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TORONTO – Rubicon Minerals Corp. is at risk of collapse after breaching a debt covenant and halting its high-profile Ontario gold project because of technical problems.
The junior miner announced Tuesday that there’s “significant doubt” it may continue like a going concern because of its debt, and could need to seek creditor protection.
To stay onside using the terms of its loan facility, Toronto-based Rubicon required to have its Phoenix mine ready to go right now. That has not happened. Rubicon needed to halt development work at the Red Lake-based project last year after you have underground and understanding that the geology was much more complex of computer initially thought. In January, the organization cut the gold resources at Phoenix by a shocking 88 per cent, noting the mineralization was “less continuous” than expected.
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Rubicon’s financial situation is ugly. It’s just $22.3 million of money, $70 million of debt along with a capital deficit of just about $180 million. The company is within discussions using its secured lender, the Canada Type of pension Investment Board, but said there is no be certain that CPP will not exercise its rights within the loan agreement following a breach. Rubicon is evaluating all its strategic alternatives, and did note last month that CPP is supportive of the process coupled with no immediate intends to exercise any rights.
“Rubicon may incur significant dilution towards the holdings of existing shareholders in almost any restructuring and financing, or are usually necesary to find relief within court-approved restructuring process,” the organization said in a statement.
Rubicon lowers like a cautionary tale in the Canadian mining sector. The organization, which raised a lot more than $700 million from investors, rushed into construction from the Phoenix mine without doing a feasibility study (which would have given a deeper understanding of the deposit). Some experts were concerned that Rubicon did not do enough exploration and other preparatory work, as well as their fears were confirmed when the miner halted development and slashed its gold resources.
More exploration jobs are needed in order to salvage Phoenix, according to Rubicon. However, that would require raising more capital. Investors aren’t keen to give Rubicon more income after losing nearly everything they have committed to it.
“Other than conducting desktop studies and preparing future exploration plans, Rubicon does not have any intentions to proceed by having an exploration program in the immediate future,” the company said.
The stock, which peaked at a lot more than $6 a share in 2010, is now worth just eight cents. It shot up as much as 143 per cent on March 10, prompting the organization to announce that it hadn’t been aware of whatever reason for the surge. However, it gave back nearly all of those gains within the following few days.
Rubicon also reported an annual loss for 2015 of $355.9 million on Tuesday. That loss included a writedown of $203.5 million associated with property, plant, equipment and inventories.
pkoven@nationalpost.com
Twitter.com/peterkoven
