https://www.miningweekly.com

Fortune Minerals defaults on Colorado-based Revenue silver mine debt

6th July 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

Font size: - +

TORONTO (miningweekly.com) – Canadian miner Fortune Minerals has defaulted on a metals prepay agreement with its major financing partner, triggering all amounts and deliveries owing under the contract to become immediately due and payable.

Fortune and its subsidiary Fortune Revenue Silver Mines (FRSMI), which owned the Revenue silver mine (RSM), in south-west Colorado, on Friday reported that it had received notice from LRC-FRSM (Lascaux) that events of default had occurred under the amended and restated senior secured metal prepay agreement dated March 25.

TSX-listed Fortune in October last year completed its acquisition of RSM, underlining its strategic transition from project developer to miner. However, stubbornly low precious metals prices and continued capital requirements at RSM had scuppered Fortune’s plans to turn a profit from the operation.

FRSMI's obligations under the prepay agreement were secured by all of its assets and guaranteed by Fortune and certain of its other subsidiaries, including Fortune Minerals NWT and Fortune Minerals Saskatchewan, which had also granted Lascaux security over their respective assets.

Fortune reported that Lascaux had notified it and its units that it intended to enforce its security under the Canadian Bankruptcy and Insolvency Act from Friday.

Fortune and Lascaux had held discussions regarding a settlement and Fortune had also engaged its other secured creditors who were parties to an intercreditor agreement with Lascaux.

Fortune reported that the parties had now reached a nonbinding understanding on terms to settle all outstanding debts.

Under the terms of a proposed settlement, Fortune would transfer to Lascaux all FRSMI’s shares and intercompany indebtedness owing from FRSMI to Fortune, FRSMI would transfer $750 000 to Fortune and Fortune’s Nico gold/cobalt/bismuth/copper project in the Northwest Territories, all related permits and the shares of Fortune NWT and Fortune Saskatchewan would be spun out into a new wholly owned subsidiary of Fortune (Newco). Lascaux would also receive C$5-million face amount of preferred shares of the new company and the other secured creditors would receive C$3.75-million of preferred shares of the new company.

The preferred shares would have a liquidation preference of face value of the preferred shares in the event of any financing of the Nico project and each preferred share would be exchangeable for Fortune common shares at C$0.25 apiece. Further, the preferred shares would be automatically redeemed, if not previously exchanged after seven years, and would carry the right to a 5% a year preferred dividend that might be accrued or paid in cash at Fortune's option.

A shareholder agreement at the Newco level would also provide certain minority protections to preferred shareholders.

Further, Lascaux would receive 7.5-million warrants of Fortune with each warrant entitling the holder to buy a common share at a price of C$0.15 for five years.

Fortune’s other secured creditors that held security in the Canadian assets would receive five-million Fortune warrants, with each warrant entitling the holder to buy one common share at a price of C$0.15 for five years.

Fortune would provide accounting, payroll, purchasing, information technology and other services to Lascaux to assist in the operation of  RSM.

RSM is an underground high-grade silver/gold/lead/zinc mine with a mill and concentrator and surface facilities near the town of Ouray, in the historic Sneffels mining district.

The mine was operated between 1876 and 1912 by Caroline Mining and had historical output estimated at 15-million ounces before it closed as a result of a fire. RSM was reactivated and a new 400 t/d mill and concentrator was constructed before Fortune bought the project in 2014. The company was focused on completing the commissioning and ramping up to a planned 400 t/d production rate.

Fortune’s TSX-listed stock on Monday traded a penny lower at C$0.04 apiece, having dropped 86% in the last 12 months.

Edited by Tracy Hancock
Creamer Media Contributing Editor

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION