Vancouver-based Petaquilla Minerals Ltd. is in discussions about alternative financing after defaulting on a loan.

Petaquilla is a gold producer that operates the Molejon gold mine in Panama, and owns exploration and development-stage projects in Spain and Portugal.

The company is in default on a gold purchase delivery agreement, because it did not meet delivery requirements for December 2012 and June 2013. The amounts owed for the failed delivery requirements were paid in September, but Petaquilla was still in default with Deutsche Bank because it did not meet certain reporting covenants, according to filings with the U.S. Securities and Exchange Commission. 

The company says there is substantial doubt about its ability to continue as a going concern because of the default on the Deutsche Bank debt and the company’s working capital deficiency, according to SEC filings.

The company says it has been discussing alternative financing arrangement with several parties, but there is no assurance that it will succeed with agreeable terms. The company has two loans from Deutsche Bank, one for C$6 million (about $5.7 million) and one for $11.3 million.

Petaquilla failed to meet the delivery requirements, because the Molejon mine’s output was decreased as Petaquilla attempted to increase production at another mine.

The company plans to spin off Panamanian Development of Infrastructures SA (PDI), a subsidiary that will focus on infrastructure and construction, but must first pay off the Deutsche Bank debt.

As of June 30, 2013, the company had a working capital deficiency of $85.6 million and accumulated deficit of $128 million.

The company’s shares were halted from trading in Canada on Nov. 25 because of an order by the British Columbia Securities Commission, which was set to review the company’s filings. The order was issued because Petaquilla failed to file interim financial statements for the quarter ended Sept. 30.

In November Petaquilla closed a private placement of $14.3 million shares to raise C$5 million ($4.78 million). Proceeds will be used for working capital purposes, the company says in SEC filings.

The company’s revenues are also up from previous years: For the year ended June 30, 2013, Petaquilla listed $110.7 million in revenue, compared with $96. 1 million in revenue for the year ended May 31, 2012.

For the previous edition of Turnaround Tuesday, see “BG Medicine Needs Funds.” For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List

Due to vacation schedules, Turnaround Tuesday will not be published on Tuesday, Dec. 24, and will resume publishing on Dec. 31. 

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