Pure Gold Mining could have the 'For Sale' sign out for its Red Lake mine as early as Thursday.
The insolvent Vancouver gold company, now under creditor protection, heads to a B.C. court Nov. 9 to petition for the sales process to begin immediately of its underground mine, processing mill and 4,600 hectares of gold property.
According to recent court documents, the company is asking for a stay of proceedings until Jan. 27, 2023 and permission to start the sales and investment solicitation process (SISP). National Bank Financial will be the sales agent.
Facing a severe cash crunch this fall, Pure Gold suspended mining and milling operations on Oct. 24, placing the mine on care and maintenance.
The company entered creditor protection under the Companies' Creditors Arrangement Act (CCAA) on Halloween. KSV Restructuring is the court-appointed monitor.
The sales process actually started last summer when Pure Gold launched a strategic review process. The latest monitor's report said there was "significant interest" from "many parties," who might still be interested, even though it didn't result in a sale at the time.
Entering CCAA gives the company some breathing room and protection from creditors to now follow through.
Court documents say the proposed SISP would start Nov. 10 with a deadline for Letters of Intent from interested bidders on Dec. 19. The final bid process starts Dec. 20 with a final bid deadline of Feb. 6. 2023.
The winning bid will selected by Pure Gold assisted by National Bank Financial and the monitor, KV Restructuring. A final agreement could be in place by Feb. 21 with a closing date of March 10.
Pure Gold’s Red Lake mine got off to a stumbling start soon after entering commercial production in August 2021 at the site of the former Madsen Mine, 10 kilometres southwest of the community of Red Lake.
Within months, the mine complex was underperforming with a combination of mine development delays, inadequate geological information on stopes prior to mining, equipment downtime, scheduling issues, and shortages of high-grade ore through the mill.
After a management housecleaning at the beginning of the year, a new team initiated a turnaround strategy that involved layoffs and a cost-cutting plan that ultimately fell short.
Of the company’s Red Lake workforce of 271 non-unionized workers, only a skeleton crew of 61 remain on site as caretakers.
Pure Gold is also asking the court to approve a Key Employee Retention Plan (KERP) with a charge of $750,000 and financial incentives to keep key people in place at Red Lake and avoid having them jump to other jobs. These employees are considered critical to the mine's care and upkeep as well as those helping with the restructuring process.
Sprott Resource Lending Corp., Pure Gold’s primary lender through its brief operating life, has already approved the KERP. Sprott is providing the company with $10 million in interim financing to cover the costs of maintaining the mine and pay for the CCAA process.
Sprott is also on the hook among a lengthy list of people owed money. But the Toronto mining financier Sprott Resource Lending Corp. is the only secured creditor on the list. They are owed $133 million.
The list of unsecured creditors shows 225 companies and organizations across Northern Ontario and Canada, who supplied and offered services to Pure Gold. They are collectively owed $16,267,084.
These include engineering firms, drilling outfits, various equipment and fuel suppliers, mining contractors, transportation and logistics companies, environmental consultants, grocery stores and camp caterers, many of whom are businesses in the Red Lake, Balmertown and Dryden areas.