NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Largo Inc. ("Largo" or the "Company") (TSX:LGO) (NASDAQ:LGO) is pleased to announce further details in connection with the binding term sheet entered into with the senior lenders ("Lenders") to Largo's principal operating subsidiary, Largo Vanádio de Maracás S.A. ("LVMSA"), for the rollover of principal of all debts owed by LVMSA to March 18, 2026 with a further automatic rollover to September 18, 2026 (the "Proposed Rollover Agreement"). The Proposed Rollover Agreement is subject to, among other conditions, the requirement for LVMSA to receive equity contributions totaling in the amount of US$22 million (the "Equity Contribution Requirement") by November 17, 2025.
Largo announces a US$23.4 million offering comprising (i) a registered direct offering in the United States (the "Registered Direct Offering"), and (ii) a concurrent private placement (the "Private Placement" and, together with the Registered Direct Offering, the "Offering"). The Private Placement comprises of an offering of common shares in the capital of the Company ("Common Shares") together with one Common Share purchase warrant ("Warrants") at a combined purchase price of US$1.22. Each Warrant will be immediately exercisable and will entitle the owner to acquire one (1) Common Share at a price of US$1.22 per Common Share for a period of five (5) years from the date of issuance. The offering price of the Common Shares and the exercise price of the Warrants was determined by arm's length negotiations among the Company, H.C. Wainwright & Co., LLC (the "Placement Agent") and the institutional investors. The price was calculated based on the 5-day VWAP of the Common Shares on the Toronto Stock Exchange (the "TSX") of C$$2.6349 less a discount of 35% (or C$1.7127) converted to US dollars on the basis of C$1.00 per US$0.714.
As of the date hereof, Largo has entered into binding commitments in respect of the entire US$23.4 million Offering. In connection with the Registered Direct Offering, Largo has entered into securities purchase agreements with institutional and accredited investors for the purchase and sale of 14,262,309 Common Shares and 14,262,309 Warrants and, in connection with the Private Placement, Arias Resource Capital Fund III L.P. ("ARC Fund III"), an affiliate of the Company's largest shareholder, has entered into a securities purchase agreement to acquire 4,918,033 Common Shares and 4,918,033 Warrants (the "ARC Commitment").
A portion of the ARC Commitment was advanced by way of a US$5 million secured convertible bridge loan (the "ARC Bridge Loan") which will reduce the ARC Commitment by US$5 million. Subject to the approval of the Financial Hardship Exemption (as defined below) by the TSX, the ARC Bridge Loan will automatically convert on the closing of the Offering into units consisting of Common Shares and Warrants on the same terms as the Offering. Should the TSX not grant approval of the Financial Hardship Exemption, the ARC Bridge Loan will remain non-convertible on its terms and mature in two (2) years. The ARC Bridge Loan carries an interest rate of 12% per annum, payable upon maturity or immediately upon default. The ARC Bridge Loan is secured against the common shares of Largo Resources (Yukon) Ltd., a wholly owned subsidiary of the Company.
Proceeds from the ARC Bridge Loan will be used to sustain the Company's working capital and the use of proceeds of the Offering and the remaining proceeds from the ARC Commitment will be to make payment to the Company's Brazilian lenders and payments to the mining contractor at the Maracás Menchen Mine and other key suppliers, which is already starting to negatively impact rates of mine production due to liquidity constraints.
The aggregate number of Common Shares expected to be issued pursuant to the Offering assuming exercise of the Warrants in full and on conversion of the ARC Bridge Loan at the offering price is 39,359,045 being approximately 36% of the total issued and outstanding Common Shares on a fully-diluted basis post-transaction, and 61.4% pre-transaction on a non-diluted basis.
ARC Fund III will acquire 9,836,066 Common Shares under the Private Placement, including those issued upon conversion of the ARC Bridge Loan and assuming full exercise of the Warrants, representing approximately 9% of the fully diluted shares. As a result, the interests of Arias Resource Capital and entities controlled by Mr. Arias would change from 28,039,000 Common Shares, representing 43.7% of the issued and outstanding pre-transaction Common Shares to 32,957,033 Common Shares, representing 37.9% of basic shares outstanding post transaction and 37,875,66 Common Shares, representing 34.2% assuming the full exercise of the Warrants.
Alberto Arias is director and chair of the board of directors of the Company (the "Board") and funds managed by Arias Resource Capital have been a significant investor of the Company since 2010 and currently own approximately 43.7% of the issued and outstanding Common Shares. As a result, ARC Fund III is an affiliate of an insider of the Company and as a result, is also an insider of the Company. Because ARC Fund III will acquire more than 10% of the Common Shares which are outstanding, on a non-diluted basis, disinterested shareholder approval of such issuance would be required pursuant to Section 607(g)(i) of the TSX Company Manual. The Private Placement (including any Common Shares and Warrants issued upon the conversion of the ARC Bridge Loan) will not result in a new control person.
The Common Shares and Warrants issued to ARC Fund III pursuant to the Private Placement (including any Common Shares and Warrants issued upon the conversion of the ARC Bridge Loan), will be subject to a four (4) month hold. The Common Shares (but not the unregistered Warrants and the Common Shares underlying the Warrants) in the US Registered Direct Offering described above are being offered by the Company pursuant to an effective shelf registration statement on Form F-3 (File No. 333-290163) previously filed with the U.S. Securities and Exchange Commission (the "SEC"), under the Securities Act of 1933, as amended (the "Securities Act"), and declared effective by the SEC on September 19, 2025. The offering of the Common Shares is being made by means of a prospectus, including a prospectus supplement, forming a part of the effective registration statement. The Warrants issued in connection with the Registered Direct Offering and the underlying Common Shares, and any securities issued in the Private Placement to ARC Fund III, have not been registered under the Securities Act, or any applicable state securities laws, and will be issued in reliance on exemptions from such registration requirements. The Warrants issued in the Registered Direct Offering will also possess certain resale registration rights under the Securities Act.
Pursuant to an engagement letter dated September 21, 2025, between the Company and the Placement Agent, the Company agreed to pay the Placement Agent a total cash fee equal to 7.0% of the aggregate gross proceeds from the Offering. The Company also agreed to issue to the Placement Agent or its designees warrants ("Broker Warrants") to purchase 998,362 Common Shares representing 7.0% of the aggregate number of Common Shares placed in the Offering at a price equal to US$1.53 per Common Share (or 125% of the price per Common Share issued pursuant to the Offering). However, the Company will only be required to pay a 2% cash fee to the Placement Agent in respect of the ARC Commitment, and no Broker Warrants will be issued in respect of the ARC Commitment. The Company must also pay the Placement Agent up to $50,000 of legal counsel expenses and $15,950 for other out-of-pocket and clearing expenses. The securities purchase agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. In addition, until 60 days after the closing date of the Offering, the Company has agreed not to offer, sell, contract to sell, hypothecate, pledge, otherwise dispose of, or enter into a transaction which might result in the issuance of Common Shares or securities convertible, exchangeable or exercisable into Common Shares, with certain exempt issuances permitted. The Company has agreed to indemnify the Placement Agent against certain liabilities relating to or arising out of the Placement Agent's activities under the engagement letter and to contribute to payments that the Placement Agent may be required to make in respect of such liabilities.
The closing of the Offering is expected to occur on or about October 22, 2025, subject to the satisfaction of certain closing conditions and approval from the TSX, as further described below.
Hardship Exemptions
TSX Financial Hardship Exemption
The Company has applied to the TSX for an exemption from the requirement to seek securityholder approval for the Offering in reliance upon Section 604(e) of the TSX Company Manual on the basis that the Company finds itself in a state of serious financial difficulty and that the Offering is designed to improve the Company's financial situation in a timely manner (the "Financial Hardship Exemption").As part of the Financial Hardship Exemption application, the Company is seeking an exemption from the requirement for shareholder approvals (a) under subsections 604(a)(ii), 607(g)(i) and 607(g)(ii) of the TSX Company Manual due to the size the Offering; (ii) under section 607(e) of the TSX Company Manual due to discounted price of the securities being offered; (c) in respect of the automatic conversion feature of the ARC Bridge Loan; and (d) for certain warrant provision that are inconsistent with TSX guidance set out in TSX Staff Notice 2024-0008.
The Offering will be dilutive and will result in the issuance of Common Shares to insiders of the Company in a number greater than 10% of the Common Shares outstanding and greater than 25% of the Common Shares outstanding, which would exceed the private placement thresholds, requiring the Company to obtain disinterested security holder approval of such issuances pursuant to subsections 604(a)(ii), 607(g)(i) and 607(g)(ii) of the TSX Company Manual.
Section 607(e) of the TSX Company Manual states that shareholder approval is required if the price per share is lower than the market price (as defined by TSX) less the applicable discount. Under the Offering, the price of the Common Shares and the Warrant exercise price, and the Broker Warrant exercise prices are below the applicable discounts in section 607(e) of the TSX Company Manual.
Because the ARC Bridge Loan is not convertible prior to TSX approval of the Financial Hardship Exemption, the TSX has approved the ARC Bridge Loan under Part 5 of the TSX Company Manual and the TSX has advised the Company that the ARC Bridge Loan is also being considered as part of the application for Financial Hardship Exemption, and if the TSX approves the Financial Hardship Exemption, the ARC Bridge Loan will be convertible on those terms. If the TSX does not approve the Financial Hardship Exemption, the ARC Bridge Loan will remain non-convertible on its current terms.
The terms of the Warrants contain provisions pertaining to the cashless exercise of Warrants and certain adjustment provisions for (i) subsequent rights offerings, (ii) pro rata distributions and (iii) fundamental transactions that are inconsistent with TSX guidance set out in TSX Staff Notice 2024-0008 and the cashless exercise formula in Section 608(b) of the TSX Company Manual setting out cashless exercise and anti-dilution provisions for convertible securities (including the warrants) acceptable to TSX. The adjustment provision for fundamental transactions provide that in the event of a fundamental transaction, such as a merger of the Company, a disposition of all or substantially all of the assets of the Company, a successful tender or exchange offer to holders of more than 50% of the Company's common shares, a reorganization resulting in the Company's common shares being exchanged for other securities, cash or property, or a share purchase or business combination with another person, the holders of the Warrants will be entitled to receive the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of common shares in such fundamental transaction, in an amount equal to the Black-Scholes value of the unexercised portion of the Warrant on the date of consummation of such fundamental transaction. The Company has requested the TSX exempt the Company from the guidance in TSX Staff Notice 2024-0008 and to approve these provisions as part of the Financial Hardship Exemption.
As ARC Fund III is controlled by Mr. Arias, Mr. Arias and entities controlled by him are not considered disinterested shareholders for the purposes of securities laws, and would not be entitled to vote their currently owned Common Shares, representing approximately 43.7% of the issued and outstanding Common Shares, in respect of the required approvals.
The Company, having sought the guidance of its legal counsel and management, considered whether it would be feasible to proceed to obtain the required securityholder approvals by way of shareholder meeting out of concern as to how announcement of "financial hardship" may be perceived by customers and counterparties. However, as further described below, the Company's existing financial circumstances, together with a lack of improvement in the working capital situation, and concerns around timing, cost and uncertainty of security holder approval as well as restrictions under US securities laws in connection with the Direct Registered Offering (described above) which generally prohibit "offers" to sell securities before a registration statement is filed, led the Company to determine that proceeding by way of shareholder meeting is not a tenable solution.
There is no assurance that the TSX will approve the request for the Financial Hardship Exemption. In connection with reliance on the Financial Hardship Exemption from the TSX's security holder approval requirements, it is expected that the TSX will place Largo under a remedial delisting review, which is customary when a listed issuer seeks to rely on this exemption.
Exemption from Formal Valuation and Minority Approval Requirements under MI 61-101
The Company has determined that the ARC Commitment and the ARC Bridge Loan are exempt from the formal valuation and minority approval requirements applicable to related party transactions required under Part 6 and Part 8 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), in reliance on the financial hardship exemptions under sections 5.5(g) and 5.7(1)(e). Generally, under MI 61-101, the Company would be required to obtain minority security holder approval and a formal valuation as a result of the ARC Commitment and the ARC Bridge Loan, since ARC Fund III is a "related party" of the Company within the meaning of MI 61-101 and, as a result, each such transaction is a "related party transaction" under MI 61-101. However, should the Financial Hardship Exemption be approved by the TSX, the Company can rely on sections 5.5(g) and 5.7(1)(e) of MI 61-101 to be exempted from obtaining minority security holder approval and a formal valuation.
Approval of the Board of Directors
The Board and the Board's independent directors separately considered and reviewed the circumstances currently surrounding the Company, the Offering, the ARC Commitment and the ARC Bridge Loan including, among other factors: the Company's current financial difficulties and immediate capital requirements; management's efforts over the past 12 to 18 months, exploring various alternatives to improve the financial situation; the lack of alternate financing arrangements available and the fact that the Offering (with the ARC Commitment) is the only viable financing option. After consideration, the Board, acting in good faith, and all of the independent directors, acting in good faith, determined that: (i) the Company is in serious financial difficulty; (ii) the Offering and ARC Commitment are designed to improve the Company's financial position; and (iii) the Offering, the ARC Commitment and the ARC Bridge Loan are reasonable in the circumstances.
Background to Offering
The Company has experienced lower realized pricing across its vanadium products due to depressed vanadium prices, resulting in significant margin erosion. The global vanadium market has experienced significant volatility, with prices declining sharply in 2025 due to oversupply from major producers in China and Russia and weaker-than-expected demand in key end markets such as steel and construction. This has resulted in lower realized prices for both standard and high-purity vanadium products, compressing margins and reducing operating cash flow. The Company's exposure to these market dynamics has been exacerbated by its reliance on export markets and the premium segment, where pricing has also come under pressure. These factors have increased the risk of covenant pressure and delayed payables.
Recognizing the impacts of lower vanadium prices, beginning in Q2 2024, the Company announced that it was focusing on diversifying revenue streams and aimed to address logistical challenges. This was followed by a continued focus on reducing costs in the Company's vanadium operation in Brazil. However, the Company was also impacted by certain non-recurring items, which included write-downs of finished vanadium product inventories due to the declining price environment. During this time, the Company actively sought out financing partners and considered multiple strategies to source the requisite equity capital to fund its obligations. This included signing mandate letters and submitting applications for debt financing with lenders, calls with investment banking teams and negotiating multiple term sheets with a view to securing funding.
The Company also continued to combat a challenging vanadium market and by Q1 2025, increased its focus on operational improvements, cost reductions and productivity enhancements, as part of its operational turnaround strategy. This also included implementing a number of critical initiatives to further enhance productivity and strengthen cost controls.
On July 30, 2025, Executive Order 14323 increased tariffs on imports from Brazil to the U.S. from 10% to 50%, effective August 6, 2025. This tariff increase did not affect Largo's ferrovanadium sales in the U.S., but is impacting Largo's high purity vanadium sales contracts in the U.S. These tariffs, combined with the Company's the short-term liquidity issues, resulted in delayed shipments and some defaults to U.S. customers, further weakening the Company's financial condition and operating capacity.
During this period, the discussions with private equity parties and investment banks resulted in the Company successfully securing a US$10 million factoring facility as well as a US$6 million secured loan to support its working capital. However, the Company has been unable to fully address its working capital deficiency.
About Largo
Largo is a globally recognized supplier of high-quality vanadium and ilmenite products, sourced from its world-class Maracás Menchen Mine in Brazil. As one of the world's largest primary vanadium producers, Largo produces critical materials that empower global industries, including steel, aerospace, defense, chemical, and energy storage sectors. The Company is committed to operational excellence and sustainability, leveraging its vertical integration to ensure reliable supply and quality for its customers.
Largo is also strategically invested in the long-duration energy storage sector through its 50% ownership of Storion Energy, a joint venture with Stryten Energy focused on scalable domestic electrolyte production for utility-scale vanadium flow battery long-duration energy storage solutions in the U.S.
Largo's common shares trade on the Nasdaq Stock Market and on the Toronto Stock Exchange under the symbol "LGO". For more information on the Company, please visit www.largoinc.com.
Cautionary Notes:
This news release does not constitute an offer to sell or solicitation of an offer to sell any securities in the United States. The Securities have not been registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any U.S. state securities laws, and may not be offered or sold in the "United States" or to "U.S. persons" (as such terms are defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable U.S. state securities laws or an exemption from such registration is available.
Forward-Looking Information
This press release contains "forward-looking information" and "forward-looking statements" within the meaning of applicable securities legislation. Forward‐looking information in this press release includes, but is not limited to, statements with respect to the Proposed Rollover Agreement with certain lenders and the timing of the same, the Offering, ARC Commitment and the ARC Bridge Loan and the timing of the same, the ability of the Company to continue as a going concern, the anticipated number of Common Shares to be issued by the Company pursuant to the Offering and the ARC Commitment and the ARC Bridge Loan, the impact of the Proposed Rollover Agreement, Offering, ARC Commitment and the ARC Bridge Loan on the Company and the results thereof, including that it will allow the Company to address its significant working capital deficiency and provide operating capital to the Company so that it can go forward as a viable going concern, anticipated positive cash flows, cost reductions, continued operational improvements, successful negotiations of the tariffs from Brazil into the U.S., receipt of the regulatory and TSX approval, including approval from the TSX of the Financial Hardship Exemption, the closing of the Offering, the satisfaction of the closing conditions in the Offering, the anticipated use of proceeds from the Offering and the ARC Bridge Loan, and the ability for the Company to keep the Maracás Menchen Mine operating, thereby significantly improving the Company's financial situation.
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", although not all forward-looking statements include those words or phrases. In addition, any statements that refer to expectations, intentions, projections, guidance, potential or other characterizations of future events or circumstances contain forward-looking information. Forward-looking statements are not historical facts nor assurances of future performance but instead represent management's expectations, estimates and projections regarding future events or circumstances. Forward-looking statements are based on our opinions, estimates and assumptions that we considered appropriate and reasonable as of the date such information is stated, subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of 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 www.sedarplus.ca and available on www.sec.gov from time to time. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. 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 which also apply.
Trademarks are owned by Largo Inc.
Neither the Toronto Stock Exchange (nor its regulatory service provider) accepts responsibility for the adequacy or accuracy of this release
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For more information, please contact:
Investor Relations
Daniel Tellechea
Interim CEO & Director
+1.416.861.9797
info@largoinc.com
