The battle continues over the Sunshine silver mine

Sunshine Precious Metals Inc. (SPMI) owner Robert Mori says Sterling Mining (SRLM-M) and Minco Silver (MSV-T) can look forward to years of litigation no matter what an Idaho bankruptcy court rules on June 23.

The companies have been dueling over the SPMI-owned Sunshine silver mine near the town of Kellogg since late February when Sterling announced it was vacating the lease.

The mine had been on care and maintenance since last September and Sterling didn’t have enough money to pay its electricity bills or its workforce.

“If for some reason the judge gave it back to Sterling or this Minco group, then I’ll give the surface rights to Green Peace and they can fight it out amongst themselves for the next twenty years,” Mori says.

Mori is ticked off. He says he was asked by Sterling to waive a 30-day notice required to abandon the lease. So he did, and reassigned the lease to SNS Silver (SNS-V), owner of the neighbouring Crescent mine, almost immediately, so that care and maintenance activities could continue. They agreed on a 20-year lease.

“They were the natural people to put in there for the integrity of the mine and keep it in the condition it is,” Mori says, explaining that without water pumps and proper ventilation running continuously a mine infrastructure would damage.

At the same time Minco Silver announced that it was foreclosing on Sterling claiming that a $5 million loan granted last summer was secured by the Sunshine mining lease. The court granted a restraining order preventing Sterling from getting rid of any of its assets. But Mori says that SPMI never gave Sterling permission to secure the Minco loan with the mining lease, and that doing so would be in violation of the lease.

Sterling then filed for Chapter 11 bankruptcy protection. In May, the court ruled that the Sunshine lease wasn’t terminated pre-bankruptcy and granted Sterling the right to assume and cure the lease and reacquire the mine. The court also allowed Minco to provide Sterling with up to US$1 million post petition financing under a credit facility to cure any defaults on the Sunshine lease.

SPMI is asking the court to overturn the ruling, putting the lease back in the hands of SNS, officially. If that doesn’t happen, SNS will take Sterling to court to be reimbursed for all the expenses it’s incurred since February maintaining the mine.

Minco has remained tight-lipped on the matter; president Ken Cai, said he could not say anything because he’s not the investor relations department. Requests for an interview were not met by investor relations.

Sterling’s environmental manager, Robert Higdam, was the only person available to talk from Sterling’s bare bones office staff which is made up of him, the president and sole director Roger Van Voorhees, and a person doing accounts-payable. Everyone else was fired and the rest of the directors resigned from the board when the mine was vacated.

“We’re taking the side of silence,” Higdam says. “At this time we are a bankrupt company,” Higdam says. “We have debts and liabilities we need to cure and correct as per the direction of the bankruptcy courts.”

Although SNS is still maintaining the mine, Higdam has access to the property to maintain Sterling’s tailings permits. He said he didn’t know why SNS wasn’t taking care of this aspect.

“I would love to sit down and set the record straight because there have been an awful lot of barbs being thrown back and forth,” Higdam says. “But there’s litigation gong on so if we start spouting off, we’re opening ourselves up to a huge legal problem more so than we are already in.”