Largo to sell 14.262M shares at $1.22 in registered direct offering

Largo (LGO) announced that it has entered into securities purchase agreements with institutional and accredited investors for the purchase and sale of 14,262,309 common shares of the company at a purchase price of $1.22 per common share in a registered direct offering for aggregate gross proceeds of $17.4M. In a concurrent private placement, the company will issue unregistered warrants to purchase up to 14,262,309 common shares with an exercise price of $1.22 per warrant that will be immediately exercisable upon issuance and will expire five years from issuance. The closing of the offering is expected to occur on or about October 22, subject to the satisfaction of certain closing conditions and approval from the TSX, as further described below. In a concurrent private placement, Arias Resource Capital Fund III, an affiliate of the company’s largest shareholder, has agreed to provide the company with financing of $6M and has entered into a securities purchase agreement to acquire 4,918,033 common shares and 4,918,033 warrants. Such offering shall be a private placement on the same terms as the common shares and warrants offered pursuant to the offering. A portion of the ARC Commitment may be advanced by way of a $5M secured convertible bridge loan which would reduce the ARC Commitment by $5M. If provided, the ARC bridge loan would automatically convert on the closing of the offering into units consisting of unregistered common share and warrants on the same terms as the offering. The ARC Bridge Loan will carry an interest rate of 12% per annum, payable upon maturity in two years or immediately upon default. The ARC bridge loan will be secured against the common shares of Largo Resources, a wholly owned subsidiary of the company. The proceeds of the potential ARC Bridge Loan would be used to make an equity contribution to Largo’s principal operating subsidiary, Largo Vanadio de Maracas S.A. and would be used by LVMSA for working capital purposes; payments to the senior lenders to LVMSA would occur following the closing of the Offering and ARC Offering. Alberto Arias is director and chair of the board of directors of the Company and funds managed by Arias Resource Capital have been a significant investor of the Company since 2010. H.C. Wainwright & Co. is acting as sole placement agent for the offering and the ARC offering. The use of proceeds from the ARC Bridge Loan will be to sustain the company’s working capital until 2026, and the use of proceeds of the Offering and the remaining proceeds from the ARC Offering, net of placement agent fees and other Offering expenses payable by the Company, will be to make payment to the company’s Brazilian lenders and payments to the mining contractor at the Maracas Menchen Mine and other key suppliers, which is already starting to negatively impact rates of mine production due to liquidity constraints.