TORONTO (miningweekly.com) – Base metals miner Mercator Minerals is advancing and accelerating a strategic review that will consider an outright sale of the company, a business combination, or a sale of all, or a portion of, its assets, in light of the current commodity price environment, capital market conditions and the challenges these pose for the company.
The company, which owns and operates the Mineral Park copper/molybdenum/silver mine, in Arizona, said in a statement on Monday that it had conducted discussions, signed confidentiality agreements and received nonbinding proposals from a number of interested parties.
Mercator also further amended its credit facility and was given permission to withdraw up to $5-million from its restricted cash in the debt service reserve account.
The company was also granted relief for its $4.8-million credit facility principal payment due on Monday and the lenders had agreed to refrain from exercising any remedies until October 31. After that date, Mercator would require further approval from its lenders.
Mercator further disclosed that it had violated additional covenants, as the outstanding payables in the second quarter had not been repaid. As a result, the lenders also agreed to waive certain other covenants until October 31.
The credit facility currently consists of a term loan that has a principal amount outstanding of about $86.8-million.
“While Mercator’s balance sheet remains stressed, the lenders appear to be very cooperative given the number debt amendments made. Based on our analysis, we estimate the company would require additional external financing within the next six months. We believe potential sources of liquidity for Mercator include an equity issuance and the deferral of Silver Wheaton silver deliveries,” Laurentian Bank Securities Equity Research mining analyst Christopher Chang said in a note to clients.
"The impact of the concessions made under the credit facility should allow Mineral Park to continue to operate in this challenging environment which, in turn, will facilitate the review of strategic alternatives currently under way,” Mercator president and CEO Bruce McLeod said.