Death at Boleo mine piles on more bad news for Baja Mining

As if the prospect of a $1.7 billion copper mine being shut down due to insolvency wasn’t bad enough, Baja Mining (TSX:BAJ) has now reported ...

As if the prospect of a $1.7 billion copper mine being shut down due to insolvency wasn’t bad enough, Baja Mining (TSX:BAJ) has now reported that an employee has been killed at its financially troubled Boleo mine project in Mexico.

The company reported Thursday that a mining contractor has died while working on its Minera y Metalurgica del Boleo (MMB) copper mine in Mexico.

The fatality comes on the heels of news that the project itself could be killed.

The $1.7 billion mine is at risk of being shut down, the company warned in its third-quarter managers’ discussion and analysis (MD&A) report. The project is facing a $500 million overrun, and if efforts to secure additional financing from a consortium of Asian lenders fail, the project is at risk of insolvency, the company said.

In an attempt to save the project from collapsing, Baja has negotiated a rescue with a consortium of lenders in Korea.

The consortium has already provided $90 million for an additional financing, increasing its stake in the project to a majority position, to 51% from 30%.

Consortium parters are Korea Resources Corp., LS Nikko Copper, Inc., Hyundai Hysco Co. Ltd., SK Networks Co. Ltd. and Iljin Materials Co. Ltd.

The latest of several standstill agreements now in place expires November 20. Should the consortium fail to provide a second round of financing and call in its loans, “Baja expects the result would be the immediate shutdown of the project and the insolvency of MMB,” Baja warns in its MD&A, which also reported a third-quarter loss of $152.3 million.

Under the refinancing agreement, the consortium is increasing its role in managing the MMB project.

However, Baja warns that the consortium may not have the expertise to see the project through.

“The consortium has no previous operational experience at the project,” it warns in its MD&A. “It is uncertain whether MMB will be able to obtain the services of the personnel it requires to advance the project or to successfully manage the transition of control of MMB and the project.”

Earlier this year, John Greenslade was forced to resign as CEO of the company he founded following revelations the MMB project would cost between $400 million and $500 million more to complete than estimated.

The project was scheduled to go into operation in 2013.

nbennett@biv.com

@nbennett_biv

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