Dakota’s Alaskan unit seeks creditor protection

Crumbling under a large debt load, Dakota Mining (DKT-T) operating subsidiary USMX of Alaska has filed for bankruptcy protection.

After a 90-day interim financing facility provided by NM Rothschild & Sons expired without Dakota reaching a debt-restructuring agreement with its creditors, the subsidiary voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

USMX of Alaska, which operates the Illinois Creek gold mine in west-central Alaska, owes a total of US$12.1 million. Dakota and its subsidiaries (including USMX of Alaska) owe more than US$38 million, including US$18.4 million to holders of the company’s convertible debentures, US$9.7 million to Rothschild for Illinois Creek, US$3.7 million to Gerald Metals, and US$5.4 million to D.H. Blattner and Sons for contract mining services at Illinois Creek and other operations.

While Dakota itself did not file for bankruptcy protection, the Ontario Securities Commission issued a cease-trade order for the company on May 25 for failing to file its year-end statement on the May 20 due date. The halt will remain in place until the statement is filed.

Shares of the company suffered badly before the trading halt. On May 22, following news of the bankruptcy filing, they fell to 10 cents from an opening bid of 22 cents, with more than 2 million shares changing hands. The last trade before the halt was for 9 cents a share.

Dakota has asked various state and federal agencies to allow it to draw down on existing cash bonds to fund reclamation and permit obligations at certain mine sites. The company has US$9 million in cash bonds associated with its Illinois Creek, Stibnite, Gilt Edge, and Goldstrike mines.