UPDATE 3-Australia's Lafayette moves to avoid bankruptcy
SYDNEY, Dec 18 (Reuters) - Australia-listed Lafayette Mining (LAF.AX: Quote, Profile, Research) entered voluntary administration on Tuesday to avoid bankruptcy and give it time to obtain new capital or to sell its troubled Philippine mining business.
Lafayette was the first foreign company to operate a mine in the Philippines after a law granting full foreign ownership of local projects was upheld in 2004.
But cyanide spills in 2005 shut the copper and zinc mine for more than a year, causing huge financial strain and making the Australian owner the poster child for the perils of large-scale mining in a country deeply suspicious of the sector.
The ensuing uproar hampered government plans to attract billions of dollars in foreign investments to the minerals industry but after a period of quiet, big players are testing the waters and Lafayette's financial distress is unlikely to put off the industry's slow revival.
"Mining companies always have lessons learned and cautionary tales and Lafayette always comes up," said Tom Green, executive director of Pacific Strategies and Assessments, a risk consultancy.
"The mining companies are well aware of Lafayette's woes over this thing and what they went through. They were aware of it before they started to come in."
Environmental campaigners, who have kept up the pressure on Lafayette since the spills on the central island of Rapu Rapu, saw the group's financial difficulties as a victory.
"We hope this development will lead to the permanent closure of mining operations in Rapu Rapu," said Clemente Bautista, national coordinator for environmental group Kalikasan-PNE.
But Carlos Dominguez, the chairman of the Lafayette's Philippine operations, said the mine and its 1,000 strong workforce would continue working until the Australia-based administrator told them otherwise.
"We have no plans to shut down the mine. We will stay open for as long as it is profitable," Dominguez told Reuters.
He said the project, 350 km (218 miles) southeast of Manila, was forecast to generate net cash operating income of $52 million on gross revenues of $105 million in its 2007/08 fiscal year.
A bailout plan under consideration by a private equity group, South East Asian Strategic Asset Fund, would have eliminated around A$300 million ($260 million) of Lafayette's debt and bad hedges with the help of a $151 million capital raising.
Late last month, Lafayette said crucial financial support from the private equity group was a possibility. But on Tuesday it said that the level of certainty over the plan had declined, and it had no grounds to continue to hold that view.
Australia-based administrator Ferrier Hodgson has now been appointed to take control of the the company and its property.
The Rapu Rapu mine had been forecast to turn out 10,000 tonnes of copper in concentrate, 14,000 tonnes of zinc in concentrate, 50,000 ounces of gold, and 600,000 ounces of silver annually.
LG International Corp (001120.KS: Quote, Profile, Research) and state-run Korea Resources Corp together hold a 26 percent stake in the mine. (Reporting by James Regan; Additional reporting by Carmel Crimmins in Manila; editing by Jan Dahinten)