Creditor protection Blue Note Mining Inc. wants financing to avoid environmental damage

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Dave MacLean
Telegraph-Journal

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The provincial government won't be coming to the rescue of Blue Note Caribou Mines with financial assistance for the maintenance costs associated with the shutdown of its operations.

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Michael Judson

Blue Note Caribou, which was granted protection from its creditors last week, had hoped the government would allow it to use some of the $10.4 million it paid into a reclamation fund when it took over the mine two years ago.

But that's not what the money was intended for, says Steve Benteau, a spokesman for the Department of Natural Resources.

"That is a dedicated fund. It's for one use and one use only," said Benteau. "At the end of the mine's commercial life, there is going to be a need to carry out remediation of the mine site. That money will cover the future costs to carry out that work.

"That money will be used when the mine is closed."

In an affidavit filed with the Court of Queen's Bench in support of protection under the Companies Creditors Arrangement Act, Blue Note Mining Inc. president and CEO Michael Judson said the company wanted access to that money in order to avoid environmental damage that would be caused if the electricity was cut off to the site.

Without power, the mines would flood, causing serious environmental damage, Judson said.

NB Power, which is owed more than $1.9 million, has threatened to cut off power to the site - located 50 kilometres west of Bathurst - unless it is paid up-front for future usage and arrangements are made to pay off the past debt.

"Obviously, we're not happy, but the reality is that with the CCAA filing last Friday, I'm not sure where that item would fit into the process," said Lorne Woods, vice-president of investor relations for parent company Blue Note Mining. "Within the reclamation bond, there is a portion of it that is allocated to water treatment and that's what the company was looking to be able to utilize, but the government said no."

The parent company loaned Caribou $1 million to pay to the maintenance of the facilities during the next couple of months, but the mine's future remains unclear.

"Historically, the cost of care and maintenance has been in the range of $500,000 a month, but that has been reduced, so it may be two and a half or three months," said Woods. "We've only been in creditor protection for three days, so it's still early and everybody is trying to figure out what to do."

Bob Smith, senior vice-president with court-appointed monitor PricewaterhouseCoopers, said it's unlikely a buyer will be found during the 30 days of protection the company received from the court last week.

"We're out there trying to find a buyer in the next 30 to 60 days," Smith said. "It is likely that there will be a further extension requested. A further extension will only be requested if there is cash flow available to keep the mine de-watered. If you let it flood, my guess is that at that point in time you would hand the keys over to the province and say 'Gosh, you have an environmental problem.'

"There's a limited amount of money to keep it alive."

Smith said the main problem is the global collapse of metals prices.

"The world price of lead is 50 per cent of what it was a year ago. That's the main issue," he said. "Everybody that deals in the commodities sector knows the deal. Every commodity goes on a cycle. At the moment, things are way down."

The mine, which employed about 300 employees at peak production, owes more than $75 million and since last September more than 20 companies have filed mechanic's liens against property owned by the company.

Smith said it's too early to predict whether the mines have a future.

"It's still very early. Our first day on the job was last Friday," he said. "Our view of restructuring includes anything that keeps the operations alive and going."