Acadian Subsidiary ScoZinc Gets Creditor Protection

Dramatic cost reduction measures at Acadian Mining’s (ADA-T, ADAIF-O) Scotia mine a few months ago weren’t enough to save it from collapsing zinc and lead prices.

The price of zinc has fallen to US51¢ per lb. from US$1.08 per lb. in January 2008, while lead has plunged to US39¢ per lb. from US$1.23 per lb.

Seeking creditor protection was the only option, Acadian Mining says. On Dec. 23, the Supreme Court of Nova Scotia granted Sco- Zinc, the wholly owned subsidiary of Acadian that holds the asset, creditor protection for an initial 30 days — or until Jan. 20, 2009. That date was later extended to March 20.

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 said it would allow ScoZinc to borrow up to $250,000 to meet short-term operating commitments.

On Dec. 31, the court increased that amount enabling ScoZinc to borrow up to $1 million from TCE Capital Corp. for these purposes. The facility, which is a demand revolving loan, will be used largely to bridge timing gaps between payables and receivables.

At presstime, Acadian was trading at 3¢ per share. The stock has a 52-week trading range of 1.5-87¢ per share.

In late October, 27 workers were laid off at the open-pit zinc-lead mine at Gays River, about a 20- minute drive from Halifax. Another 38 people were laid off more recently, bringing the total number of staff at the mine to 70, about half the number ScoZinc had employed in October.

Acadian said the Scotia mine will continue to operate on a reduced basis until February or March, and has initiated the planning process to place the mine on care and maintenance.

The mine is expected to produce 30,000 tonnes of zinc concentrate and between 8,000 and 10,000 tonnes of lead concentrate this year.

Acadian has also been developing four advanced gold properties — together known as its Scotia Goldfields project — consisting of Beaver Dam, Tangier, Forest Hill and Goldenville. Each of the properties are past-producers and host National Instrument 43-101 gold resources. In total, the four projects have a measured and indicated resource of 626,000 oz. gold and an inferred resource of 909,000 oz. gold.

In July, Acadian announced it would not proceed with a previously announced plan to spin off its gold assets into a new public company to create value for its shareholders, because of unfavourable conditions in the capital markets.