A lead poisoning investigation in a southwestern Australia port town has left lead miner Ivernia (IVW-T, IVWFF-O) with no choice but to stop production at its Magellan mine for three to four months until the company finds a new way to ship lead.
Lead exports from the Esperance port have been suspended since March 12 after autopsies of two birds showed they died of lead poisoning. Blood tests on more than 400 people so far have shown that at least seven people had lead levels higher than recommended, but do not require medical treatment.
Ivernia’s stock dropped 16.5% on the TSX to $1.11 on the news on a trading volume of 4.6 million shares.
The company is looking into enclosed and double-sealed containers approved by the International Standards Organization as well as sealed “bulka” bags to ship its lead concentrate.
Ivernia is also searching for an alternative to ship 9,000 tonnes of lead concentrate stuck in a shed at the port.
About 75% of the company’s workforce has been laid off, while the rest will manage the wind-down of production and care and maintenance activities until the mine goes back into production. The company issued force majeure notices to its suppliers, customers and contractors.
“The decision to put Magellan on temporary care and maintenance was a difficult but necessary one,” said president and CEO Alan De’ath during a media conference after the announcement.
The Magellan mine is estimated to have a 10-year mine life with a measured and indicated resource of 21.4 million tonnes grading 5.8% lead.
Ivernia reported a net income of US$5.8 million for the fourth quarter of 2006 and revenue of US$32.8 million. The company produced 18,500 tonnes of lead concentrate, an increase of 8% from the previous quarter.
De’ath said that three weeks prior to the announcement, Ivernia had a strong balance sheet, with cash and a bank facility, but the export ban is causing hard times for the company.
“The position taken by our bankers has placed a level of stress on our business that has to be addressed quickly,” De’ath said.
Ivernia has secured new financing for its US$11-million debt facility with BNP Paribas, which matured March 30 and a US$16.5-million loan from Sentient Note.
BNP has agreed to a 30-day moratorium on the exercise of certain enforcement rights after freezing Ivernia’s loan upon news of the export ban, which prevented the company from funding its working capital requirements.
Sentient Note will provide a 12-month extension of the US$16.5 million currently outstanding at an interest rate of 11.25% and a US$22-million non-revolving loan at an interest rate of 9.25%. The second Sentient loan will be used to pay the outstanding BNP loan and assist with the company’s overall funding requirements.
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