Largo executes new Brazilian bank facility

JOHANNESBURG (miningweekly.com) – TSX-V-listed Largo Resources’ Vanadio de Maracás (VMSA) subsidiary has entered into definitive agreements with a consortium of existing commercial banks in Brazil for a new debt facility, as well as to restructure the export credit facilities for the Maracás Menchen mine.

Largo in December signed an indicative term sheet with the banks for the new facility, which would provide it with a R$104.6-million working capital facility to be disbursed over 11 months.

The agreement also set out a two-year grace period on the payment of interest and the principal loan, after which quarterly payment would start.

The facility would mature 84 months after the disbursement date and the proceeds would be used strictly to pay interest and principal falling due under the company's existing construction debt facility, and to pay the swap settlements relating to one of the company's export facilities.

The new facility and the implementation of amendments to the export facilities were, however, contingent on Largo and VMSA securing an additional $15-million in equity funding and the filing of the definitive documents with certain registries in Brazil. 

Largo expected to close the second and final tranche of a $26.5-million equity financing soon.

Concurrently with the new facility, Largo had also agreed to new commercial terms for an up to $4-million loan facility with Banco Pine to roll over its existing facility on roughly the same terms as the new facility, while VMSA had agreed to commercial terms with Banco Pine for a new facility of up to R$80-million to close out its existing swap contracts with Banco Pine. 

“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 global 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,” said Largo CEO and president Mark Smith.