The Rapu Rapu Group of Companies will seek
court protection this week from creditors after its mother
company, Australia- listed Lafayette Mining Ltd., entered
voluntary administration or bankruptcy protection.
The legal process called voluntary
administration in Australia, will allow Lafayette to seek
recapitalization or to sell off its mining operations in the
Philippines.
Lafayette’s Rapu Rapu mine was the first
foreign-owned mine to operate in the Philippines after a law
granting full foreign ownership of local mining projects was
upheld in 2004.
Cyanide spills a year later led to a
temporary closure and damage from three typhoons further
hindered operations.
A bailout plan under consideration by a
private equity group, South East Asian Strategic Asset Fund,
would have eliminated around A$300 million ($260 million) of
Lafayette’s debt and bad hedges with the help of a $151 million
capital raising.
The bailout plan however fizzled out.
Carlos G. Dominguez, chairman and president
of Lafayette Philippines, which oversees the Rapu Rapu group,
said the local units will file a petition for rehabilitation so
it can continue normal operations, which is the best way to
protect all its stakeholders, particularly its host communities,
employees, and the environment.
The rehabilitation petition is expected to
result in a court order instructing the group’s present
creditors and suppliers to continue their services and
transactions with the local companies for as long as they are
paid on cash basis.
Payment for existing debts will be suspended
until the court has approved a rehabilitation plan that will
fairly settle all outstanding debts and ensure the continued
operations of the company.
In Australia, the voluntary administration of
LML was reached after its board deemed that it could not
continue to meet its obligations as and when they fall due.
Following Australian rules, two
administrators had been appointed to take control of LML and to
find ways to lighten the company’s debt burden through the sale
or restructuring of bank debts and/or raise new capital.
"In the end, the administration process in
Australia and the rehabilitation in the Philippines will make
the local units stronger financially by addressing its
longstanding issues regarding under-capitalization,
over-borrowing, and poor hedging deals," he said.
Negotiations with new investors are still
continuing, Dominguez said. Based on current term sheets, the
investors will put in new money into the local units and buy the
debt papers, wiping out its debts and allowing the operating
companies to use its income for operations and community
projects.
The mine has been forecast to generate annual
production of 10,000 tons of copper in concentrate, 14,000 tons
of zinc in concentrate, 50,000 ounces of gold and 600,000 ounces
of silver.
Australia-based administrator Ferrier Hodgson
had been appointed to take control of the company’s business and
property, effective immediately, Lafayette said. (with reports
from Reuters)