Denison, Potacan in default on potash mine loan payment

Denison Mines (TSE) is attempting to persuade its lead bankers to reschedule payments on a US$209.4-million loan arranged to finance development of the company’s potash mine in New Brunswick.

After failing to meet the Jan. 31 deadline on a principal repayment of US$13.085 million, Denison-Potacan Potash, the company that owns the mine, is hoping that future payments can be refitted to meet mine cash flow.

Denison-Potacan is a partnership owned 60 % by Denison and 40% by Potash Co. of Canada which in turn is owned by each of Entreprise Miniere et Chimique of France and Kali and Salz of Germany.

As the non-recourse loan is restricted to the assets of Denison-Potacan, none of the partners is under any obligation to put up the funding needed to pay off the loan.

Denison President Bill James, who visited New Brunswick recently to take a look at the operation, said that because of low potash prices, the mine isn’t producing enough cash flow to make the payments. “It is up to the banks to make the next move,” said James, who was recently attempting to find a buyer for Denison’s stake in the project.

While mine production increased in 1990 to 972,000 tons from 881,000 tons in 1989, lack of sufficient cash flow will again prevent the partnership from making its next loan payment by the July 31 deadline.