Silver explorer
The company has proposed a plan of reorganization with the approval of its four largest bondholders, which control more than 70% of the outstanding debt.
The plan calls for Sunshine to arrange US$5 million in debtor-in-possession financing from affiliates of the major bondholders. The package includes a commitment for US$5 million in long-term financing after the company emerges from bankruptcy.
The company’s long fall into the hole began in the spring when it was unable to refinance debt owed to holders of 8% senior exchangeable notes, also known as Eurobonds. Their maturity was extended throughout the summer.
Sunshine raised US$30 million through these Eurobonds in 1996 and 1997 to finance exploration and development of the Pirquitas silver-tin deposit in northern Argentina. The company outlined reserves of 116 million oz. silver in 23.9 million tons averaging 4.9 oz. silver per ton. However, low silver prices made it uneconomic to develop the property.
The company also lost its coveted listing on the New York Stock Exchange, one it had maintained for more than 70 years.
Under the plan, all equity in the company will be cancelled, though the bondholders have agreed to let current shareholders have 4% of the equity in the reorganized company. Another 6% of the new equity will be reserved for other unsecured creditors, while the bondholders will retain 90% of the new equity issued under the plan. They will also name a majority of the directors of the reorganized company.
The plan also gives the bondholders an option to acquire the Sunshine subsidiary that owns Pirquitas should the plan of reorganization fail.
Sunshine’s other major asset is its namesake mine in northern Idaho, which produced 5.2 million oz. silver in 1999 at an average cash cost of US$4.43 per oz. In addition, the company controls two exploration properties in Argentina — Capricho and Aguas Calientes.
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