in the event the Escrow Release
Conditions have not been met on or before April 8, 2012, the exercise
price of the Subscription Receipt Warrants shall be further decreased from Cdn$0.40
to Cdn$0.35.
Following
the completion of the Amendments, an aggregate of Cdn$73,951,595.55 shall
continue to remain in escrow pursuant to and in accordance with the terms of
(i) the Subscription Receipts, as amended, and (ii)
the related escrow agreement between Equity Financial Trust Company and
the Company, among others, which agreement shall be amended and restated
concurrently in order to, among other things, implement the Amendments.
As a condition of the TSX Venture Exchange's approval of the Amendments, the
Governance Agreement (previously announced and further described by Largo in
its April 11, 2011 press release) will also be amended and restated
to reduce certain voting requirements for any resolutions relating to the
Escrow Release Conditions to regular board approval as opposed to the
approval of six of Largo's seven directors as had been provided under the
Governance Agreement.
The
Amended Subscription Receipts and the Common Shares and Subscription Receipt
Warrants underlying the Amended Subscription Receipts shall be subject to a 4
month regulatory hold period commencing from the date of the
Amendments. The Amendments remain subject to TSX Venture Exchange
acceptance of requisite regulatory filings.
The Bridge
Loan, the Offering and the Amendments were considered and approved by the
board of directors of the Company. Dirk Donath,
a director of Largo and Senior Managing Director and Partner at Eton
Park Capital Management, L.P., the investment manager of the Eton Park Funds
and J. Alberto Arias, a director of Largo and President of Arias
Resource Capital Management L.P., the general partner of the ARC Funds,
declared their respective conflicts and recused themselves from voting on the
Offering and Amendments. There was no materially contrary view or abstention
by any director approving the Bridge Loan, the Offering or the Amendments.
Upon
closing of the Offering and the Amendments, the ARC Funds will own an
aggregate of 85,725,393 Common Shares of Largo, representing approximately
16.23% of the issued and outstanding Common Shares of the Company. Upon
closing of the Offering and the Amendments, the Eton Park Funds will own an
aggregate of 47,289,744 Common Shares of Largo, representing approximately
8.95% of the issued and outstanding Common Shares of the Company. Upon
closing of the Offering and the Amendments, Ashmore will
own an aggregate of 47,289,744 Common Shares of Largo, representing
approximately 8.95% of the issued and outstanding Common Shares of the
Company. Upon closing of the Offering and the Amendments, Mackenzie
will own an aggregate of 76,272,267 Common Shares of Largo, representing
approximately 14.44% of the issued and outstanding Common Shares of the
Company.
The Company
is exempt from the requirements to obtain a formal valuation or minority
shareholder approval in connection with the Offering and the Amendments in
reliance on sections 5.5(a) and 5.7(a), respectively, of Multilateral
Instrument 61-101 ("MI 61-101"), as neither the fair
market value of the securities received by the ARC Funds and Mackenzie nor
the proceeds for such securities received by the Company exceeds 25% of the
Company's market capitalization as calculated in accordance with MI 61-101.
The material change report is being filed less than 21 days before the
closing of the Offering and the Amendments as the Company requires the
consideration it receives in connection with the Offering and the Amendments
immediately to facilitate and secure the Bridge Loan for working capital
purposes. The Company had been considering various sources of
funding. Given time constraints, the Company elected to proceed with
the Bridge Loan, the Offering and the Amendments upon agreement with the
Amending Holders.
________________________________________
1 Where (i) the CDI percentage
shall be computed based on the annual average rate (considering a year of 252
days) relating to transactions with Interbank Deposit Certificates ("CDI")
with a term equal to one (1) business day (over), as determined and published
by the Clearing House for the Custody and Financial Settlement of
Securities (CETIP), with the daily factor rounded to the eighth decimal
place; and (ii) the fixed rate, whenever a fixed rate is defined, shall also
be computed on an accrual basis, but based on a year of three hundred and
sixty (360) days. Whenever the CDI percentage is zero, the Interest shall be
deemed fixed.
About
Largo
Largo is a
Canadian-based mineral resource exploration and development company focused
on creating a world leading strategic metals company. Largo currently
holds a 90% interest in the Maracás Vanadium
Project, a 100% interest in the Currais Novos Tungsten Tailing Project, a 100% interest in the Campo
Alegre de Lourdes Iron-Vanadium Project, all in Brazil,
and a 100% interest in the Northern Dancer Tungsten-Molybdenum property
located in the Yukon Territory, Canada. The immediate goal of the
Company is to develop the Maracás Vanadium
Project by Q2 2013 and produce WO3 concentrate from the
reprocessing of tungsten tailings from Currais Novos. Largo's skilled management team both in Canada and Brazil,
are confident in their ability to advance these projects.
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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