Rubicon Minerals details restructuring terms, gets initial CCAA order

By Caroline Salls

Pittsburgh, Oct. 20 – Rubicon Minerals Corp. announced the details of its refinancing and recapitalization transaction in a Thursday news release and said it obtained an initial order from the Ontario Superior Court of Justice granting the company and its subsidiaries a stay of proceedings under the Companies’ Creditors Arrangement Act to allow them to implement the restructuring.

Rubicon said George Ogilvie committed to assume the role of president and chief executive officer upon and subject to the completion of the transaction. Julian Kemp will leave his position as interim president and CEO upon the appointment of Ogilvie. He will remain as chairman of Rubicon’s board of directors.

Ernst & Young Inc. was appointed as the company’s CCAA monitor.

The company said the restructuring transaction will involve a new C$40 million equity raise and the reduction of its outstanding obligations.

The transaction is supported by Rubicon’s principal creditors, CPPIB Credit Investments Inc. and RGLD Gold AG, which entered into support agreements with the company.

Phoenix Gold plans

The company said it intends to implement the restructuring transaction under a CCAA plan of compromise and arrangement. Rubicon said it believes that the implementation of the restructuring transaction will improve its financial position and enable it to resume exploration activities at the Phoenix Gold Project.

“The restructuring transaction is the best available transaction for the company and its stakeholders and follows an exhaustive review of strategic alternatives,” Kemp said in the release.

Ogilvie said in the release, “I believe in the exploration potential of the Phoenix Gold Project and the company’s large land packages in Red Lake, Nevada and Utah.

“My vision is to systematically diamond drill, drift, sample, test mine in the main mineralized zone, and analyze the F2 Gold Deposit until we have a strong understanding of the geology hosting the gold mineralization before embarking on a new NI 43-101 mineral resource estimate.

“Over the long-term, our objective is to evolve into a company that is profitable and provides a healthy return on capital to our investors, in a measured and conservative manner” Ogilvie added in the release.

“We believe the proposed restructuring transaction will provide the company with a strong balance sheet and enable us to recommence exploration activities at the Phoenix Gold Project over the next 24 months.”

According to the release, this process is not expected to affect Rubicon’s day-to-day business, and the company has sufficient resources to continue without disruption while the transaction is being pursued.

New equity financing

As part of the restructuring transaction, the company said new equity financing is intended to raise gross cash proceeds of C$40 million by way of a private placement for 60% of the outstanding equity interest in Rubicon.

BMO Capital Markets Corp. is the lead agent for the new equity financing and may, at its option, raise up to C$45 million in equity financing, subject to a pro-rata adjustment of the equity interest to be issued to the participants in the new equity financing.

The proceeds from the new equity financing will be used to fund the restructuring transaction, pay down a portion of the outstanding amounts owing to CPPIB Credit, resume exploration activities at the Phoenix Gold Project and for general working capital purposes.

Restructuring terms

The key elements of the restructuring transaction include:

• The company will seek to raise the new equity financing;

• The C$68.4 million principal outstanding to CPPIB Credit under an existing secured loan facility will be reduced to C$12 million, in exchange for a 29% equity interest in the reorganized company and a cash payment of C$20 million;

• The CPPIB facility will be amended to reflect the reduction of the principal loan amount to C$12 million, extend the maturity date to Dec. 31, 2020, provide that interest payments will be paid in-kind with an interest rate of 5%; provide that the CPPIB facility can be voluntarily prepaid at any time without premium or penalty and revise some covenants and event of default provisions;

• The gold stream facility with RGLD will be exchanged for 1% net smelter royalty (NSR) on all of the company’s land holdings in Red Lake, Ont., including the Phoenix Gold Project, subject to a maximum 4% NSR on any one property, 2.5% NSR on the Nevada/Utah properties, subject to a maximum 5% NSR on any one property, 6% equity interest in the company and an assignment of Rubicon’s rights to acquire any portion of an existing NSR that is subject to a buyback provision and a right of first refusal for any royalty, stream, participating interest in production or amount of gold or other minerals based on production that the company wishes to offer for sale in connection with its current properties;

• Existing Rubicon shareholders will retain roughly 5% of the equity interest in the company;

• If the new equity financing is greater than C$40 million, the equity interests to be held by the new equity financing participants, CPPIB Credit, RGLD and existing shareholders will be adjusted; and

• Unsecured creditors will receive at their option either the lesser of the amount owed to the creditor or C$5,000, or 2.5% of the amount owed to the creditor, subject to restrictions.

Rubicon said the outside date for completing the restructuring transaction Jan. 15.

In accordance with its policies and in connection with the implementation of the CCAA proceedings, the company said the Toronto Stock Exchange is reviewing the continued listing of Rubicon’s common shares, which have been suspended from trading.

Based in Toronto, Rubicon is a gold producer.

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