Largo Announces CDN$12 Million Convertible Bridge Loan

TORONTO, March 11, 2015 /CNW/ - Largo Resources Ltd. (TSX-V:LGO) ("Largo" or the "Company") is pleased to announce that it has agreed to a term sheet with certain funds managed by Arias Resource Capital Management LP (the "ARC Funds") with respect to a CDN$12 million non-revolving, convertible term loan facility bearing an interest rate of 20% per annum (the "Bridge Loan").  The proceeds of the Bridge Loan will be used solely to finance development costs and for general corporate purposes of the Company's Vanadio de Maracás Menchen Mine located in Bahia State, Brazil. The Bridge Loan remains subject to final TSX Venture Exchange acceptance of requisite regulatory filings and the execution of definitive agreements. The Bridge Loan is expected to close on or about Friday, March 13, 2015.

The Bridge Loan will have a 6-month term and will be drawn down over a number of weeks on a bi-weekly basis. It will be secured by a pledge of securities and guaranteed by a Largo subsidiary, Campo Alegre de Lourdes Ltda. 

All or any portion of the outstanding indebtedness under the Bridge Loan will be convertible into common shares of Largo ("Common Shares") at the option of the ARC Funds at a conversion price of CDN$1.01 per Common Share (being the closing price of the Common Shares on the TSXV on March 10, 2015). The conversion of outstanding indebtedness will be subject to standard anti-dilution provisions.

The Bridge Loan will be subject to mandatory repayment if Largo raises any additional financing (in an amount equal to the net proceeds of such financing transaction), upon a change of control of Largo or if the loan is accelerated upon an event of default. In case of default, interest will increase to 23% per annum on the amount outstanding under the Bridge Loan.

Pursuant to the Bridge Loan documents, the ARC Funds will also be granted a participation option to subscribe for up to an aggregate of CDN$40 million of securities under any proposed offering of Common Shares or securities exchangeable or convertible into Common Shares on or after the date of the loan agreement (the "Participation Right"). Under the Participation Right, in respect of any proposed equity offering, the ARC Funds, collectively, may subscribe for that number of securities having an aggregate purchase price equal to the lesser of (a) the aggregate purchase price of all such securities; (b) CDN$40 million; and (c) CDN$40 million less the aggregate purchase price of all securities previously acquired by the ARC Funds pursuant to the Participation Right.  The Participation Right will be subject to the participation rights of parties other than the ARC Funds under the investor nomination rights and governance agreement among Largo, the ARC Funds and certain other parties.

The ARC Funds are insiders and a "Control Person" (as defined under the policies of the TSX Venture Exchange) of the Company by virtue of their ownership of Common Shares. The Common Shares, if any, issued pursuant to the conversion right will be subject to a regulatory hold period of four months and one day from the date of issuance. 

Pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), entering into the Bridge Loan with the ARC Funds will be a "related party transaction". The Company will be exempt from the requirements to obtain a formal valuation or minority shareholder approval in connection with the Bridge Loan in reliance on sections 5.5(a) and 5.7(a), respectively, of MI 61-101, as neither the fair market value of the Common Shares that may be received by such parties nor the proceeds of the Bridge Loan to be received by the Company exceeds 25% of the Company's market capitalization as calculated in accordance with MI 61-101. The material change report in respect of the Bridge Loan will be filed less than 21 days before the closing of the Bridge Loan as the Company requires the financing it received under the Bridge Loan immediately to finance development costs of the Company's Maracás Menchen Mine.

About Largo

Largo is a growing strategic mineral company with projects in Brazil and Canada. The immediate goal of the Company is 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.

Largo is listed on the TSX Venture Exchange under the symbol "LGO".

This press release contains forward-looking information under Canadian securities legislation.  Forward-looking information includes, but is not limited to, statements with respect to completion of the Bridge Loan and any additional financings, Largo's development potential and timetable of its operating, development and exploration assets, Largo's ability to raise additional funds necessary; the future price of vanadium, tungsten and molybdenum; the estimation of mineral reserves and mineral resources; conclusions of economic evaluation; the realization of mineral reserve estimates; the timing and amount of estimated future production, development and exploration; costs of future activities; capital and operating expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". All information contained in this news release, other than statements of current and historical fact, is forward-looking information. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Largo to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on SEDAR from time to time. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo's annual and interim MD&A.

NEITHER THE TSX VENTURE EXCHANGE (NOR ITS REGULATORY SERVICE PROVIDER) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

SOURCE Largo Resources Ltd.