Cline Mining Corp. defaults on $2.5 million payment
Cline Mining Corp., owner of the New Elk Mine in Trinidad, CO said that it defaulted on a $2.5 million debt payment.
Local officials said they remain hopeful that the coal mine will reopen.
“My thoughts are that New Elk is looking for a buyer who has beaucoup, beaucoup, beaucoup bucks. That they will buy the mine from Cline and bring it back up to standard and start production,” Steven Kelly, director of the Trinidad-Las Animas County Economic Development Inc. told The Denver Post.
Last February, Cline issued US$25 million of bonds to Marret Asset Management, which represents the bond holders. The proceeds were earmarked to expand the New Elk metallurgical coal mine in Colorado in order to meet targeted production rates.
A second round of US$25 million in bonds was issued in April, once again to Marret clients.
By July, Cline halted production at its New Elk metallurgical coal mine in Colorado to explore strategic alternatives and potential financing, and complete the sale of the coal in inventory.
In September, Cline Mining CEO Ken Barnes said, “The global coal market, in which metallurgical coal prices have decreased sharply over the last two quarters, is incredibly challenging for coal companies at the present movement and is a direct reflection of this challenging environment. We have taken all the necessary actions so that we preserve our capital position and conserve our working capital.”
Last May, the coal mining company sued the government of British Columbia for C$500 million in compensation after its proposed new coal mine ignited a political war between Canada and the United States and the state of Montana and the province of British Columbia, resulting in the ban on mining in the Flathead Valley on both sides of the Canadian/U.S. border.
Cline is seeking a declaration that its right under its coal licenses and coal license applications for the Lodgepole, Sage Creek and Cabin Creek properties were expropriated, taken or injuriously affected by the passage of the Flathead Watershed Area Conservation Act.
By October, Cline announced it posted a loss of $1.93 million during the third quarter and a $7.8 million loss for the first nine months of this year. CEO Bates advised, “Current market conditions for coal producers continue to be challenging. Demand continues to be weak in the metallurgical coal market with prices declining across the board.
Since July, about 250 people have lost their jobs at New Elk, Kelly said.
In July, Cline announced a 60-day suspension of production at the mine and laid off workers. In September, the company said that because of the current market, the suspension of operations would continue “pending improved market conditions.”
A semi-annual interest payment of $2.5 million was due Dec. 17 on Cline’s outstanding $50 million principal amount of 10 percent senior secured bonds.
The company said it has been in discussions with Marret Asset Management Inc., which represents the bondholders, and is considering its options.