Largo Resources Ltd. announces execution of new Brazilian bank facility and restructuring of its export facilities
Largo Resources Ltd. (TSX-V:LGO) (“Largo” or the “Company“) is pleased to announce that, further to its press release of January 29, 2016, Vanadio de Maracás SA (“VMSA“), the Company’s operating subsidiary, has entered into definitive agreements 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.
The terms of the New Facility, consistent with the previously announced binding term sheet with the Lenders, include:
- Working capital facility of up to R$104,596,000 (Brazilian reais), disbursed in 11 monthly payments over 2016.
- Working capital facility in an amount equivalent to the mark-to-market value of the swap contract applicable to one of the Company’s Export Facilities.
- Margin equal to the Interbank rate (CDI) + 5.70% per annum.
- Two-year grace period on the payment of interest and principal, measured from the disbursement date. Quarterly repayment (in arrears) of the New Facility commencing after the end of the grace period.
- Final maturity 84 months after the disbursement date.
- Use of proceeds strictly to pay interest and principal falling due under the Company’s existing construction debt facility and to pay the swap settlements pertaining to one of the Company’s Export Facilities.
The restructuring of the Export Facilities includes an amendment confirming that the principal and interest installments due for the 12 months after the Disbursement Date will be payable on the same payment terms of the New Facility, including, the addition of a grace period.
Funding under the New Facility and the implementation of amendments to the Export Facilities remain contingent on Largo and VMSA securing an additional US$ 15 million in equity funding and the filing of the definitive documents with certain registries in Brazil. In order to meet this financial condition, Largo expects to the close the second and final tranche of its previously announced equity financing imminently (see January 19 and 29, 2016 press releases).
Concurrently with the New Facility, Largo has agreed to new commercial terms for an up to US $4,000,000 loan facility with Banco Pine to roll over its existing facility on roughly the same terms as the New Facility and VMSA has also agreed to commercial terms with Banco Pine for a new up to R$ 80,000,000 facility to close out its existing swap contracts with Banco Pine.
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Mark Smith, President and Chief Executive Officer for Largo, stated: “With a world class vanadium resource, well established metallurgy, low unit production costs and a high performance team, Largo has been able to successfully restructure its debt and is now in a position to close the final tranche of its current financing imminently. With the changes occurring in the world-wide vanadium market, including, bankruptcy proceedings for several South African vanadium producers, similar troubles in Russia and fundamental changes in the Chinese vanadium industry, including the cessation of operations at several older vanadium slag producing steel mills and the increased importation of seaborne iron ore that does not contain vanadium, Largo is now well positioned for success as the world faces a potentially significant reduction in vanadium supply.”
Largo (TSX-V: LGO) is a growing strategic mineral company focused on continuing production 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 a compound annual growth rate of over 6% for the past several years (Roskill, 2013), 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“.
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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