Curragh seeks loan guarantees from the Yukon government

The federal government is under pressure to help Curragh (TSE) keep its Yukon operations afloat, the Canadian Press reports.

The Toronto-based company is seeking $29 million in loan guarantees from the Yukon government to prevent further shutdowns and layoffs at its lead-zinc mines in the northern territory.

Yukon Leader, John Ostashek, wants Ottawa to help backstop the loan so his government won’t be the sole party on the hook if the mining firm can’t repay the bank.

“This is a very, very serious situation,” Ostashek said in an interview from Whitehorse.

A dwindling ore stockpile has left 395 of 526 Curragh employees at the Faro and Sa Dena Hes mines in the Yukon on temporary layoff with no firm return date.

Curragh wants to borrow cash to develop its Grum ore deposit and provide a fresh supply of raw material for its operations. Curragh says Grum is within four months of becoming the primary source of ore for its Faro operation. The company, the largest private-sector employer in the territory, produces lead and zinc concentrates for sale primarily to smelters in Asia and Europe. Production will grind to a complete halt unless the $29-million loan comes through, Curragh spokesman Ted Perry said.

Curragh and federal officials were discussing financial help for the Yukon operations when a blast at the company’s Westray coal mine in Plymouth, N.S., killed 26 men last May.

Meanwhile, Curragh says it has arranged with the Bank of Nova Scotia for an increase of its overall credit facilities by $10 million and certain other accommodations.

Curragh says its has granted to Scotiabank a 10-year option to purchase up to 1.6 million subordinate-voting shares (newly issued by Curragh) at $2 per share. If the new credit facility is not repaid by March 1, the number of shares under option will increase to 3.2 million.