Crown gets breathing room (October 29, 2001)

Vancouver — Solitario Resources (SLT-T) is providing a $1-million secured-note financing to its major shareholder, financially beleaguered Crown Resources (CRRS-O).

The funds are part of a proposed $3.6-million financing, which is intended to enable Crown to restructure $15.4 million in 5.75% convertible subordinate debentures. The company defaulted on the payment of these in late August.

Solitario’s portion of the financing comprises two 5-year notes of $350,000 and $650,000, which are secured by Crown’s wholly owned Crown Jewel gold deposit in northeastern Washington state.

A 10% interest rate, payable quarterly in cash or stock, is attached to the notes. Only $350,000 will be available as cash, with the $650,000 note, convertible into shares at 35 apiece, held in escrow pending the restructuring. In return for the funds, Solitario will receive a warrant, exercisable at 75 over five years, for each share that is converted under the $650,000 note. The Denver-based junior also gets a warrant, exercisable at 60 over five years, for each converted share under the $350,000 note. The conversion price of this note is 29.

About 10% of the proceeds will be used to finance permitting at Crown Jewel.

Newmont Mining (NEM-N) had picked up a 54% stake in the deposit through its acquisition of Battle Mountain Gold, but recently returned the property to Crown in exchange for a sliding-scale royalty interest.

Crown says it may still seek protection from its creditors and file a plan of reorganization under federal bankruptcy law.

The debentures stem from the 1991 acquisition of the Kettle River gold mine, also in Washington state, which Crown later sold to Echo Bay Mines (ECO-T).

The company recently had its shares delisted from the Toronto Stock Exchange for failure to maintain minimum listing requirements. It retains a 42% interest in Solitario.