Colossus Seeks Creditor Protection, Financing Lifeline

Colossus Minerals (TSX:CSI) has reached the end of its life with an announcement today that it will seek the protection of creditors after it failed to make an interest payment at the end of 2013. 
Now insolvent, the Toronto-based company plans to file a “notice of intention” allowing it to pursue a sale process and restructuring under court supervision, according to a press release. The release also says that Colossus will seek up to $4 million in credit from noteholders and streaming company Sandstorm Gold (TSX:SSL), that would keep it afloat for the next six weeks.
Under the planned debt-to-equity swap, noteholders would own 51.5 percent of the stock, Sandstorm would hold about 38.8 percent, and current Colossus shareholders would own just 1.7 percent.
It’s an ignominious end to a junior mining story that at one point held great hopes. Six months ago, the finish line was in site for Colossus, which was moving forward with its 75 percent-owned Serra Pelada gold mine in Brazil and was on track to begin production by the first quarter of 2014.
But a dewatering issue caused delays past the original startup target, which then led to issues with financing the project to a later production date.
A December 18 proposal from two capital funds that would have provided the company with a $21 million loan was terminated two day later, leading to the deal involving gold-linked noteholders and Sandstorm Gold. But with no way to make an interest payment on Dec. 31, the company was effectively insolvent.
Colossus has so far raised more than $380 million to develop the mine, reported The Province newspaper, which hosts 557,000 tonnes of ore containing 230,000 ounces gold, 48,000 ounces of platinum and 71,000 ounces of palladium, according to a December resource estimate.
Stock in the $7 million market cap company last traded at 4 cents a share, compared to a height of $9.56 just over three years ago. Shares in Sandstorm Gold were down by 1.84 percent in mid-day trading on Tuesday.
 
Securities Disclosure: I, Andrew Topf, hold no investment interest in any of the companies mentioned. 
Related reading: 
Colossus Mired in Uncertainty After Key Meetings Cancelled
Colossus Minerals: What’s Going On?