Largo Resources Ltd. (CVE:LGO) (PINK:LGORF) stock value continues to melt away since the price topped out roughly 1.5 month ago upon hitting a new 52-week high.
The recent news included a few notable highlights but had more of a negative impact on the share price, which tanked roughly 10% over the past 3 days. The stock was also influences by the general weakness of the market, caused by a post-earthquake crisis in Japan.
Focusing more on the inside developments of Largo, the planned $110 million equity financing is rather ambitious, but could have an immense effect on their wellbeing if successful. On the market, a cautious reaction from traders is a natural response though, as the plans are in still in a form of LOI with possible major investors and the means of financing could cause a significant dilution.
Issuing units at 35 cents per piece would mean 85.7 million new shares will hit the market with the first planned wave funding totaling $30 million. This would dilute the current shareholders by roughly 27.9%. 28.5 million warrants, that will come along and will be convertible at 50 cents per share, pose even further threat of dilution. Combined potential dilution of full financing can be tremendous, as new shares issued could top the currently outstanding count of 307 million.
In other news, Largo recently announced they have extended the option to purchase the remaining 30% of Northern Dancer Tungsten-Molybdenum property in Yukon, which the company still doesn’t own. The business clearly struggles to raise the required $5 million and plans to do it through exercise of warrants and options which should expire in early May. The purchase term was extended until May 15, 2011.
