Firstgold investors terminate forbearance, declare default on notes

By Devika Patel

Knoxville, Tenn., April 23 - Firstgold Corp. said it is considering various financing, restructuring and strategic alternatives and has engaged Haywood Securities Inc. to assist in this process.

As previously reported, the company is in default for not making principal and interest payments on a loan. Firstgold owes about $2.4 million and it negotiated a forbearance agreement that included a "standstill" until April 30.

However, late Wednesday, the two primary lenders terminated the forbearance period and declared the company is in default under its senior secured promissory notes.

While Firstgold is working with the lenders to resolve these issues, it will consider all options at this time, including an outright sale of the company.

Until new financing can be obtained to bridge the gap between start up of the Relief Canyon mine and cash flow from production, the company has been forced to suspend any additional crushing activity at the plant and will run its operations on a care and maintenance basis until such time as full operations can be restored.

"We believe our fully permitted producing mine at Relief Canyon has the potential to be a world class asset," chief executive officer Steve Akerfeldt said in a press release.

"Unfortunately, with our current financial condition it has been difficult to arrange the capital necessary to enable the plant to reach peak operating capacity.

"Therefore, the company's board of directors has taken the step today to formally review all options including the ultimate sale and/or merger of the company. To this end, the company has already begun discussions with three interested partners and plans to move expeditiously to conclude a transaction we believe would best suit our shareholders. We will also be working with our two major lenders to allow sufficient time for us to develop these alternative strategies, " he said.

"The equity and credit markets have become very difficult to access for companies like Firstgold. Currently Firstgold in addition to being in breach of its debt obligation to lenders has approximately $3.7 million dollars in payables that cannot be repaid until new financing has been obtained. These are difficult times but we believe the steps we have implemented today will enable us to preserve and enhance our shareholders value," Akerfeldt added.

Firstgold is a mining company based in Cameron Park, Calif.

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