If market conditions don’t improve, Canadian Royalties (CZZ-T) might not have enough cash to pay interest on $137.5 million in debentures issued in March last year.
The company is trying to renegotiate the terms of its 7% convertible senior unsecured debentures due March 31, 2015.
The debentures were issued last March so the company could continue development of its Nunavik Nickel project.
Canadian Royalties is also considering selling equipment, applying for tax credits, cutting jobs and considering joint venture opportunities.
The company has already delayed project development; postponing engineering work and larger-scale exploration.
With about $20 million in the bank, Canadian Royalties says it has enough to cash to survive for several years.
Glenn Mullan, interim president and CEO, and chairman of the board, says that if the company can successfully renegotiate its interest payments on the debenture the burn rate will be cut to about $2-3 million per year.
In 2007, Canadian Royalties completed a bankable feasibility study that supported the construction of a $466-million project that would see nine years of production at a rate of 3,500 tonnes per day with production starting in mid-2010.
The company’s original goal was to produce 26 million lbs. nickel in concentrate, 38.8 million lbs. copper in concentrate, 900,000 lbs. cobalt in concentrate, 14,500 oz. platinum and 78,600 oz. palladium per year over nine years.
An economic assessment was completed for the Mequillon deposit projected the project life could be doubled to 18 years.
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