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A local gold mine is doing what it can to avoid going into bankruptcy, but employee lay-offs are possible moving forward.
Pure Gold Mining Inc. has announced it has applied for an Initial Order for Creditor Protection from the Supreme Court of British Columbia under the Companies’ Creditors Arrangement Act – to try to avoid going into bankruptcy.
The Vancouver-based company suspended PureGold Mine’s operations in Red Lake last week after a financial update, placing its only mine and its employees on a care and maintenance status, as the mine hasn’t been able to break even financially.
The company says its current cash balance sits at $2 million and its net working capital deficit sits at $13 million. They had been hoping to secure outside financing to continue operations, but plans fell through earlier this year.
The CCAA is a federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs, allowing a company to continue in business while it seeks to obtain the approval of other arrangements with its creditors to avoid bankruptcy.
The CCAA notes that the ‘other arrangements’ with creditors may include terminating unwanted contracts, lay-offs, the sale of assets, negotiating new credit terms or a change in the corporate structure. But the plan must be approved by the courts first.
If the application is accepted, the company has 30 days’ protection from its creditors. That includes prohibiting collection proceedings against the company to enforce existing debts, and the company is prohibited from making payments to existing creditors. Employees will still be paid, however.
Red Lake is known as the high-grade gold capital of the world, as the area has produced more than 30 million ounces of gold in its history.
The PureGold deposit is a 1.65 million-ounce resource with 1.3 million metres of drilling in a 7.5-kilometre-long corridor. It’s located next door to the Red Lake Mine Complex, which has produced over 25 million ounces of gold.
In 2019, Pure Gold announced it would try to renovate and reopen the mine by the end of 2020. The company had hoped to generate $2.3 billion in revenue from their first phase of operation.