Largo Resources Receives Term Sheet for Debt Restructuring

After receiving some skepticism from at least one analyst regarding its production guidance and outlook for 2015, Largo Resources (TSXV:LGO) appears to have made progress towards a debt restructuring agreement. The company announced Monday that it had received a non-binding indicative term sheet from its existing lenders to defer its debt amortization schedule and extend maturities for its construction debt facility for the Maracas Menchen Mine.

At close of day on Monday, shares of Largo were up roughly 10 percent to $1.05 on the news. Trading volumes were about two-thirds the daily average for the company.

As quoted in the press release:

The current term sheet envisages a deferral of one year to the amortization repayment schedules for all the Facilities and an extension in the maturity of two years for the export credit facilities and three years for the main construction facility.

The term sheet is indicative in nature and remains subject to approval from each of the Lenders credit committees and some other conditions precedent prior to closing. Largo anticipates that the process will be concluded prior to the commencement of the amortization period on its existing Facilities.

Largo Resources president and CEO, Mark Brennan, said:

We are extremely pleased to have received this indicative term sheet from our Lenders. Although not yet finalized, we believe this indicative term sheet demonstrates our Lenders support of the Project and their willingness to engage in productive negotiations. We at this time remain confident that a suitable conclusion will be reached in the near term.

While we have seen a deterioration in commodity prices that has an impact on near term cash flow generation, the Maracas Menchen Mine has improved markedly on an operational basis from a year ago and remains extremely viable, particularly once the current ramp up has been achieved.

Click here to read the Largo Resources (TSXV:LGO) press release

About Largo

“Largo (TSX-V: LGO) is a growing strategic mineral company focused on continuing to ramp-up production at its Vanadio de Maracás Menchen Mine.

Largo’s Maracás Menchen Mine boasts the highest grade vanadium deposit yet discovered and is expected to be a low cost producer. With an off-take in place with Glencore, Largo is well positioned to become a leading producer of vanadium globally and is expected to generate substantial cash-flows.

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.”