Two directors who quit Baja Mining Corp.'s (TSX:BAJ) board of directors have agreed to return, along with two of the proxies Mount Kellett Capital Management LP had lobbied for during a recent proxy battled.
One of the first jobs of the reconstituted board will be to consider a plan to deal with the $1.15 billion cost overrun on the Boleo mine it is building in Mexico.
But it's not clear whether reconstituting the board will result in Mount Kellett withdrawing an application it made to the courts Friday to have an independent auditor appointed to open Baja's books.
The petition to the court asks for Ernst & Young to be appointed to inspect Baja's books to determine just when management knew about a $246 million overrun on the Boleo copper-cobalt-zinc project near Santa Rosalia, Mexico.
As reported May 1 by Business in Vancouver, Baja has been embroiled in a vicious proxy battle, and now faces a funding crunch.
On April 23, three directors quit the board of directors, not long after the company revealed it is $246 million short on completing the $1.15 billion Boleo mine, which is slated to go into production in mid-2013.
Two of those directors – Wolf Seidler and Tom Ogryzlo – last week agreed to a proposal by Mount Kellett in which they would resume their positions on the board, provided two proxies preferred by Mount Kellett – Stephen Lehner and Lorie Waisberg – also were appointed.
The deal hinged on the new board removing the company's founder, John Grenslade, as CEO.
This morning, Baja issued a press release stating that it has agreed to Mount Kellett's proposal.
Seidler, Ogryzlo, Lehner and Waisberg have been appointed to a new board. However, Greenslade also remains on the board, and it's not clear if the move goes far enough to satisfy Mount Kellett, which declined to comment on whether it now plans to withdraw its court application.
Baja also announced that it met with its Korean partners last week and has come up with a proposal to fund the $246-million shortfall. A Koran consortium owns 30% of the Boleo projects.
"During the meetings, Baja discussed the Boleo project capital cost increases and various potential minimally dilutive funding alternatives, including a subordinated debt financing to fund a significant amount of the cost overruns," the company stated.
"A written proposal has been prepared for presentation to the consortium, subject to the approval of Baja's reconstituted board."
The new board won't have much time to make a decision, however, as the company's burn rate will soon exceed its cash flow.
The company has US$41 million on hand, according to a Baja Mining press release, and access to a further US$24 million. But its projected burn rate is US$60 million in May, US$75 million in June and US$60 million in July.
