Shareholders, suppliers and Ontario taxpayers lose millions
Citing financial difficulties, Swiss-based United Commodity SA has suspended operations at its Yukon Refinery in North Cobalt and terminated all but a few staff.
The company saw its shares on the Stuttgart stock exchange soar to g22 in 2013, then plunge to g3.30 before being delisted, leaving Swiss and German shareholders with worthless paper.
Also on the hook are several Cobalt area creditors and the Northern Ontario Heritage Fund Corporation, which approved a $1 million investment in the company in August 2013.
According to reports by Swiss media, United Commodity raised in the neighbourhood of US$30 million through a boiler room in Zurich with as many as 25 people selling company stock.
Loan in default
“On November 31, 2014, the company was sent a letter advising that its loan was in default,” said Julia Bennett, a spokesperson for the Ministry of Northern Development and Mines. “The letter requested the repayment of the funding by December 15, 2014 (but), to date, no response has been received.”
The refinery is on care and maintenance with a skeletal staff monitoring its tailings facility, but it’s not clear who’s paying to keep the lights on or cover the payroll given the company’s depleted treasury.
Being on care and maintenance is nothing new for the Yukon Refinery, which has had at least three owners prior to United Commodity’s acquisition of the property in June 2012.
Originally a silver mill, Cobatec purchased and converted it to a recovery plant for tailings in the early 90s. It was subsequently converted to accept feedstock from a smelter stack in Cuba containing cobalt and nickel.
Canmine Resources purchased it in the late 90s and operated it for a few years before going bankrupt. It then devolved to bondholders represented by a Swiss financial group, which kept it on care and maintenance while trying to sell it for 10 years.
The acquisition by United Commodity was cause for celebration in the Cobalt area as 46 employees were hired and several million dollars were invested in upgrading the plant’s Merrill-Crowe process to produce nickel, cobalt, silver and gold from otherwise difficult to process concentrate.
The refinery is equipped and licensed to process ore containing arsenic, which it is able to render inert by heating it in an autoclave and converting it to ferrous arsenide.
In September 2012, United Commodity issued a press release announcing an agreement with Mistango River Resources “to work together in a united effort to advance tailings recycling,” but Mistango River Resources’ chairman and CEO Robert Kasner said nothing ever came of it.
Another press release issued by Gowest Gold Ltd. announced a memorandum of understanding with United Commodity to supply the Yukon Refinery with concentrate from its Bradshaw property.
“It’s truly disappointing because a lot of us here (in Cobalt) wanted it to work and did everything we could to help them out,” said Gino Chitaroni, owner of PolyMet Labs, one of several creditors who hasn’t been paid.
Chitaroni acknowledges that United Commodity spent money on capital improvements and had upwards of 40 employees, all of whom were eventually paid, he thinks, but “in the year and a half they were there, I don’t know what they actually processed,” he said.
“The big problem was securing feedstock. I always felt that one of the biggest drawbacks to the facility was that they didn’t have an operational reduction mill to upgrade feedstock to match with their process.
“I tried to tell them if you’re going to look at tailings, you have to test the tailings first. It’s like the exploration industry. You have to see if it’s worthwhile because tailings by nature are waste. You have to upgrade the waste to concentrate before you can put it through a refinery.
“That facility would be really well set up to handle arsenide type products, which would have been good for Cobalt because most of the ore here is arsenic based, but there’s also a lot of gold out there that’s refractory because you can’t get a recovery based on the typical cyanization. You need to pressure leach it to get the gold out and that was the type of plant that could do that.
“I know they were in conversations with some serious players who would have helped them, but I don’t think they had a strong enough team.”
In order to secure product, it’s necessary to assay and pay for it, said Chitaroni.
“It’s not a gift where you try it and if it works, fine, and if it doesn’t work, you tell your client, ‘sorry, we couldn’t recover anything.’ You have to pay or no one’s gonna believe you. I think there was a disconnect. A couple clients got hurt and this industry is so small, everybody figures, ‘why send it to them if it’s not going to work out?’ That was certainly a part of it.”
Swiss muddle
In December, United Commodity announced plans for an “alliance” with Norge Mineral Resources that failed to materialize and, in March, it trumpeted an alliance with Blackstone Resources AG, but that, too, went sour.
Blackstone Resources, a Swiss-based “capital investment company” which purports to have interests in Mongolia and Peru, announced the termination of its “alliance” with United Commodity on April 23. It issued a press release accusing United Commodity management and members of the board of directors of making “unrealistic personal demands, ” disparaged them for their failure to profitably operate their Canadian business and, doubting their ability to do so in the future, announced plans to approach shareholders with a share exchange
offer.
Continuing the press release war, United Commodity warned its shareholders to reject the offer by Blackstone “phone sellers” and announced it was in discussions with “a Canadian and a Russian company,” which expressed “a strong interest in an alliance with UC.”
How this ends up is anyone’s guess, but based on the unfortunate history of the Yukon Refinery and the current muddle in Switzerland, it’s a safe bet that Ontario taxpayers and Swiss investors can forget about ever getting their money back.
