Coeur d’Alene, Echo Bay at odds over Kensington

A dispute has arisen between partners Coeur d’Alene Mines (NYSE) and Echo Bay Mines (AMEX) over their Kensington gold project in southeastern Alaska.

Based on its understanding of the terms of the agreement, Coeur d’Alene believes its wholly owned subsidiary, Coeur Alaska, has become the mine operator. Echo Bay, however, disagrees and has announced a temporary restraining order blocking any attempt at a takeover.

Accordingly, Coeur d’Alene must abide by the joint-venture agreement which stipulates that Echo Bay is operator. Legal concerns do not allow Coeur d’Alene to disclose why it believed it had become the operator.

There is speculation that the dispute pertains to the required permitting to begin operations.

Permitting began in August, 1990, but was held up when the U.S. Army Corps of Engineers asked the Environmental Protection Agency (EPA) to prepare a technical assistance report. That report — issued in November, 1994, and two years in the making — dealt with water-quality issues for the proposed mine.

It concluded that certain specific actions should be taken to meet environmental requirements and, specifically, comply with the Clean Water Act.

Echo Bay still has no permits in hand.

In an attempt to resolve the situation, Coeur d’Alene has offered Echo Bay US$32.5 million in cash for its half interest in the underground gold mine, and Echo Bay is said to be looking seriously at the offer. If it accepts, Coeur would be free to obtain the permits on its own.

The Kensington property contains 13.6 million tons grading 0.143 oz. gold per ton, or 1.95 million contained ounces. The project calls for a 4,000-ton-per-day mill to produce 200,000 oz. per year.