TRONA — The bankruptcy sale of assets of Searles Valley Minerals, Inc. reached a milestone Tuesday, with buyer and seller both announcing a deal.
Hesperia-based 5E Advanced Minerals, which already produces boric acid at a pilot facility near Newberry Springs in San Bernardino County, said it has agreed to buy Searles Valley Minerals’ Trona assets.
“We are confident that 5E is the right steward for these assets,” Searles President Dennis Cruise said in a news release.
“Their capital resources, technical expertise, and strategic commitment to critical minerals supply position the business for continued success and long-term growth,” he continued. “Equally important, this outcome ensures over 150 continuous years of mining operations, clear operational direction for our employees, preserves our customer relationships, and maintains the infrastructure that serves the Trona community. We look forward to working with 5E through the transition to ensure a seamless handoff of operations.”
Paul Weibel, chief executive officer of 5E, said the acquisition represents a “transformative opportunity” for his company.
The deal was also detailed in a notice and purchase agreement filed with the bankruptcy court Tuesday.
Searles filed for Chapter 11 bankruptcy protection on June 15, about four months after announcing a reduction of about 55% of its Trona workforce. Trona is also in San Bernardino County and many of its employees live across the Kern County line in Ridgecrest. Also in bankruptcy and part of the deal are two affiliated companies, Trona Railway Company LLC and Searles Domestic Water Company LLC.
According to 5E’s news release, the deal will transform 5E from a pre-revenue development company into an operating critical minerals producer with established commercial production, an active customer base, and near-term revenue —while preserving its Fort Cady project as its long-dated growth resource.
“Searles Valley brings established production facilities, infrastructure and a long operating history that complement 5E’s large, multi-generational boron resource at Fort Cady,” Weibel said. “Bringing these assets together has the potential to significantly strengthen 5E’s position within the U.S. boron supply chain, establish a platform for meaningful domestic borate production, and to potentially become the second largest borates producer in the Western world.”
5E Advanced Materials describes itself as a “critical minerals company.” According to its website, the company’s Fort Cady Project, located near Newberry Springs, is “the largest known new conventional boron deposit outside of Turkey, fully permitted, in production, and designated U.S. Critical Infrastructure.” Newberry Springs is about 60 miles northeast of Hesperia and 115 miles southeast of Trona.
ISL mining — a process that extracts minerals by dissolving them underground rather than digging them out physically — is taking place at Fort Cady. So far, that operation remains a small-scale facility producing about one short ton of boric acid per day. The Searles operation at Trona and Rio Tinto’s open pit mine at Boron are the only commercial-scale producers in California.
SVM operates as a wholly owned subsidiary of Karnavati Holdings, Inc., which is owned by Nirma Limited, a major Indian industrial conglomerate. Nirma purchased Searles from a private investment firm around November 2007.
Rio Tinto, one of the world’s largest mining and metals companies, acquired U.S. Borax in Boron in the late 1960s. In June, the Anglo-Australian company headquartered in London said it plans to sell the operation located in Kern County, about 40 miles south of Trona.
“For a decade, America’s boron supply has depended on foreign-owned production,” Weibel added. “With Searles Valley’s operating facilities and Fort Cady’s multi-generational resource under one American company, 5E now has a path to supply both near-term demand and long-term capacity in a mineral with no substitute. That is the platform we set out to build.”
The agreement for 5E to buy the Trona operation does not end the bankruptcy proceedings, although both companies said they expect the deal to close next month.
“Throughout the bankruptcy process and following closing, Searles Valley Minerals will continue normal operations,” the company’s news release said. “Westend will continue to produce boron, sodium sulfate, and other specialty products for customers. The Trona Railway will continue to operate. Searles Domestic Water Company will continue to provide potable water service to the Trona community without interruption.”
In its news release, 5E said it “expects to maintain operations in Trona, California without interruption and retain a meaningful portion of the Searles Valley operating employees.”
The deal
As described in both news releases and a document filed with the court, 5E will acquire Searles Valley Minerals’ production facilities (Westend and Argus plants), approximately 9,000 acres of Searles Lake brine resources, the Trona Railway short-line railroad, potable water production and distribution facilities, permits, licenses, and related operating assets located in San Bernardino, Kern, and Inyo counties
The company will put up $3,357,906 in cash and 8,300,000 shares of its common stock and take on a $6.2 million senior unsecured note. 5E has secured $10 million in bridge financing from Nirma Limited (or its designated subsidiary) to fund the acquisition and provide working capital.
The transaction remains subject to approval by the bankruptcy court and satisfaction of customary closing conditions, including, with respect to the Trona Railway railroad assets, required authorization from the Surface Transportation Board.
In its news release, 5E noted that the company “will also assume specified liabilities related to ongoing environmental compliance obligations.”
And a footnote included with the news release addressed “risks and uncertainties” that come with the deal, among them the risk “that the motion filed by the California Air Resources Board in the Chapter 11 Cases objecting to the sale of the Specified Assets free and clear of certain environmental and regulatory obligations is not resolved in a manner acceptable to the company.”
Searles made no secret of its $76.3 million environmental liability to CARB’s cap-and-invest program when the bankruptcy petitions were filed in June. That was a pre-petition liability.
And the sale documents filed Tuesday suggest Searles has settled with CARB.
According to the court filing, the debtors will exchange approximately 16,048 carbon credits to satisfy “postpetition emissions obligations.” That would be the company’s obligation since mid-June.
CARB, according to the filing, “has agreed not to pursue an appeal and will withdraw its stay pending appeal request.” Also, the filing states, “CARB will not file a proof of claim, thereby significantly reducing the overall unsecured claims pool in these cases.”
What’s next
Another hearing is set for Sept. 24. Referenced as an “omnibus hearing,” it would allow the court to consider a variety of matters, and the notice did not include a specific agenda.
That hearing is also expected to take up a motion setting deadlines for creditors to file claims — proposing a 30-day window for most creditors once the order is signed, and a Dec. 14 deadline for government agencies, including CARB and Kern, San Bernardino and Inyo counties.
Case information is online at cases.stretto.com/SVM.
Claudia Elliott is founder and editor of The Mojave Beat She can be reached by email: claudia@mojavebeat.news.