Labrador Iron Mines Holdings Ltd. (TSX:LIM) announced that it is initiating court protection from creditors under the Companies’ Creditors Arrangement Act (CCAA) to assist in the restructuring and refinancing of its business operations. The company stopped mining operations last year due to the plummeting iron ore price.
Labrador Iron Mines Holdings Ltd. (TSX:LIM) announced that it is initiating court protection from creditors under the Companies’ Creditors Arrangement Act (CCAA) to assist in the restructuring and refinancing of its business operations. The company also announced that it has sold its remaining interest in the Howse project, a joint venture with Tata Steel Minerals Canada, for $5 million.
As quoted in the press release:
LIM did not resume mining operations in the 2014 or 2015 operating seasons, due to the deteriorating iron ore market conditions and particularly in the context of LIM’s previous high operating costs. In 2014, the price of iron ore declined nearly 50 percent to approximately US$66.00 per tonne by late December 2014. The iron ore price has continued its decline in 2015, dropping to approximately US$50 per tonne by the end of March, primarily as a result of excess supply from the large Australian producers to the China market.
At December 31, 2014, LIM had, and currently has a very significant working capital deficit and has not met certain financial obligations. LIM needs to complete a financial restructuring in order to continue as a going concern and preserve the long-term value of its assets.
The CCAA proceedings will, among other things, provide LIM with the time and stability to restructure its business, negotiate a restructuring plan with stakeholders, compromise creditor claims, restructure key operating contracts, secure new financing, and otherwise consider restructuring and refinancing options. An Initial Order from the Ontario Superior Court of Justice (Commercial List) (the “Court”) under the CCAA was obtained today by the Company.
Concurrently, LIM also announced today that it has completed a transaction pursuant to the provisions of its joint venture agreement with Tata Steel Minerals Canada (TSMC) whereby TSMC has acquired LIM’s remaining interest in the Howse Project for $5.0 million. The sale proceeds will be used to fund ongoing operating and stand-by costs, and care and maintenance expenses, and to finance the restructuring.