Baja Mining Corp. (TSX:T.BAJ, Stock Forum) said that its subsidiary Minera y Metalurgica del Boleo S.A. de C.V. (MMB) has secured US$90 million of interim financing for the Boleo project in Mexico.
The copper-cobalt-zinc project, located near Santa Rosalia in Baja California Sur, has a measured and indicated resource of 265 million tonnes.
According to the press release, funds are being provided by the Korean Consortium composed of Korea Resources Corp., LS-Nikko Copper Inc., Hyundai Hysco Co., SK Networks Co., and Iljin Materials Co., which acquired a 30% interest in MMB in July 2008.
Baja has been in search of financing since the company announced, on April 23, that the cost to build the Boleo project would be $246 million more than originally forecast. The 22% increase was a shock that led to stock collapse from about $0.83 to $0.38. Since then the stock has been continually falling and has now hit a 52-week low of $0.08 a share.
Baja also faced criticism when the CEO John Greenslade resigned on May 14. He has since been replaced by interim CEO Thomas Ogryzlo.
Now that the Boleo project is way over budget, the company is faced with the challenge of raising enough money to avoid a shutdown.
Currently, the Consortium appears to be ready to throw Baja a life jacket.
The Consortium, subject to the approval of the board of directors and/or senior management, has committed to contribute US$90 million to MMB on or about August 30, 2012 in Stage I of the financing.
Furthermore, in Stage II, which is not committed, the Consortium may choose to contribute additional funding in an amount sufficient to complete the Boleo project.
Initially, the contribution of US$45 million of the total US$90 million commitment will result in an immediate reduction in Baja's interest in MMB from 70% to 49%.
The Stage I funding will enable MMB to begin addressing outstanding vendor liabilities and continue its current level of critical path activities at the Boleo project.
However, both stages of the financing involve significant dilution to Baja's interest in MMB. Further, there is no certainty that the Boleo project will be completed, as the Consortium may elect not to complete the Stage I financing, and may determine that it does not wish to proceed with Stage II.
If the entire US$90 million is not funded by the Consortium on or about August 30, 2012, the Consortium's interest will revert to 30%, and any MMB board and management changes will be reversed.
Overall, if the Consortium elects to proceed with the Stage II funding, Baja will have a right to contribute to such funding, subject to contributing a minimum of US$10 Million and a contribution which would result in it holding a maximum 40% interest in MMB.
Baja is a Vancouver based mine development company. Currently, the company holds a 70% stake in the Boleo project.
On Thursday, Baja was down 6% and was trading at $0.08 a share. The company has a market cap of $27.2 million, based on 340.2 million shares outstanding. The 52-week high and low was $1.24 and $0.08 respectively.