Baja's top shareholder won't give more for Boleo

Besieged Baja Mining  (TSX:BAJ) suffered another setback on Thursday after Mount Kellett Capital Management, the company’s largest shareholder, announced it wouldn’t provide debt or equity financing for the Boleo project in Mexico.

However, Reuters reports the investment firm will contemplate providing permanent financing for Baja and its copper-cobalt-zinc project, if the Canadian miner is willing to bring on a strategic investor to manage the project.

In late June, the Vancouver-based  company said lenders have agreed to a 45-day standstill for the project financing, giving the company more time to arrange for funds.

Also last month Louis Dreyfus, one of Baja's main shareholders, sued the company because of over expenditures at the Mexican project.

Dreyfus is seeking an independent investigation to the "cost overruns" of the Boleo project and has also demanded for the removal of "officers and directors that share responsibility for Baja's alleged failure to make timely disclosure of cost overruns."

Baja has said it "intends to defend this action vigorously."

Louis Dreyfus holds roughly 10% of Baja Mining and has sought arbitration through the London court system.

Baja has lost 77% of its value this year due mainly to the acrimonious boardroom battle started last year, which ended with a reconstituted board and the resignation of the CEO and founder in mid-May.

But what has really crushed the miner’s market value was an announcement little over two months ago that the company's Boleo project will now cost $1.143 billion to construct, a 21.5% increase.

Before the cost run-ups, first flagged at the end of March, Baja forecast $890 million would be needed to build the mine.

Baja has previously said that Boleo remains on track to enter production in the second half of 2013 and a special committee has now been set up to look at new ways of financing.

The bitter – and very public – boardroom dispute with 20%-shareholder Mount Kellet Capital Management has kept the tight-knit Vancouver mining community buzzing for months.

Mount Kellett, which has pumped $80 million into Baja, had not been pulling punches, accusing Baja CEO John Greenslade of “enriching family and friends” at the expense of shareholders.

For its part, Baja called Mount Kellet a wolf in sheep's clothing wishing to stealthily takeover the company.

 

(Image: Oliver, Please sir I want some more, YouTube)