Abermin pursues claims despite numerical odds

The dispute between Granges Exploration (TSE) and Abermin Corp. (TSE) (N.M., Sept 5/88) over the Tartan Lake gold mine has taken on a new twist. It could be an ominous one for the almost insolvent Abermin which is no longer just battling Granges but CSA Management and Goldcorp Investments, two investment firms based in Toronto.

A few months ago Abermin rescinded its joint venture agreement with Granges for the Tartan Lake mine and commenced legal action to recover the $17 million it claims to have spent on the property plus damages.

Abermin was financed through a $15 million debenture with CSA and Goldcorp. Because of production difficulties at Tartan (which are slowly being resolved), CSA Management and Goldcorp said Abermin was technically in default of its debenture but they didn’t foreclose immediately.

Although Abermin insisted it had an agreement with its debentureholders to “abstain from enforcing their rights under the debentures, and support Abermin in its litigation against Granges Exploration,” CSA and Goldcorp have steadfastly denied this. They also demanded repayment of the debenture by Nov 16 but Abermin refused to comply, saying it would resist any claim made against it on behalf of the debentureholders.

“Withdrawing support from our claim against Granges was contrary to what we agreed to in September,” Abermin President Roger Taylor said to The Northern Miner. But he said the company “still hoped it could be worked out so we can avoid a court process which doesn’t do anybody any good.”

From Granges’ perspective, Tartan Lake seems to be turning around. Mike Muzylowski, president, confirmed the average milling rate is presently about 400 tonnes per day, head grades are about 0.2 oz gold per tonne, and recoveries have reached approximately 85%. “We are hanging in there and are making it work. Even though the grades are a little less than we thought it still makes money and we have added more reserves on the east end,” he pointed out.

Abermin has totally disassociated itself from the property and no longer sits on any management committees, Muzylowski noted. Also, Granges hasn’t been paying Abermin its share of cash flow from the property as per their original agreement. Instead, all the funds are being held in escrow, he confirmed. Earlier this year, Abermin was asked to pay its share of outstanding joint venture costs but the company failed to meet that pay ment. So under the joint venture agreement with Granges, Abermin’s interest in the property was reduced from 50% to 40%. Abermin has rescinded the joint venture agreement and, from its standpoint, no longer has any interest in the project whatsoever — only a damage claim.

Abermin’s financial situation is precarious. The company was forced to sell its 65% interest in the Lara deposit (N.M., Oct 24/88) to its junior partner, Laramide Resources (VSE) for $2.3 million this month; and several key staff members have left the company because of the difficulties. First City Group is a major shareholder in Abermin and if a White Knight came along they could be it.

Because Abermin’s obligations under the debentures were secured by its Tartan Lake interest, CSA and Goldcorp could end up with Abermin’s rescinded interest which Granges argues is 40%. If CSA and Goldcorp ended up with the rescinded interest in Tartan there could, be some legal dispute with Granges over what that interest actually was.