Baja sued for $260 million in class action. Vancouver co is worth only $18 million, down 93% in 2012

Baja Mining (TSX:BAJ) dropped by almost a third on Friday after announcing that class action proceedings have been commenced against it for $260 million in damages for misrepresenting the true state of affairs at its Boleo project since 2010.

Friday's complication is just the latest setback for Vancouver-based Baja which has now lost 93% of its value this year closing at 5 1/2 cents. It is now worth a paltry $18.7 million on the Toronto big board.  At its height during the heady days of 2007 Baja Mining was valued at $836 million.

Only yesterday, Baja was given a lifeline securing $90 million of interim financing for the copper-cobalt-zinc project in Mexico from its Korean partners. The consortium led by Korea Resources Corporation owns 30% of Baja's Mexico subsidiary, Minera y Metalurgica del Boleo, a stake it picked up five years ago.

In order to save the project and the company RK Consulting is performing a due diligence on Boleo while BMO Capital Markets continues to "actively canvass potential strategic and financial interested parties".

Baja is also the subject of arbitration proceeding at the London Court of International Arbitration concerning a $35 million cost overrun facility provided by Louis Dreyfus Commodities Metals Suisse commenced in June.

The rot set in last year with an acrimonious boardroom battle that ended with a reconstituted board and the resignation of the CEO and founder last week.

But what really crushed the stock was an announcement little over a month ago that the company's Boleo copper-cobalt-zinc project in Mexico 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 do a takeover of the company by stealth.

At a special shareholder meeting on April 3, the Greenslade camp scored a narrow victory over Mount Kellet, although it turned out to be a Pyrrhic one.