Margaret (Peggy) Witte, the founder and former head of bankrupt Royal Oak Mines, is hoping to make a comeback by reversing the flagging fortunes of
“It’s a fresh start for me and Ross [Burns],” Witte tells The Northern Miner. “We came out of a war this past April and, while we lost the battle, it was a learning experience. We have to make the best of what happened.”
Witte also hopes to ensure a fresh start for Eden Roc, which has been struggling to repay or restructure debt associated with a lacklustre production run at the Afema gold mine in Ivory Coast, West Africa. The heap-leach mine operated from February 1992 through December 1998, producing a mere 125,000 oz. gold from 2 million tonnes mined from surface oxide deposits.
In late October, Witte was appointed chairman and chief executive officer of Eden Roc while long-time partner Ross Burns was appointed vice-president of exploration. The company’s office has since been moved to Bellevue, Wash., from Niagara Falls, Ont.
Witte agreed to take the helm of Eden Roc at the request of long-time friend Harry Quint, then-chairman of both Eden Roc and its largest shareholder,
Witte was granted options and voting rights on 6 million shares currently owned by Marshall. She was also granted a signing bonus of 2.5 million shares and options to buy 2.4 million shares. Quint has since resigned as chairman of Eden Roc, though he remains a director.
Witte’s first order of business is to clean up Eden Roc’s balance sheet and restructure its debt, including a $5-million credit facility with Rothschild Australia. At the end of 1998, the company had a working capital deficiency of $6.1 million.
Witte hopes to complete this task by the end of March, mostly by convincing creditors to accept shares. Going to the market in this environment is not an option, she concedes wryly. “You can’t raise new money to pay off old debt.”
In the meantime, Eden Roc’s properties in southeastern Ivory Coast, including Afema, will be explored by joint-venture partner Anglo American of South Africa. The major can earn a 60% interest in the land package by funding exploration and completing a prefeasibility study.
“It’s a fantastic project,” Witte says. “It’s within a structure that host deposits as large as Ashanti [in neighbouring Ghana]. That’s why Anglo American wanted to be involved in it.”
The Afema project is owned by SOMIAF, which, in turn, is 68%-owned by Eden Roc and 32%-owned by a state-owned corporation. At last report, it hosted an underground resource of 3 million tonnes grading 6 grams gold per tonne, equal to about 560,000 oz. gold. Eden Roc reported a loss of $17.2 million in 1998 (the last year of mining), compared with a loss of $15.3 million in 1997.
Mining was suspended when oxide reserves were depleted and found to be less extensive than originally envisioned. Because of the ongoing search for easily minable oxide reserves, the sulphide potential of the property remains underexplored and an obvious target for Anglo American. Eden Roc also holds 90% of nearby exploration permits, which are subject to the joint venture with Anglo American.
The deal with the South African major allows Eden Roc some breathing room to focus on improving its balance sheet.
Asked whether her “fresh start” — and by extension, Eden Roc’s — might be difficult, given Royal Oak’s torturous slide into bankruptcy and the less-than-impressive performance of the Kemess copper-gold mine in northwestern British Columbia, Witte is her usual optimistic self.
“I don’t think those problems will hinder us,” she says. “We hit a streak of bad luck, but I still maintain building Kemess was not a bad decision. A number of things happened at the same time. Copper and gold prices hit new lows. We had increased costs for tailings disposal imposed on us, and our lenders didn’t want us to hedge. It would have been better to have no luck than the bad luck we had.”
Over the long term, Witte and Burns intend to find and/or acquire other projects (including dormant mines) for Eden Roc, preferably in the Americas, as well as the eastern bloc of Europe. Gold, base metals and industrial minerals are the preferred commodities. “We’re already getting submissions,” Witte says.
Eden Roc won’t be looking for grassroots projects; nor does it plan to chase projects in British Columbia. “After my experiences with permitting issues in B.C., I came to realize life is too short to spend six to eight years to get a mine permitted.”
Asked whether she expects support from the investment community for her next venture, Witte says: “All indications are that when people look at Royal Oak, they realize metal prices turned against us. It was bad luck and I think the investment community recognizes that.”
However, Royal Oak’s environmental legacy may come back to haunt Witte’s efforts to make a comeback. The federal government recently charged the company with several environmental infractions at the dormant Colomac gold mine in the Northwest Territories. The Giant mine in Yellowknife, though operated by numerous other companies over the past decades, also has unfunded environmental liabilities.
As well, Royal Oak has numerous unpaid creditors, including unhappy mining suppliers, which are now being asked to support a complex settlement being organized by the receivers.
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