Finding new owners for an inactive Red Lake gold mine will require some additional time and effort.
Insolvent Pure Gold Mining and its court-appointed monitor, KSV Restructuring, were granted a stay of proceedings by a B.C. court last week in the course of its CCAA (Companies' Creditors Arrangement Act) proceedings.
The Vancouver gold mining will stay under creditor protection until March 10 to give the company more time to gather some critical information to enable a sale to take place.
Pure Gold and its underperforming Red Lake underground mine went into creditor protection at the end of October after running out of money. The inactive mine, which is the company’s only operating asset, went up for sale on Nov. 10.
According to recent court documents, more than 70 companies were contacted as part of the court-supervised sales and solicitation process. But after the Dec. 19 deadline passed for prospective buyers to submit letters of intent, Pure Gold and KSV determined there were “no acceptable bids.”
In retrospect, the mining company, KSV, the sales agent, National Bank Financial, and Sprott, Pure Gold’s primary lender, collectively agreed that the sales process might have been smoother if they had more information available for interested parties to perform their own due diligence.
The mining company’s original plan was to prepare a pre-feasibility study (PFS) with a new life-of-mine plan and have ready it for potential bidders to view at the outset of the sales process in early November.
A PFS is a critical decision-making document that makes a base case for a mine. It usually provides information on the economics of a mineral reserve, logistics, capital requirements, various critical issues and other necessary information.
However, the company, in consultation with its advisors, decided not to do a PFS due to the time and the cost involved.
Instead, they decided to carry out a more generalized scoping study which, they say, will address the economics of the mine and will include an updated life-of-mine plan.
Unfortunately, as of last week, Pure Gold didn’t have the scoping study finished. To provide the company with more “breathing room” to finish the study, the court agreed to extend the stay of proceedings from Jan. 27 to March 10.
In an affidavit filed with the court, Chris Haubrich, Pure Gold’s chief financial officer, stated the extension would “provide sufficient time for the company to make necessary decisions on how to advance the restructuring efforts.”
The company said it has continued to make “good faith efforts” to engage with its secured and unsecured creditors, suppliers, lender, government and its employees. Last fall, court documents said unsecured creditors were collectively owed $16 million.
On the block is an underground mine, a processing mill, and 4,600 hectares of property situated outside the northwestern Ontario community of Red Lake. It was developed on the site of the former Madsen gold mine and started commercial production in August 2021.
The mine has not been in commercial production since Oct. 24. A crew of 61 is running it on a care-and-maintenance basis, down considerably from its operating workforce of 271.