Omai Gold Mines

Largo Resources Announces Non-Binding Term Sheet to Restructure and Convert Existing Debt Facilities with Banco Pine

TORONTO, July 24, 2017 /CNW/ - Largo Resources Ltd. ("Largo" or the "Company") (TSX: LGO) (OTCQB: LGORF) is pleased to announce that it, along with its operating subsidiary, Vanádio de Maracás S.A. ("Vanádio"), have entered into a non-binding term sheet for the restructuring and conversion of their existing debt facilities with Banco Pine S.A (the "Lender").

Highlights of the Proposed Arrangement:

  • Conversion of an existing USD $4,425,475 credit facility between the Company and the Lender (the "USD Facility") into common shares of Largo to be issued within 60 days from the date of a definitive agreement (the "Agreement"); and
  • Renegotiation of the repayment schedule for an existing BRL $89,127,631 credit facility (including accrued interest) between Vanádio and the Lender and guaranteed by Largo (the BRL Facility") and, upon fulfilment of certain payment milestones, the long-term restructuring of the BRL Facility.

Details of the Debt-to-Equity Conversion

The Company and the Lender anticipate the Agreement to provide for the conversion of the full outstanding amount under the USD Facility into common shares of Largo. The converted common shares would be issuable within 60 days from the date of the Agreement. Until the Agreement has been finalized and the conversion has occurred, interest shall accrue on the outstanding amount of the USD Facility in accordance with the underlying loan agreement. The Lender will also receive a restructuring fee that may be payable in common shares. Any debt-to-equity conversion contemplated by the Agreement will be subject to receipt of all required approvals.

It is expected that, upon conversion of the debt to common shares, the Lender will enter into a lock-up agreement under which it will not sell, assign, encumber or otherwise dispose of the converted common shares for six months from the execution of the Agreement.

Details of the BRL Facility Restructuring

It is anticipated that, under the terms of the Agreement, the payment schedule for the BRL Facility will be amended to allow Vanádio up to 290 days from the execution of the Agreement to pay USD $8,500,000 (approximately BRL $26,800,000) towards the outstanding amount of the BRL Facility (the "Initial Payment"). If, following the Initial Payment, the outstanding amount of the BRL Facility is higher than BRL $69,000,000, Vanádio must make an additional payment to reduce the outstanding amount of the BRL Facility to this amount.

Upon fulfilment of the Initial Payment, it is expected that the remaining amount outstanding under the BRL Facility will be refinanced through a new loan agreement, the terms of which are likely to include:

      1. a maturity date 7 years from the date of execution;
      2. a floating interest rate equal to IPCA ("Índice Nacional de Preços ao Consumidor Amplo"; the Broad Consumer Price Index, currently 3.0%), with a cap of 12% per annum;
      3. any interest accruing during the first 12 months from the Initial Payment shall be paid at the end of the first year. Thereafter interest shall be paid on a semi-annual basis until December 2021. From January 2022 until the maturity date interest shall be paid monthly;
      4. no outstanding principal shall be repayable until 2021. At which time, 1% of the principal shall be repaid in 2021; 5% of the principal shall be repaid in 2022; 15% of the principal shall be repaid in 2023; and the balance of the principal shall be repaid in monthly instalments until maturity; and
      5. Vanádio shall have the right to prepay the outstanding amount under the restructured facility at any time.

Mark Smith, President and Chief Executive Officer for Largo, stated: "We believe that the proposed restructuring of these facilities will result in a debt profile that enables the Company to more accurately match its future cash flows with its debt servicing obligations. We are very pleased with the strong support shown by Banco Pine in working with the Company to find a solution that benefits both parties.  This outcome would not have been possible without all of the hard work of the Largo team that has enabled us to provide stable production at a low unit cost. This foundation along with our world class resource will ensure the future success of Largo as vanadium prices continue to rise."

About Largo

Largo Resources Ltd. is a growing strategic mineral company focused on the production of vanadium pentoxide 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. As trends in the steel industry now demand increasingly stronger and lighter products for advanced applications, the use of vanadium is expected to grow 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. For more information, please visit www.largoresources.com.

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Largo Resources

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