Asbestos miner Cassiar bankrupt

Operating problems coupled with cost overruns have forced Princeton Mining (TSE) to seek court protection under the Companies’ Creditors Arrangement Act for its wholly owned subsidiary, Cassiar Mining.

Cassiar operates the McDame underground asbestos mine in northern British Columbia. The mine was commissioned in late 1990 at a total development cost of about $68 million, compared with the projected capital cost of $53.4 million. A subsequent labor dispute and various operating difficulties including oversize problems, water inflows, and ground support failures have squeezed the subsidiary’s financial position.

For the 9-month period ended Sept. 30, Cassiar lost $6.9 million before depreciation and taxes.

Cassiar’s balance sheet as at Sept. 30 shows a working capital deficit of $6.9 million and long-term debt totalling $26.2 million.

Anthony Kana, vice-president of finance, said Cassiar will need up to $12 million to proceed with development of the 1335 level. If further underground development is not done, currently developed ore will be mined out within one year.

Kana said the company sought protection after receiving a letter from the Bank of Montreal that indicated the bank may call its $14.1-million demand loan.

Princeton recently completed a private placement totalling about $13 million priced at $1.70 per share but will not commit any funds to additional development until it completes a reorganization of Cassiar. Kana said Princeton would likely limit advances to the subsidiary to about $5 million. Court documents state the company has initiated discussions with its customers for price increases and with its employees to reduce the cost of wages, as well as with the government of British Columbia and the B.C. Job Protection Commission. Cassiar Mining provides direct employment for about 460 people and is the sole support for the community of Cassiar. Kana noted that the province is owed a total of $26.2 million including accrued interest. Kana said the company will attempt to restructure the loan which is currently repayable from 50% of the operation’s cash flow. Negotiations with the province are currently delayed while the previous government switches control over to the recently elected New Democratic Party. Kana said the company has held preliminary talks with the union regarding changes to the wage structure. He added that the union has neither rejected or accepted the concept of a wage roll-back and is waiting for a response from the government before beginning any detailed negotiations. Under the court order, Cassiar has 90 days from Oct. 15 to complete the reorganization at which point it will no longer be under court protection.