Photo by: Mercator Minerals
TORONTO (miningweekly.com) – North American base metals miner Mercator Minerals on Tuesday filed for creditor protection in both Canada and the US after the board and its creditors could not agree on “several proposals” put on the table by interested parties that wanted to buy the struggling firm.
TSX-listed Mercator explained that it had filed a ‘notice of intention to make a proposal’ (NOI) under the Canadian Bankruptcy and Insolvency Act (BIA), the first stage of a restructuring process under the BIA, which would allow the company to pursue the restructuring of its financial affairs, through a formal proposal.
The NOI would give Mercator an opportunity to avoid bankruptcy and might allow creditors to receive some form of compensation for amounts owing to them by the company. Once the NOI had been filed, the company would be given up to 30 days of protection from its creditors to pursue the option of a proposal.
Professional services firm Deloitte's Corporate Restructuring Group was appointed as the trustee in the company's proposal proceedings and would monitor and assist Mercator in its restructuring efforts.
Further, four of Mercator’s subsidiaries had also filed for Chapter 11 bankruptcy protection in the US and Mineral Park Incorporated (MPI) would engage an investment bank for a standalone sale of the subordinate firm.
Mercator pointed out that its board believed the sale of MPI would not recover all outstanding debt owing to its lenders and that Mercator’s liabilities under the parent guarantee, as well as its other liabilities, had led to a situation where it was unable to meet its current and future obligations, prompting it to file the NOI.
Mercator in September last year announced that it had started a strategic review in the face of declining copper and molybdenum prices and operational issues at its cornerstone Mineral Park mine, in Arizona.
Mercator last week warned that it had restarted the process to consider strategic alternatives, after an agreement to be bought by diversified Russian mineral resources company Intergeo was terminated at the start of the month. The closing of the deal was delayed after the Russian Federal Anti-Monopoly Services requested more information, which caused delays that stretched beyond the deal cutoff date.
With the termination of the Intergeo transaction, Mercator's lenders agreed to exercise forbearance in exercising their various rights and remedies under the Mineral Park credit facility.
Mercator also owned two development projects in Sonora, Mexico – the copper heap leach El Pilar project and the molybdenum/copper El Creston project.
Mercator noted that it could not guarantee success in its restructuring efforts, failing which it was likely the company would become bankrupt.
The TSX on Tuesday suspended Mercator’s stock from trading and said in a statement that it had started a delisting review owing to the company failing to meet the continued listing requirements.