Canadian Baja Mining (TSX:BAJ) continues to struggle with cost overruns at its flagship Boleo mine in Mexico, as the company has not yet received any funding proposals for the project and can only run it until August 1, the miner said Friday.
Baja’s shares reacted to the announcement on the Toronto Stock Exchange this morning, dropping a further 18% to 13.5 cents, making the stock one of the biggest losers of the session.
Last week, the Vancouver-based company suffered a major setback after Mount Kellett Capital Management, the company’s largest shareholder, announced it wouldn’t provide debt or equity financing for Boleo.
In late June, Baja said lenders have agreed to a 45-day standstill for the project financing, giving the company more time to arrange funds its copper-cobalt-zinc Boleo project, which is jointly owned by Baja and a Korean consortium.
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 spending at 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 80% of its value in the last three months due mainly to the acrimonious boardroom battle 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 a 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 Kellett has kept the tight-knit Vancouver mining community buzzing for months.
Mount Kellett, which has pumped $80 million into Baja, has 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 Kellett a wolf in sheep's clothing wishing to stealthily takeover the company.