TORONTO – Rubicon Minerals Corp. reaches chance 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 as 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 by now. That has not happened. Rubicon needed to halt development work at the Red Lake-based project this past year after you have underground and understanding that the geology was far more complex than it initially thought. In January, the organization cut the gold resources at Phoenix by a shocking 88 percent, noting the mineralization was “less continuous” than expected.
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Rubicon’s finances are ugly. It’s just $22.3 million of cash, $70 million of debt and a working capital deficit of almost $180 million. The organization is in discussions with its secured lender, the Canada Type of pension Investment Board, but said there isn’t any guarantee that CPP will not exercise its rights in the loan agreement following a breach. Rubicon is evaluating its strategic alternatives, and did note last month that CPP is supportive of the process and had 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 may be required to find relief within court-approved restructuring process,” the company said inside a statement.
Rubicon lowers as a cautionary tale in the Canadian mining sector. The organization, which raised more than $700 million from investors, rushed into construction of the Phoenix mine without doing a feasibility study (which would have provided a deeper knowledge of the deposit). Some experts were concerned that Rubicon did not do enough exploration along with other preparatory work, and their fears were confirmed when the miner halted development and slashed its gold resources.
More exploration work is necessary for to salvage Phoenix, based on Rubicon. However, that would require raising more capital. Investors are not keen to provide Rubicon more money after losing nearly everything they have committed to it.
“Other than conducting desktop studies and preparing future exploration plans, Rubicon doesn’t have any intentions to proceed by having an exploration enter in the immediate future,” the company said.
The stock, which peaked at more than $6 a be part of 2010, is now worth just eight cents. It shot up around 143 percent on March 10, prompting the organization to announce that it was not conscious of whatever reason for the surge. However, it gave back almost all of those gains in the following few days.
Rubicon also reported an annual loss for 2015 of $355.9 million . That loss included a writedown of $203.5 million related to property, plant, equipment and inventories.
pkoven@nationalpost.com
Twitter.com/peterkoven
