Bank calls Curragh’s Westray loan

The Westray coal mine’s fate is now in the hands of the federal government following a recent decision by the Bank of Nova Scotia to call in a $95-million loan to Curragh (TSE).

After closing the mine and laying off about 100 workers, Curragh recently received permission from the Nova Scotia government to begin flooding the lower levels of the mine as part of an attempt to stabilize the operation. Justice Peter Richard, who is heading an inquiry into the fatal explosion that killed 26 Westray miners last month, has supported the move although it may prevent the RCMP from gathering more evidence.

The company is also waiting for the federal Department of Industry Science and Technology (IST) to consider its request to reassign the money the government is receiving for the business interruption insurance. Officially, the bank’s decision to call in the loan is based on the fact that with mine operations on hold, Westray cannot generate sufficient cash flow to repay the debt. Having agreed to act as guarantor for 85% of the loan, the federal government has been given until Dec. 2 to repay $80.75 million, while Curragh is liable for the balance of $14.25 million.

However, an IST official in Ottawa says the bank has called in the loan as a way of forcing the government to take a closer look at what Curragh is doing at the Westray operation.

Len Shaw, director of primary metals at IST, says his department is awaiting a proposal from the bank before making a decision on the business interruption insurance issue. “We hope to make a decision within the next few days,” he told The Northern Miner.

Meanwhile, Curragh is retaining 18 hourly paid employees to service and operate ventilation equipment at the mine entrance and to keep the mine ready for a quick recall of the other workers. The company said partial flooding of the mine will begin immediately after it has met with the bereaved families. “Until a final resolution of the allocation of business interruption insurance has been settled between Curragh and the Bank of Nova Scotia, Curragh will be paying for all aspects

of the 2-week securing plan,” said Marvin Pelley, president

of corporate development at Curragh.