TORONTO (miningweekly.com) – Canadian miner Fortune Minerals has entered into a two-pronged restructuring agreement with former funding partner LRC-FRSM (Lascaux) and its other secured creditors to settle its secured debt obligations.
The TSX-listed company earlier this month announced that its subsidiary Fortune Revenue Silver Mines (FRSMI), which owned the Revenue silver mine (RSM), in south-west Colorado, had received notice from funding partner LRC-FRSM (Lascaux) that events of default had occurred under the amended and restated senior secured metal prepay agreement dated March 25, triggering all amounts and deliveries owing under the contract to become immediately due and payable.
"We regret that the restructuring with our secured creditors has resulted in the loss of the RSM, in which we have invested significant effort and funds over the past year,” president and CEO Robin Goad said in a statement.
“However, upon completion of the restructuring, Fortune Minerals will be able to continue to operate with its Canadian assets intact and with manageable debt obligations that may be repaid through the exercise of warrants into Fortune common shares,” he said, stressing that the company was positioned to focus on the development of its flagship Nico gold/cobalt/bismuth/copper deposit, in Canada's Northwest Territories, and its proposed refinery in Saskatchewan.
FRSMI's obligations under the prepay agreement were secured by all of Fortune's assets and guaranteed by the company and certain of its other subsidiaries, to which Lascaux had also sent notices of default.
Fortune and Lascaux had entered into discussions regarding a settlement of the company's obligations under the prepay agreement. Discussions were also held with the company's other secured creditors who were parties to an intercreditor agreement with Lascaux. Fortune had reached a preliminary understanding with its creditors early this month.
The first stage closed on Friday and the second stage was expected to close on or before August 7.
Under the terms of the restructuring agreement, Fortune had transferred to Lascaux all of FRSMI’s shares and intercompany indebtedness owing from FRSMI to Fortune, and transferred all of the shares of FRSMI to Lascaux.
All obligations of Fortune and its Canadian subsidiaries under the Lascaux short-term facility were released and FRSMI had paid $200 000 to Fortune.
Further, Fortune had agreed to provide certain purchasing, logistics and operations transition services to FRSMI and Lascaux to assist in operating RSM until the end of the month.
Under the second stage of the accord, Fortune would issue to Lascaux and the other secured creditors unsecured seven-year term debentures in the principal amount of C$5-million to Lascaux and C$3.75-million to the other secured creditors. The debentures would bear interest at 5% a year, accruing semiannually and repayable at maturity.
Fortune would also issue 7.5-million Class A warrants and 21-million Class B warrants to Lascaux, which would receive up to an additional 8.25-million Class B warrants exercisable if, and to the extent that, at the maturity of its debenture, Lascaux elects to exercise such warrants instead of being paid all or part of the interest due under its debenture.
The other secured creditors would receive five-million Class A warrants and 14-million Class B warrants. Each Class A warrant would entitle the holder to buy one Fortune common share at C$0.15 and would expire on the fifth anniversary of the date of issue. Each Class B warrant would entitle the holder to buy one Fortune share at C$0.25 and would expire on the seventh anniversary of the date of issuance. The Class B warrants could only be exercised for the purposes of setting off or financing the repayment of an equivalent amount owing under the debenture held by the warrant holder.
The debentures would be repayable in the event that Nico was sold, directly or indirectly.
FRSMI would pay $550 000 to Fortune, after which all remaining security in Fortune's and its subsidiaries assets held by Lascaux under the prepay agreement and by the other secured creditors would be discharged.