Crown gets breathing room (October 19, 2001)

Vancouver — Junior Solitario Resources (SLT-T) is attempting to throw a lifeline to its major shareholder, financially beleaguered Crown Resources (CRRS-O), by way of a $1 million secured note financing.

The funds form part of a proposed $3.6 million financing aimed to restructure Crown’s existing $15.4 million 5.75% convertible subordinate debentures. The company defaulted on the payment in late August.

Solitario’s portion of the financing comprises two 5-year notes of $350,000 and $650,000, which are secured by Crown’s wholly owned Crown Jewel despot in northeastern Washington state.

A 10% interest rate payable quarterly in cash or stock is attached to the notes. Only $350,000 will be available as cash, with the $650,000 note, convertible into shares at 35 apiece, held in escrow pending the company’s restructuring. In return for the funds, Solitario will receive a warrant, exercisable at 75 over a 5-year period, for each share that is converted under the $650,000 note. The Denver-based junior also gets a warrant, exercisable at 60 over a 5-year period for each converted share under the $350,000 note. The conversion price of this note is set at 29.

It is expected that about 10% of the proceeds will be used to move forward on permitting the Crown Jewel deposit in northeastern Washington state.

Newmont Mining (NEM-N), which picked up a 54% stake in the deposit through its acquisition of Battle Mountain Gold, recently returned the property to Crown in exchange for a sliding-scale royalty interest.

Crown may still seek protection from its creditors and file a plan of reorganization under federal bankruptcy law to complete the restructuring and recapitalization of the company.

The debentures stem from the 1991 acquisition of the Kettle River mine, which Crown later sold to Echo Bay Mines (ECO-T).

The company recently had its shares delisted from the Toronto Stock Exchange for failure to maintain minimum listing requirements. It retains a 42% interest in Solitario.