Largo relying on financial hardship exemption

Executive Summary

• Largo Inc. announced a $23.4 million financing consisting of a U.S. registered direct offering and a concurrent private placement, tied to a $5 million secured convertible bridge loan from ARC Fund III.
• The company is seeking a TSX “financial hardship exemption” to bypass required shareholder approvals because it is in serious financial difficulty and needs the capital to pay Brazilian lenders, mining contractors, and sustain working‑capital.
• If approved, the offering will be dilutive, increasing outstanding common shares by ~36 % on a fully‑diluted basis; ARC Fund III will own roughly 9 % of fully‑diluted shares post‑transaction.

Key Details

• Financing Structure – $23.4 M total:
• Registered direct offering: 14,262,309 common shares + 14,262,309 warrants at a combined purchase price of US$1.22 per share/warrant (35 % discount to VWAP).

• Private placement to ARC Fund III: 4,918,033 common shares + 4,918,033 warrants; includes conversion feature for the $5 M bridge loan.

• Bridge Loan – $5 M secured convertible bridge loan from ARC Fund III at 12 % annual interest, secured by Largo Resources (Yukon) Ltd.; will convert into units of common shares and warrants on closing if TSX grants hardship exemption; otherwise remains non‑convertible with two‑year maturity.

• Use of Proceeds –

• Pay Brazilian lenders and mining contractor at Maracas Menchen mine.

• Working‑capital support for the company.

• Dilution Impact – Assuming full warrant exercise and bridge‑loan conversion:

• Total shares issued ≈ 39,359,045 (≈ 36 % of fully diluted post‑transaction).

• ARC Fund III’s ownership rises to ~9 % fully diluted; insider holdings shift from 43.7 % pre‑transaction to ~38 % post‑transaction.

• Shareholder Approval – Offering exceeds TSX thresholds (≥10 % and ≥25 % of non‑diluted shares), normally requiring disinterested shareholder approval under sections 604(a)(ii), 607(g)(i) & (ii). Company is applying for exemption under TSX Section 604(e) due to financial hardship.

• Holding Period – Shares/warrants issued to ARC Fund III subject to a four‑month hold; U.S. offering shares sold under Form F‑3 prospectus, warrants unregistered but relying on exemptions.

• Placement Agent Compensation – 7 % cash fee of gross proceeds plus warrant issuance for the direct offering; 2 % cash fee (no broker warrants) for ARC commitment; up to US$50,000 legal and US$15,950 other expenses payable by Largo.

• Closing Timeline – Expected closing around Oct 22 2025, subject to TSX approval of hardship exemption and satisfaction of customary conditions.

• Background Context – Lower realized vanadium prices, margin erosion, covenant pressure, and a recent U.S. tariff increase on Brazilian imports have strained liquidity, prompting the financing as the only viable option after failed debt/ equity alternatives.

Notable Quotes

“The board, acting in good faith, determined that the company is in serious financial difficulty and that this offering is designed to improve our financial position.” – Board of Directors (statement)