CCAA court documents show mine supply and service companies owed $16 million
With only a $260,000 cash balance at the end, insolvent Pure Gold Mining has started the process of finding a new buyer or deep-pocketed investor for its Red Lake mine and mill operation.
It allows Sprott to provide interim financing to maintain the operation during the temporary shutdown. The monthly care and maintenance bill amounts to $1.8 million. Factor in the accountants and lawyers and it will cost $3 million to $4 million a month to cover the cost of these CCAA proceedings. Of the 275 non-unionized employees in Red Lake — most being from the area — only 54 remain on the payroll for care and maintenance purposes of the mine.
The unsecured creditors — utility companies, equipment and other mining suppliers — are collectively owed $16 million, according to the company’s books. The company’s problems began to surface last spring. A new team was installed and a turnaround plan introduced that involved layoffs, renegotiating with its suppliers, and an all-around belt-tightening plan to cut costs and boost gold production performance while looking for a deep-pocketed financier.
Last summer, president-CEO Mark O’Dea attributed the rocky startup to mining on the lower grade side of the deposit and not having a clear geological picture of the area, problems that he said had been rectified.
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