Princeton seeks funds to pay McDame development costs

A prolonged strike at the Similco copper mine in southern British Columbia as well as continuing operating problems at the Cassiar underground asbestos mine in northern B.C. have forced Princeton Mining (TSE) to raise additional funds.

Princeton, owner of the two mines, has engaged Deacon Barclays de Zoete Wedd to act as agent to raise up to $15 million by way of a private placement priced at $1.70 per share. An initial issue of 6.85 million shares has been placed for total proceeds of $11.6 million and the company expects to complete a second placement of $1.37 million by the end of September. The placement price represents a recent 3-year low for the company which traded as high as $6.12 in 1989.

Princeton’s McDame as-bestos deposit, commissioned in late 1990 at a total development cost of about $68 million, has been plagued with operating problems since startup. They include a labor strike, problems with oversize ore, water inflows and ground support failure in extraction drifts. The company has solved the problems and is now using a redesigned ground support system. Rehabilitation of the failed drifts is ongoing. As a result of the problems, Princeton now reports that additional funds will be required for mine development which was not kept up in advance of mining operations.

In addition to further development work, Princeton has concluded that the McDame project will require significant restructuring in order to remain in operation. The company is now in restructuring negotiations which, if unsuccessful, would force the suspension of mine development work. In that event, developed ore will be exhausted within one year.

The restructuring currently includes changes to operations to bring costs down and does not affect debt associated with the Cassiar operation. As at Dec. 31, 1990, Prince-ton had drawn down $20

million from a provincial government facility and $11.8 million from its bank facility. Interest on the government loan is capitalized at prime plus 1% and is payable after the bank loan has been repaid. The government loan totalled $24.2 million at the end of 1990.

As a result of the operating difficulties at the Cassiar op-eration, the company issued a $12-million debenture in April. The debenture, which pays 10%, brought Princeton’s long-term debt up to $51.6 million as at June 30.