Update on Progress of Funding Solution Baja Mining Corp. (TSX:BAJ)(OTCQX:BAJFF) today provided an update on the progress of its efforts to develop a funding solution for the recently announced capital cost overruns at its Boleo Project.
The Company met in Seoul, South Korea last week with the members of the Korean consortium who are Baja's partners in the Boleo project (the "Consortium"). During the meetings Baja discussed the Boleo project capital cost increases and various potential minimally dilutive funding alternatives, including a subordinated debt financing to fund a significant amount of the cost overruns. A written proposal has been prepared for presentation to the Consortium, subject to the approval of Baja's reconstituted Board.
The Company has also delivered confidentiality agreements to several third parties for their possible participation in the project. In addition, the Company has also initiated preliminary discussions with members of the brokerage industry, however equity markets remain difficult.
Any decisions on funding will be subject to the approval of the reconstituted Board of the Company.
While discussions with the Consortium have been positive and the Consortium members remain supportive of the Company and the project, the Company is concerned that an approval process in regards to the potential funding solutions being investigated may not be completed as quickly as required even if approved by the Consortium.
Swift approval is important because no further funds will be available from Baja's senior loan facilities until an acceptable funding solution is provided to the Company's primary lenders. The Company's project subsidiary has a May 4, 2012 cash position of US$41 million with access to a further US$24 million in its restricted intermediary account. The Company's projected burn rate is US$60 million in May, US$75 million in June and US$60 million in July.
Baja has implemented an aggressive cash flow management strategy, but the project will not be able to proceed without a cash injection by approximately mid-June 2012. The Company is assessing its current obligations and what steps will be required if it cannot come to a timely financing arrangement.
Further cost saving measures continue to be reviewed in an effort to reduce or defer costs. The Company is looking at the benefit of deferral of the cobalt and zinc circuits and believes deferral could result in upfront savings of $85 million.