Colossus said Tuesday its board approved the filing of a so-called "notice of intention" by the company to make a proposal under the Bankruptcy and Insolvency Act of Canada, which will allow it to pursue its approved restructuring plan and sale process under court supervision.
The plan provides for interim debtor-in-possession financing from noteholders and streaming company Sandstorm Gold, which will fund Colossus as it pursues both a six-week sale process and a restructuring of its capital through the conversion of debt into equity.
If Colossus ends up undergoing a debt-for-equity swap, noteholders would take control of the company, owning 51.5% of the stock, while Sandstorm would own 38.8%. Lenders under a bridge loan would own 8%, and current shareholders would own just 1.7%.
In the coming days, the company said it is planning to seek an order from the court approving the terms of a DIP financing as well as the sale process, which will be overseen by financial advisor Duff & Phelps.
The DIP facility will be a senior, secured term credit facility, according to Colossus' statement, with an initial maximum amount of up to US$4.0 million, subject to increase by up to an additional US$6.0 million. The interest rate is 20% per year, and will be payable monthly in arrears.
Once a bright star in the junior mining sector, Colossus controls the Serra Pelada project, a gold deposit in Brazil. The company raised over $380 million for the development of the mine, and construction was near complete when it realized last year it would need more capital to finish the job. This came at a particularly poor time for capital markets and junior miners in particular, as precious metals prices dropped precipitously.
A financing agreement crumbled to pieces in late December, leaving the company effectively insolvent and unable to pay its interest payment due on December 31.
Also Tuesday, the TSX said it would review Colossus's stock for delisting, with respect to meeting the requirements for continued listing on the exchange. Securities were suspended from trading.