BUSINESS

Labrador Iron Mines writes down assets by $198.2 million due to low ore prices

11/17/2014 01:30 EST | Updated 01/17/2015 05:59 EST
TORONTO - Labrador Iron Mines Holdings Ltd. (TSX:LIM) says it's in need of a financial restructuring and new creditor agreements while it waits out a market downturn that has cut iron ore prices.

"LIM urgently needs to secure additional financing arrangements in order to fund or restructure its current working capital deficit and to fund its continuing operations, planned development programs and corporate administration costs so as to continue as a going concern," the company said Monday.

It is seeking to negotiate support from an existing creditor and offtake partner, RBRG Gerald Metals, but expects that could require a filing under the Companies' Creditors Arrangement Act and more favourable commercial terms on supply and service contracts.

LIM posted Monday a second-quarter net loss of $204.7 million or $1.62 per share on Monday as it reduced the value of its assets by $198.2-million. The loss compared with a loss of $24.9 million or 20 cents per share in the same period a year ago.

The company reported no revenue for the quarter, compared with $40.3 million in the same quarter last year.

LIM said it did not restart its mining operations for the 2014 operating season, due to a combination of low iron ore prices and the economics of its iron ore projects.

It had $5.5 million in current assets as of Sept. 30, including $2.7 million in unrestricted cash or cash equivalents.

The company said the spot price of iron ore has fallen about 45 per cent between January and now. As of Monday, the ore had a spot price of US$75 per tonne, down from a 2013 average price of US$135 per tonne.

It says part of the problem is that iron ore exports to China from Australia have risen this year, contributing to a global surplus for one of the key materials used to make steel.

As a result of the conditions, Labrador Iron is focused on developing the Houston Mine and advancing its Howse project, both near the Quebec-Labrador border, to lower its operating costs.

It has also been re-negotiating terms of major contracts and seeking additional capital investments.