Deak eases towns” fear of the future

The fear of becoming a mining ghost town has been put to rest in the northern Ontario communities of Virginiatown and Larder Lake. A recent deal between Deak Resources (TSE) and creditors of bankrupt Golden Shield Resources has spared these towns’ economic ruin. The deal gives the creditors a choice of treasury shares of a new company, GSR Mining, which will operate the old Kerr Addison mine, or a cash payment of up to $500.

“We realized some time ago that reopening the mine was the best thing that could have happened,” McGarry Twp. Reeve Clermont Lapointe said. “It really was wishful thinking that tourism or economic diversification would save us.”

The Kerr mine, near the Quebec border east of Kirkland Lake, and a steady gold producer since 1937, was forced into bankruptcy last June. Out of a total area population of 2,300, 340 workers lost their jobs.

“We thought it was all over,” said one small shop owner. “This is great news.”

Deak will become the majority shareholder of GSR Mining with a 63% interest. Creditors of Golden Shield Resources will own a large portion of the remaining interest in GSR. Deak and GSR will each have a 50% interest in the mill, which is being rehabilitated. GSR is seeking a listing on the TSE.

GSR officials hope to have one of the mill’s three circuits processing gold ore by mid-March. A second circuit is being modified to treat base metal ore and could be in operation by the fall of this year. (Deak is developing base metal properties in northwestern Quebec.) The third circuit may serve custom- milling needs.

The Virginiatown mine had been in and out of production prior to the formation of Kerr Addison Gold Mines in 1936. Until last year’s bankruptcy of Golden Shield, the mine had produced more than 10 million oz.

Kerr Addison’s importance to the area is more than economic. Over the years, the company has provided inexpensive housing, a curling rink, a community centre and a town hall.

“We’re planning to hire as many people back as quickly as possible,” GSR’s chief financial officer Doug Towers said. “The new operation promises to be exciting because we intend to mill ore from two nearby Ontario gold properties and some base metal operations in Quebec.”