RE: RE: RE: V&O will not sit on the projectHi Jim.
Largo has a minority stake at 45.6% and Vale / Oderbrecht a majority stake with 49.9%. Largo's partner in the property MFNB has 5.5%. So combined Largo and their partner have a 50.1% majority stake.
The problem here is who does MFNB hold loyalty to.... Ultimately its to the guy with the almighty dollar and thats Vale/ODB. If Vale/ODB buys them out it really puts them in the driver's seat. They obviously have the cash to make that happen.
Again, it all depends on what Vale/ODB want to do here. If this does go to production with Largo involved, I expect is will be under the same ownership as it currently sits. Largo and MFNB would form an operating company with 50.1% and Vale/ODB would be a 49.9% JV partner. Largo would be responsible for project funding for their percentage but with such a large JV partner it would make borrowing a lot easier, possibly with Vale/ODB even putting up the loan...... Its all speculation at this point. Upside in terms of share price is still very big under this type of situation.
Its my opinion that Vale/ODB optioned this property to Largo with the intent on having LGO mine it. Lets hope that is still stands true as that offers the best scenario for shareholders. In that scenario they just took the opportuninty to increase their stake considerably by not giving an extension on the option payment to LGO....... It could very well end up that this situation pays better for LGO shareholders in the current market IF the ability to obtain project fiancing is more of a reality now than LGO going at it alone...... Also keep in mind Vale/ODB could buy out MFNB and sit on the project for several years to see if LGO dissolves at some point and they regain 100% of the project.... its a reality. I don't think its probable as I have said before the project is worth a lot more in production and generating cashflow than it is sitting for 5-10 years doing nothing. Also LGO has a high quality asset with Northern Dancer so its ability to remain a going concern is decent in my opinion so is it beneficial to try and wait it out?
It would be interesting to know any terms/timelines on the project to the effect of it getting rolled back to Vale/ODB if certain milestones are not met.
LGO management does owe shareholders some transparency on what the specifics of this project are going forward.
lurk