Photo by: Reuters
TORONTO (miningweekly.com) – Vancouver-based Veris Gold has filed for creditor protection in British Columbia and Nevada, where its flagship Jerritt Canyon mine and mill operations are located.
The TSX-listed miner on Monday said that the Supreme Court of British Columbia had issued an order granting the company’s application for creditor protection under the Companies’ Creditors Arrangement Act (CCAA), after Deutsche Bank (DB) London Branch declared payment defaults under the two forward gold purchase agreements between DB and the company.
The order also shields Veris’ subsidiaries Queenstake Resources, Ketza River Holdings and Veris Gold USA.
Professional services firm Ernst & Young would serve as the court-appointed monitor in the CCAA proceedings to oversee the operations of the company and report to the court during the restructuring.
Veris had also been granted a temporary restraining order from the US Bankruptcy Court, which would shield its assets from the company’s creditors until a full hearing of an application for recognition of the CCAA proceedings under Chapter 15 of the US Bankruptcy Code had taken place.
Veris said it was forced to start CCAA proceedings after the company failed to complete restructuring or refinancing efforts.
Veris said that it sought protection to address near term liquidity issues owing to a decreasing gold price, higher than expected production costs, demands for payment under existing loan agreements and unexpected shut downs, including the January shutdown resulting from a December fire.
The company’s Jerritt Canyon operation would continue to produce gold during these proceedings, and is cash–flow positive.
The TSX-listed stock of the North American miner lost more than half its value in January, when the miner first revealed that it had defaulted on the two forward gold purchase contracts. The midtier company said it had failed to make the monthly December gold delivery, or pay the cash equivalent of the gold delivery shortfall.
This was the result of an electrical accident, resulting in a fire that occurred in the primary crushing building at the Jerritt Canyon mill operations. The fire resulted in a temporary suspension of operations, which negatively affected output during December.
Veris said the forward gold purchase contracts with DB did not contain a force majeure provision that would have allowed Veris to temporarily suspend its obligations under the contracts owing to circumstances beyond its control.
Veris’ TSX-listed stock was on Tuesday suspended from trading pending a delisting review regarding the company meeting the continued listing requirements for its common shares and purchase warrants.