Rubicon may seek creditor protection
TORONTO — Rubicon Minerals Corp. is at risk of collapse after breaching a debt covenant and halting its high-profile northern Ontario gold project due to technical problems.
The junior miner announced Tuesday that there is “significant doubt” it can continue as a going concern because of its debt, and may have to seek creditor protection.
To stay onside with the terms of its loan facility, Toronto-based Rubicon needed to have its Phoenix mine up and running by now. That has not happened. Rubicon had to halt development work at the Red Lake-based project last year after getting underground and realizing that the geology was far more complex than it initially thought. In January, the company cut the gold resources at Phoenix by 88 per cent, noting the mineralization was “less continuous” than expected.
Rubicon’s financial situation is ugly. It has just $22.3 million of cash, $70 million of debt and a working capital deficit of almost $180 million. The company is in discussions with its secured lender, the Canada Pension Plan Investment Board, but said there is no guarantee that CPP will not exercise its rights in the loan agreement following the breach. Rubicon is evaluating all alternatives, and did note last month that CPP is supportive of the process and had no immediate plans to exercise any rights.
“Rubicon may incur significant dilution to the holdings of existing shareholders in any restructuring and financing, or may be required to seek relief under a court-approved restructuring process,” the company said in a statement.
Rubicon will go down as a cautionary tale in the Canadian mining sector. The company, which raised more than $700 million from investors, rushed into construction of the Phoenix mine without even doing a feasibility study.
More exploration work is needed in order to salvage Phoenix, according to Rubicon. However, that would require raising more capital. Investors are not keen to give Rubicon more money after losing nearly everything they have invested in it.
The stock, which peaked at more than $6 a share in 2010, is now worth just eight cents.
Rubicon also reported an annual loss for 2015 of $355.9 million on Tuesday. That loss included a writedown of $203.5 million related to property, plant, equipment and inventories.