Pioneer needs shareholders’ approval for restructuring

In an effort to continue as a viable company, Pioneer Metals (TSE) will seek shareholder approval for various restructuring proposals at its annual meeting later this month.

Pioneer settled the majority of its unsecured debts by making cash payments based on a percentage of the amount owed and is continuing negotiations to settle its remaining debt.

The company received a proposal from Westmin Resources (TSE) earlier this year for the settlement of debt relating to the Premier Gold project north of Stewart, B.C.

Pioneer, which holds a 40% interest in the mine, owes Westmin a total of about $21 million as a result of unpaid cash calls for the project. Westmin proposes to cancel the debt in return for the transfer of Pioneer’s interest in the mine.

The proposal is conditional on the agreement of Chase Manhattan Bank which has secured debt of $21 million including a mortgage against the property interest.

Management of Pioneer is investigating proposals which would allow a settlement with Westmin without Westmin and Chase Manhattan having to come to terms with respect to the relative status of Pioneer’s debt.

The company will ask shareholders at the annual meeting on June 28 to vote on a number of special resolutions related to the restructuring. The company is seeking approval to negotiate two separate settlement arrangements with Chase.

In the first, substantially all the assets of the company would be transferred to Chase in return for cancelling the debt.

The other proposal would result in Pioneer issuing the bank common stock in return for cancelling the debt. Chase would then transfer a portion of the issued stock to Pioneer management, resulting in the bank owning approximately 49% of the company, management owning about 25%, and existing shareholders holding the balance.

Stephen Sorensen, president of Pioneer, said he was optimistic an acceptable arrangement could be worked out but stressed receivership was certainly a real possibility if the bank does not agree to some form of restructuring.

Sorensen said the first alternative, involving transferring all the assets of the company to Chase, would have the same effect for the bank as receivership but would leave Pioneer as a shell company able to continue as a going concern.

In the event Chase opted to put the company into receivership, Sorensen said he doubted the bank would get more than $2 million for the company’s assets.

Pioneer’s assets include a 100% interest in the failed Puffy Lake gold mine in Manitoba, its 40% interest in the Premier mine, a 100% interest in the Bonito gold-silver property in New Mexico, a number of exploration properties in British Columbia and a 51% equity interest in Big Bar Gold (VSE), a shell company with no assets.

Shareholders will also be asked to vote on a resolution to consolidate the capital of the company on the basis of 8-10 old shares for one new share.