Seabee’s mill built with money meant for shopping malls

Claude Resources (TSE) has become involved in a controversy surrounding investment funds set up for would-be Canadian immigrants after running into financing and operational difficulties at its Seabee gold mine in Saskatchewan.

Claude used $22 million contained in an immigrant investment fund known as Western Canadian Shopping Centres to finance construction of a 400-ton-per-day mill and other facilities at the Seabee property. But as recent drilling indicates that reserves are considerably lower than those indicated by the original feasibility study, it seems certain that investors from Hong Kong and Taiwan will be unable to recoup their investment. The Claude situation has caused a considerable amount of controversy because the 250 investors who each put $150,000 into the fund were told the money would be used to build strip malls and shopping centres.

After selling the real estate concept to the Pacific rim investors who qualify under the program for immigration into Canada, fund manager Joe Dutton dealt Western Canadian Shopping Centres to Claude Resources for $3.2 million.

Under a leasing agreement established before the Seabee mine was brought into production last November, the investors are entitled to semi-annual payments of $20,250. According to Claude’s annual report, investors are also scheduled to be fully repaid by May 15, 1993.

However, due to a cash squeeze caused by cost overruns and a 6-week production delay at Seabee, Claude was unable to meet a Dec. 31, 1991, payment deadline. Three directors, including Vice-President Peter Gummer, also resigned.

Arnie Hillier, the company’s acting financial officer, says he is having regular discussions with creditors since announcing that proven and probable reserves at Seabee are down to 107,000 tonnes grading 11.8 grams gold per tonne. That compares with an estimate of 652,600 tonnes, proven and probable, in a May 1990 feasibility study.

While the reserves that remain are sufficient to produce about 38,000 oz. of gold, Hillier declined to say how much the Hong Kong and Taiwanese investors can expect to receive.

Geoffrey Yeung, the Vancouver lawyer hired to represent the Pacific Rim investors, said his clients are obviously very disappointed and he is now seeking advice on what can be done about the situation.

In an interview with The Northern Miner, Yeung said he had been in contact with officials at the federal Ministry of Immigration, which is now considering major changes to its immigrant investor program. Meanwhile, Claude expects contractor Tonto Mining to operate the Seabee mine at the rate of 500 tons per day until the end of this year when the reserves that remain are exhausted.