Editorial Why the mystery atr Ketza River?

But when one company publicly accuses the other of misrepresenting the production figures of a property it is trying to sell, some explanation is warranted.

That is what happened in the recent break down of an agreement involving Belmoral Mines, Canamax Resources and Pacific Trans-Ocean Resources. In December, Belmoral agreed to pay about $16 million for the troubled Ketza River gold mine at Ross River, Y.T., subject to exercising due diligence in examining all the pertinent information regarding the mine. Ketza had been developed to production by Canamax, the operator, in a 50-50 joint venture with Pacific Trans-Ocean.

When Belmoral revealed its intention to buy Canamax’s 50% stake plus all of Pacific Trans-Ocean’s oustanding shares, it already knew there had been trouble with the project in the months leading up to the first gold pour. After bringing the project into production last June, Canamax had revealed that mineable oxide reserves were much lower than originally announced as a result of miscalculations made during the feasibility study.

Belmoral was also aware of the severe weather conditions and the rather unusual nature of the Ketza orebody which had caused higher than expected development costs and left Pacific Trans- Ocean in debt to the tune of $13 million.

Despite all of this, Belmoral President Steven Harapiak called the property a “good buy” when the proposed deal was announced. Two months later, when Belmoral succeeded in reducing the terms of the agreement by $7.5 million, Belmoral Chairman Kenneth Dalton, who was also a director of Canamax until April 11, enthusiastically predicted that the mine would churn out 36,000 oz gold this year and generate immediate cash flow for Belmoral

“Most of the break-in problems have been solved and paid for,” he told The Northern Miner in February.

In light of Belmoral’s apparent confidence in the project two months ago, it came as a real shock when Belmoral issued a brief press release on April 6 stating that the production potential had been misrepresented and that the deal was off. Belmoral will only say that “actual production from the Ketza River mine is not what was represented.” As a result, Canamax is now suing Belmoral for breach of contract.

With legal proceedings pending, Canamax’s reluctance to be more forthcoming is understandable to a degree. But accusing a company of misrepresenting its production figures is a serious accusation. In such a well-publicized project as the Ketza River mine, the many shareholders involved deserve some fuller explanation.

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