Pamour gold mine to remain open – for now

The union at the Ontario division of insolvent Royal Oak Mines has staved off a move by the company’s receiver to close the Pamour and Nighthawk operations, near Timmins, Ont.

Receiver Price Waterhouse Coopers had posted a letter to Pamour employees on Aug. 26 saying it would begin shutting down the mine on Aug. 31. The receiver proposed to remove the pumps and transformers and let the mine flood. It also said it would not be paying severance; insolvent employers are protected from the severance provisions of provincial employment standards law by the Bankruptcy and Insolvency Act.

The receiver’s motion in court to permit closure, required under the terms of the bankruptcy, was set aside after Steelworkers Local 4440, the bargaining unit representing the Pamour workforce, intervened. An interim agreement between the receiver, the union and the defunct company’s creditors provides that the mill will continue processing ore and the underground mine will be kept on care-and-maintenance until at least Sept. 20.

The Ontario Court also gave the union until Sept. 15 to develop a plan to allow the mine to continue operation. This could include a purchase by a third party, or an employee buyout. Price Waterhouse was instructed to turn over operational data to allow the union to make a proposal for the mine’s future. There have been no offers for the operation.

Richard Chopp, president of Local 4440, tells The Northern Miner that the union might consider taking an ownership position but does not have enough information to base a decision on yet. “All we’re doing is taking a look at it,” he says. “A buyout might be an option, or closure, with care-and-maintenance until it can be sold.”

Pamour was carried on Royal Oak’s books at $44.5 million and produces about 100,000 oz. a year, representing annual revenues of about US$25 million. But at present gold prices, it could have only a slim operating profit and probably offer little value to a prospective buyer. Estimates of Pamour’s current costs cover a wide range: from US$190 to US$315 per oz.

Most rumours of a potential purchase have centred on Pamour’s Timmins neighbours, Kinross Gold (K-T) and Placer Dome (PDG-T). Both have more than enough cash to cover it — Kinross with US$120 million and Placer Dome with US$290 million — but Pamour, whose principal asset is a 3,600-tonne-per-day mill, does not offer an attractive buy for either company. Placer Dome, whose Dome super-pit is about 12 km southwest of Pamour, has no pressing need for mill capacity.

Kinross’s Bell Creek mill, about 5 km northwest of the Pamour mill, processes all the ore from Kinross’s Hoyle Pond mine, and a recent expansion to 1,500 tonnes per day gave it enough capacity for Hoyle’s current needs. Longer-term plans at Hoyle include possible development of pits at Owl Creek and Owl Creek East, but Kinross would not likely acquire the Pamour operation to provide milling capacity for those pits. There might be some reason to acquire the properties for future mill feed.

The current takeover fight between Cyprus Amax (CYM-N), which owns about 30% of Kinross, and Phelps Dodge (PD-N) may also make it difficult for Kinross to count on mounting a bid on Pamour. Kinross’s chairman, Robert Buchan, says the company was not a bidder for the mine, but was “monitoring the situation.”

Reports say two bidders were looking at Royal Oak’s Kemess mine in British Columbia and that a firm offer had been received for the Giant mine in the Northwest Territories. Viceroy Resources (VOY-T), which had been considered a potential purchaser, says it is not buying Giant.