In need of cash, the company has sold its interest in its Howse Project, developed under a joint venture agreement with Tata Steel Minerals Canada. The interest in the project has gone to the partner company for $5 million.
Labrador Iron Mines writes down assets by $198.2 million (From November 2014)
Labrador Iron Mines suspends operations (From July 2014)
LIM has a significant deficit in working capital and has entered into restructuring under the federal Companies' Creditors Arrangement Act, monitored by Duff & Phelps Canada Restructuring.
In a statement issued this morning, LIM said it will aim to address debt obligations, maintain its valued properties and evaluate operating contracts, with the goal of keeping key assets in the advent of a recovery in the price of iron ore.
“The company has no current or long-term bank debt and its liabilities consist of accounts payable and a deferred revenue obligation. Most of these liabilities have been outstanding since the end of LIM's operating season in 2013,” the release states.
“The creditors have been largely supportive of LIM's efforts to restructure its affairs and many have, for a period of more than one year and to date, continued to provide goods and services and have not sought to enforce payment or other remedies.”
Proceeds from the transaction with Tata will be put towards ongoing standby costs for LIM’s operations and helping finance the restructuring, the statement notes.
LIM noted the price of iron ore dropped nearly 50 per cent in 2014, to about US$66 per tonne as of late December.
“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.”