Acadian (ADA.to) announces that ScoZinc has obtained creditor protection.
12/23/2008 11:26 AM - Canada NewsWire
HALIFAX, Dec. 23, 2008 (Canada NewsWire via COMTEX News Network) --
Trading Symbol: ADA:TSX; C2Z-Frankfurt
Shares Outstanding: 153,402,907
Acadian Mining Corporation (TSX: ADA) ("Acadian" or the "Company") announces that ScoZinc Limited, a wholly-owned subsidiary of Acadian, has obtained an order from the Supreme Court of Nova Scotia granting ScoZinc Limited ("ScoZinc") creditor protection pursuant to the provisions of the Companies' Creditors Arrangement Act ("CCAA"). The Supreme Court of Nova Scotia (the "Court") has granted CCAA protection for an initial 30 days expiring on January 20, 2009, to be extended thereafter as the Court deems appropriate. The CCAA protection will stay creditors, suppliers and others from enforcing any rights against ScoZinc while ScoZinc reviews the various alternatives for the restructuring of its affairs until world base metal prices rebound.
The Court also authorized ScoZinc to borrow up to $250,000 to meet short-term operating commitments and, on December 31, 2008, will consider the Corporation's application to borrow up to an aggregate of $1.0 million for these purposes.
ScoZinc's Board of Directors, in consultation with the Board of Directors of Acadian, determined that seeking creditor protection is in the interests of ScoZinc, its creditors, shareholders, employees, customers and other stakeholders. These actions are necessary because of ScoZinc's inability to fund operations primarily due to the drastic decline in metal prices, particularly over the past two months. See Acadian's news release 24-08 for further information.
On January 1, 2008, zinc and lead prices were US$1.08 per pound and US$1.23 per pound respectively. On October 1, 2008, zinc and lead prices were down to US$0.75 per pound and US$0.82 per pound respectively. On December 1, 2008, the prices for zinc had declined a further 33% to US$0.50 and lead 49% to US$0.42 per pound. On December 22, 2008, the price for zinc was US$0.51 and lead was US$0.39 per pound.
Acadian holds the Scotia Mine zinc-lead asset through ScoZinc. Acadian's gold assets are held in another subsidiary that is not affected by this action.
Several months ago, ScoZinc took active measures to implement a cost reduction program at the Scotia Mine in order to attempt to continue operations within the then existing margins. These measures included the lay off of 27 employees in late October. Recently, Acadian announced that ScoZinc was scaling back its operations at the Scotia Mine due to the continued deterioration of metal prices These measures included reducing the Scotia Mine staff by a further 38 employees, bringing the current complement of workers to 70, which is roughly half the number of workers that ScoZinc had employed in October, 2008.
It has become apparent to ScoZinc's senior management that the Scotia Mine should be transitioned to a reduced-operation mode and then, if necessary, to a "care and maintenance" status until such time as zinc and lead prices become more favourable, or potentially to process gold ore from one or more of Acadian's nearby gold properties. It is anticipated that Scotia Mine will continue to operate on a reduced operation basis until February or March 2009. A decision to put the mine on care and maintenance will be made at that time.
While under CCAA protection, management of ScoZinc will remain responsible for the day-to-day operations of ScoZinc, under the supervision of the Court appointed monitor, Grant Thornton, who will be responsible for monitoring ScoZinc's ongoing operations, assisting management with the development of a restructuring plan, reporting to the creditors and the Court, and assisting management with respect to the restructuring of the business.
