Baja Mining (TSX:BAJ) dropped another 2% on Friday to trade at $0.255 bringing its losses for the week to 9%, after announcing Louis Dreyfus Commodities Metals Suisse has filed a request for arbitration with the London Court of International Arbitration concerning a $35 million cost overrun facility.
In terms of the agreement, Dreyfus will be issued common shares in Baja to the equivalent value of the amounts drawn under the facility, based on a share price of C$1.10.
Dreyfus now wants the deal cancelled and is also asking for damages. Baha has vowed to launch a vigourous defence.
Friday's complication is just the latest setback for Vancouver-based Baja which has now lost almost 70% of its value this year. It is now worth just $86.7 million on the Toronto big board.
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 70%-owned mine. Korean investors hold the rest.
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.