Ailing Dakota gets cash infusion

Creditors of Denver-based Dakota Mining (DKT-T) have advanced funds to the ailing company in a last-ditch attempt to save it from insolvency.

London-based N. M. Rothschild & Sons has agreed to provide US$1.1 million in working capital to allow Dakota time to get its house in order, the company said in a press release.

Rothschild will release US$300,000 from an account set up to hold proceeds from the Illinois Creek gold mine in Alaska, plus another US$800,000 from the proceeds of the sale of all of Dakota’s hedge contracts. The remainder of those proceeds, US$900,000, will be applied to Rothschild’s original loan to Dakota. This loan has been reduced to US$10 million and has since been converted into a demand loan.

As part of the agreement, two-thirds of the net cashflow from Illinois Creek will be applied to the principal of the loan, while the remaining third will be used to pay down US$1.9 million owed to mining contractor D. H. Blattner & Sons for work done at Illinois Creek in 1997.

The agreement will also see Dakota enter into a forbearance agreement with another creditor, Gerald Metals, under which the latter firm agrees not to take legal action against Dakota for up to three months. Dakota currently owes Gerald US$3.7 million.

Dakota is pursuing potential merger opportunities and may sell certain assets. Adding to its troubles, Dakota has been delisted from the American Stock Exchange. The shares continue to trade on the Toronto, Berlin and Frankfurt exchanges.