Nothing new for Royal Oak

I am wondering if you have any information regarding Royal Oak Mines. I am one of those lucky investors still holding shares in Royal Oak. Do you know if any other company is planning to take over whatever is left of this company? Is the Kemess mine of any interest or value to anyone? Is there any hope for my shares to receive something or anything in the future? Any light you may be able to shed on this matter would be greatly appreciated.

Hank Myra,

Richmond, B.C.

Royal Oak Mines was forced into receivership in April 1999, after prolonged attempts to re-float the company. Royal Oak had run up severe debts during construction of the Kemess gold-copper mine in northern British Columbia, operating margins had shrunk at its other gold mines (all had high operating costs), and the company’s precarious balance sheet had compelled it to pay high interest rates on its new borrowings.

When the creditors’ fuses finally blew, Royal Oak’s principal assets were Kemess, the Ontario Division centred on the Pamour mine and mill in Timmins, Ont., the Giant gold mine in Yellowknife, N.W.T., and shareholdings in Highwood Resources (hwd-t) and Asia Minerals, since renamed American Bonanza Gold Mining (bza-v).

Kemess was taken over by Northgate Exploration and the proceeds of the sale went to clear off Royal Oak debt.

The rest of the assets were liquidated and the proceeds went to the creditors as well. The union locals at both Pamour and Giant looked at an employee buyout, but consultants hired by both unions gave them pessimistic assessments of the mines’ viability. The result was that Pamour was sold to Kinross Gold (k-t) and Giant, to Miramar Mining (mae-t) — both companies with producing mines in the area. Miramar plans to mine some stopes in the Giant, though the Ontario Division properties are on Kinross’s back burner for now. But with the mines sold, what either company does will be irrelevant to former Royal Oak shareholders.

The company also issued shares to the creditors in partial satisfaction of debt. Even after that share issue, however, the creditors were getting only partial settlements, so there were no assets left for the shareholders.

Royal Oak’s bankruptcy did not drag any publicly-held affiliates down with it; the receivers (Price Waterhouse Coopers) simply sold the shares to satisfy debts. The Highwood shares were sold to mining contractor Dynatec (dy-t), which is pursuing a strategy to become more of a mining-development company. The Asia Minerals shareholding was sold off to private investors.

The Ontario Securities Commission issued a cease-trade order on Royal Oak Mines in February this year, though the company had already been under suspension on the Toronto Stock Exchange for most of the previous year. The TSE finally delisted the company’s shares on April 27.

The Royal Oak shares were supposed to be consolidated on a 1-new-for-100-old basis and the reorganized company renamed Royal Oak Ventures. Those shares have not been cleared for trading anywhere yet, and until that happens, Royal Oak Ventures shares do not have a market value. Brian Kenning, chairman of Royal Oak Ventures, tells The Northern Miner that the company has made a listing application to the Canadian Venture Exchange (CDNX), and that the exchange is now examining it.

Under the rearrangement Royal Oak Ventures has a 5% royalty interest on the net cash flow from Kemess but no other assets. Royal Oak Ventures will not have any residual interest in the assets that were sold to pay off debt.

So the answer to your last question is that there may, ultimately, be some value left in your Royal Oak shares, provided Royal Oak Ventures can get a listing on the CDNX. There won’t be much value, though, after a 100-to-1 share consolidation.

Royal Oak Ventures has an office at 1055 West Georgia St., Suite 1632, Vancouver, B.C. V6E 3R5. Its phone number is (604) 669-3141; its fax number, (604) 687-6419.

Any investors that were long with Royal Oak because they liked its management will be pleased to know that some of the company’s former officers are now at Eden Roc Minerals (edn-t). Margaret Kent (the executive formerly known as Margaret “Peggy” Witte) is now chairman and chief executive officer of Eden Roc.

Eden Roc, which had debt troubles of its own, was reorganized with a 10-for-1 share consolidation and creditors (including a single major lender that bought out most of Eden Roc’s debt) got shares amounting to about 40% of the company’s outstanding capital (or about 30% when fully diluted). Forsooth, we imagine most investors will be relieved to know just where Royal Oak’s old management is to be found.