Shares of Largo Resources (TSX: V.LGO, Stock Forum) fell 6.7% to seven cents Monday morning, after the company provided an update on its purchase of an additional interest in a Brazilian company after Friday’s market close.
Largo said Friday that it has received formal notification from Odebrecht S.A. and Companhia Vale de Rio Doce that it “has defaulted under certain of its obligations relating to the purchase of an additional interest in Companhia de Maracas, the Brazilian company that controls the Maracas project.”
The company notes that it has until December 24 to pay to Odebrecht and Vale an aggregate of US$5 million plus interest for an additional 39.9% interest in Companhia de Maracas. Largo currently holds a 45.6% interest in the company.
After it makes the payment, Largo would increase its interest in Companhia de Maracas to approximately 81%.
Largo, the operator for the Maracas project, says that in the event that it does not make the additional payment, it will retain its 45.6% interest in Companhia de Maracas but will forgo its right to acquire the additional interest. The company has requested that Odebrecht and Vale extend the payment deadline and notes that it “continues to work diligently to raise sufficient funds to conclude the payment.” Largo currently has two advanced stage projects: the Maracas Vanadium-PGM deposit in Brazil and the Northern Dancer Tungsten-Molybdenum deposit in the Yukon.
There was much conversation over the weekend from various posters who gave their thoughts on the company’s news release including kha341 who said: “The financials of the Maracas project are still very attractive. The fact that the management is diligently looking to acquire the additional piece of the pie does indicate that the pie is still very good. IMHO, they would not have any problem getting the $5M. The SP is still way undervalued[sic].”
jwood949 added:
I guess we will know for sure if they have trouble with the financingon the 24th. I was surprized as well to read that they werediligently looking for funding........... My cut on this wasthat they already had the financing locked up, but were looking foralternatives. I guess the "locked up" got up and left. Theonly thing that confuses me is the stock action this last few days.It seems at odds with a poor news release, even with buy the rumour,sell the news........... With this news release I would have expected more selling and a price at 0.04$.Monday will be interesting. Perhaps, one lastugly drive down, announce financing on shitty terms, and get on withlife[sic]
detlion also weighed in, saying:
Shouldn't have much of an impact on the SP. IMO this was priced in, don't think many of the people that are in the know would have been surprised. Some small retail holders may throw in the towel but if you spend any time following the markets you should have seen this coming a mile away. Is Largo special? Not really, just another small company trying to survive while the credit markets are shut down. Unless you're a day trader, what's the difference .07 or .03, for many who have rode this down the damage is done. Why sell now?[sic]