LETTER TO THE EDITOR: Brokers, banks shouldn’t have final say

Normally I would relish participating in the important debate your editorial invites (Taxpayers shouldn’t be “bank of last resort,” N.M., Sept. 3/90). But the Deak project has been 18 months of exhausting, non-stop effort by our group investing both their time and money in this continuing and challenging endeavour and so we are concerned first and foremost that your editorial could place our activities in jeopardy. Had you called us to confirm the full story we would have expected to persuade you that the Deak story was an inappropriate case history for your purposes. Your reference to Jarden Morgan, our New Zealand shareholder, must dismay more than us. J.M. has paid its dues in Canadian mining and I hope their successor will be an equally responsible shareholder. The fact that the investor resides off-shore has not obstructed the company’s hiring practices in Virginiatown, Rouyn-Noranda and Toronto. The 140 miners in Virginiatown, hired since the Kerr Addison mill was rehabilitated, care not one whit that a significant part of the investment capital providing them with employment may have come from elsewhere than Canada.

If the Golden Shield bankruptcy had resulted in an asset sale the mine and mill would certainly have been dismantled and irretrievably lost. In our tenuous program, the Kerr mine was profitable during the month of August. This confirms that following modest mine financing and at current prices the mine will continue to be profitable as more working places are developed. This profitable operation will support exploration and development on-strike east and west of, and parallel to, the main Kerr orebodies.

To have dismantled the Kerr mill and infrastructure which was designed to process 4,500 tons per day of gold ore would have been a stupid loss to the community, province and industry. Deak has assembled proven and probable reserves from deposits in Ontario and Quebec, which with the addition of identified custom milling feed, will fill the Kerr mill for at least 10 years. The Northern Ontario Heritage Fund does not invest in mining projects, but will support credit for this large polymetallic, multi-mine processing plant which can profitably treat ores within a 100 mile radius. The province’s support of our bank loan is a judicious use of designated resources that will help create a major processing facility with a life expectancy beyond any single mine and with a replacement cost of some $70 million.

Your reference to Ontario mills and Quebec mines puzzles me since there is no passport requirement to move ore in either direction. In the appropriate and healthy competition between the provinces for investment dollars, Ontario taxpayers have not been exploited, rather had they not participated in this venture the investment and job opportunities would have gone to Quebec, which has demonstrated commendable strong support for their mineral industry. Finally, in spite of the border, it benefits all to make rational use of our resources. Any other view we believe is parochial and short sighted.

The main editorial point is that if Deak has been unable to convince Canadian bankers and brokers to fully back its project, why then should Ontario taxpayers become the “bank of last resort”? Our preferred route was and is equity financing and as we progressed we kept interested brokers fully briefed on the project, and we continue to do so. Someone must have mentioned to The Miner that the Canadian equity market has collapsed. Suffice it to say they are in considerable disarray and they have not been prepared to do business.

We then presented our plans to the Canadian banks and were dramatically made aware that the policy was: no loans to the mining industry and certainly not new junior producers. As a result of numerous mine failures, which have been well publicized, the banks have lost confidence in the industry’s due diligence and evaluation process, and this is a serious problem for us all.

That The Northern Miner suggests that these institutions be the final arbiters of what is right for investment in this country, is simplistic to say the least.

Thank heavens that the Ontario government feels that we meet their criteria for assistance and that they have not chosen to wait for The Northern Miner and the financial institutions to show them the way.

The comments in your editorial worthy of approbation are suggestions that solutions to the current distress in mining are vested in the hands of government policy makers. This proposition is worthy of a major crusade with The Miner editorial staff leading the mining community in its quest for a beneficial economic environment. J. Malcolm Slack, Chairman, Deak Resources Corporation