Baffinland could run out of money by end of next week, CFO says
Company asking court to approve loan from Export Development Canada, which would keep operations going through shipping season
Baffinland plans to ask an Ontario court to approve a $660-million loan from a Crown corporation to cover shipping season costs. (File photo)
Baffinland could soon run out of money if it doesn’t get a loan.
Celeste van Tonder, the company’s chief financial officer, laid out the company’s situation Wednesday in a sworn affidavit.
She said the loan would give Baffinland Iron Mines Corp, which operates the Mary River iron mine on north Baffin Island, the finances required to continue operations through this summer’s shipping season.
Otherwise the company will have a “negative cash balance as of the end of next week,” van Tonder said in the affidavit.
Baffinland is seeking up to $660 million from Export Development Canada, a Crown corporation owned by the federal government, as part of the company’s creditor protection proceedings in the Ontario Superior Court that began May 15.
But a judge needs to approve it. Representatives from Baffinland are expected to make their case Friday in the Ontario Superior Court of Justice.
van Tonder said Baffinland lacks the “liquidity” to keep Mary River Mine operational and that, unless the Oakville, Ont.-based company gets the loan, the mine will be “forced to curtail or cease operations entirely and a significant number employees may need to be placed on leave.”
This comes ahead of the “cash-intensive” three-month shipping season, van Tonder said.
The company asked four entities to bid on offering it a loan by May 30. Export Development Canada, which is already one of Baffinland’s creditors, won. Over the past decade, it has given Baffinland at least four loans, for which the mining company owes more than $100 million.
Not getting the approval would have “far-reaching consequences” for the company and territory, van Tonder said in the affidavit.
Baffinland is Nunavut’s largest private-sector employer with approximately 1,200 people, including 300 Inuit employees, who, along with Inuit businesses, depend on the mine’s “continued operation,” she said.
As of May 14, Baffinland owes a total of $2.6 billion to 231 creditors, according to a list the company compiled for the court.
A dozen of those creditors are northern businesses and entities who are owed at least $27 million.
Baffinland’s financial troubles are linked partly to its failed Phase 2 railway expansion proposal. The company spent more than $1.5 billion on a proposed expansion that was ultimately rejected by the federal government after years of hearings and opposition from some north Baffin communities.
“Baffinland is in active dialogue with all stakeholders, including employees, suppliers, government related institutions and communities, to ensure continued support,” company spokesperson Peter Akman wrote in an email to Nunatsiaq News.
He declined to comment on the “specific figures or details contained in the court materials.”
Business will carry on as per usual this year to we will run out of money next week.
That is quite the change in narrative.
A judge indeed needs to approve it but the article frames it as if Baffinland still needs to make an ask. They got competing offers from multiple parties for DIP financing and accepted the offer from EDC, who was already an existing lender. This means they’ve done enough due diligence to deem the project worthy of rescue and at the very least, that it’s valueable enough that a buyer will emerge
I would be very surprised if this is not approved by the courts. They want to protect shareholder value. A government arm willing to provide financing signals to a buyer that Canada still wants this mine around, which is a good thing for the seller in terms of price.
Everything seems to be pointing at Baffinland being sold in the next 12 months rather than restructuring the debt. Unless something weird happens like iron ore doubling in price
The former Liberal Northern Affairs minister squashed the mines railway plans to become financially viable because it is on Inuit land.
And QIA, NTI and North Baffin hunters were also not in favour he approve Baffinland Phase 2 proposal, Northern Affairs minister Daniel Vandal stated.
“The land that the mine is on is not Crown land; it’s Inuit owned land…Those for me were the most salient (important) reasons.”
Nunavut MP, NDP Lori Idlout rejoiced, saying she had an “overwhelming sense of relief” on Ottawa’s rejection of the mines proposal.
Interesting, Lori Idlout now sits as a Liberal floor-crosser. Who, a few days ago, sat front row and a few seats from PM Carney during question period.