Vanadium producer Largo launches $26.5m private placement

TORONTO (miningweekly.com) – As one of the conditions under which vanadium producer Largo Resources restructured its credit facilities in December, the company on Tuesday announced that it had arranged a non-brokered private placement offering for expected total gross proceeds of up to $26.5-million.

Largo in December succeeded in restructuring its existing credit facilities with a consortium of Brazilian lenders, under condition that it raised another $20-million for ongoing working capital requirements at the Maracás Menchen mine.

Under the offering, Largo planned to issue up to 222.9-million units at a price of C$0.175 apiece. Each unit would comprise one common share and half a purchase warrant. Each whole warrant would be exercisable into one common share at a strike price of C$0.29 per share for a period of five years from closing of the offering.

Largo planned to use the proceeds from the offering for ongoing working capital requirements at Maracás Menchen and for general corporate and working capital purposes.

The offering was expected to close Friday and was subject to certain closing conditions and regulatory approvals.

Largo expected insiders to buy the bulk of the units offered.

KEEPING AFLOAT
Despite the strong performance of the company’s Maracás Menchen mine during its ramp-up to commercial production, the company continued to incur operating losses, which was mainly attributable to the price of vanadium oxide more than halving in 2015.

To remain operating, Largo in December signed a term sheet with its Brazil-based consortium of existing commercial banks for a new debt facility and the restructuring of its export credit facilities for its Maracás Menchen mine.

Under the terms of the new facility, the miner would have a working capital facility of R$104.6-million, which would be disbursed in 12 monthly instalments, starting in January.

There would be a two-year grace period on the payment of interest and the principal of the loan, after which quarterly payments, in arrears, would start.

The loan facility would mature 84 months after the disbursement date.

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.

There was also the possibility of the lender making an additional working capital facility of up to R$117.8-million available, conditional upon, among other things, the company raising further working capital in an amount to be agreed with the lenders.

The restructuring of the export facilities included the amendment establishing that the principal and interest instalments due for the 12 months after the disbursement date are payable on the same payment terms of the new facility.