Mercator Minerals Ltd., the copper producer that has fallen 79 percent this year, hired BMO Capital Markets to advise on a potential sale or merger as it deferred a debt payment on its Arizona mine.
A special committee of three board members will also consider a sale of some of the Vancouver-based company’s assets or a “strategic investment,” Mercator said today in a statement. Mercator said it has spoken with and received non-binding proposals from “a number of interested parties.”
Copper futures have declined 8 percent on the London Metal Exchange this year as growth slowed in China, the world’s largest consumer of metals. Molybdenum, which accounts for almost half of Mercator’s sales, has dropped 20 percent as demand for the metal used in steel alloys has declined.
“With metal prices dropping a little bit and the operating costs continuing to be fairly high it’s really squeezed their margins,” Adam Low, a Toronto-based analyst for Raymond James Ltd., said in a phone interview today.
Mercator dropped 4.6 percent to 10.5 Canadian cents at the close in Toronto.
Mercator’s Mineral Park unit will defer a $4.8 million principal payment due today on a $86.8 million loan facility, after reaching an agreement with lenders. The accord will also allow the subsidiary to withdraw as much as $5 million from a debt-service reserve account through Oct. 31 to fund the Arizona facility, Mercator’s only operating mine.
The agreement with creditors “should allow Mineral Park to continue to operate in this challenging environment which in turn will facilitate the review of strategic alternatives,” Mercator Chief Executive Officer D. Bruce McLeod said in the statement.
In March, McLeod said the company was in discussions to sell 25 percent of its El Pilar project in northern Mexico. The company still owns 100 percent of El Pilar, according to its website. A spokesman for Mercator declined to comment on the project.
El Pilar has the necessary permits to begin digging and “would attract some interest,” said Low. Offering to sell a minority stake might be a sticking point for buyers who want operating control, he said.