TORONTO (miningweekly.com) – TSX-V-listed Largo Resources has agreed to a term sheet with certain funds managed by Arias Resource Capital Management (ARC Funds) for a C$12-million nonrevolving, convertible term loan facility, bearing an interest rate of 20% a year.
The company would use the proceeds of the bridge loan exclusively to finance development costs and for general corporate purposes of the Vanadio de Maracás Menchen mine, in Bahia state, Brazil.
The loan, which was expected to close on Friday, was subject to final TSX-V approval and executing definitive agreements.
The loan would have a six-month term and would be drawn down over a number of weeks on a biweekly basis. It would be secured by a pledge of securities and guaranteed by a Largo subsidiary, Campo Alegre de Lourdes.
All or any portion of the outstanding debt would be convertible into common shares at the option of ARC Funds at a conversion price of C$1.01 apiece; the closing price of Largo’s TSX-V on Tuesday.
Under the bridge loan agreement, ARC Funds would also gain a participation option to subscribe for up to C$40-million in securities under any proposed offering of common shares or securities exchangeable or convertible into common shares from the date of the loan agreement.
Largo on Tuesday explained that it would need to secure about C$20-million through financing activities this year to complete optimisation initiatives at its Maracas Menchen mine, which was ramping up to commercial production.
The company also foresaw further financing over the course of 2016 of about C$30-million to fund its debt servicing requirements and certain other payments.