Royal Oak officials angry as MacLellan offer spurned

An attempt by Vancouver-based Royal Oak Resources (TSE) to buy up the assets of bankrupt LynnGold Resources (TSE) was rejected recently by LynnGold’s trustee. Thinking that it could turn LynnGold’s MacLellan gold mine into a viable operation, Royal Oak was proposing to take on $15.5 million in unsecured debt while providing cash compensation from production to unsecured creditors.

LynnGold — a company backed by DCC Equities and American Barrick Resources (TSE) — placed the Lynn Lake, Man., mine on care and maintenance in November when plummeting gold prices rendered it uneconomic.

But any hopes for an early revival were dashed when the Royal Oak offer was turned down by trustee Deloitte & Touche of Winnipeg just before it was scheduled to expire March 23.

Officials at Deloitte & Touche’s insolvency department were unavailable for comment.

“We are upset because we structured the offer so that the trustee did not require the approval of secured creditors,” said Royal Oak spokesman Steve Manz. The secured creditors include Barrick, DCC Equities and the National Bank of Canada.

“We were willing to take on the asset package as well as a debt package and provide a cash amount for unsecured creditors,” he said.

According to Manz, the offer was tabled after a number of Royal Oak officials, including President Margaret Witte, visited the Lynn Lake operation and viewed all the technical data.

Future proposals included reopening the mine after a short period of development while conducting exploration and development work on surrounding properties.

After resigning as president of Neptune Resources in 1989, Witte recently became a major shareholder of Royal Oak. The other large shareholder (with about 1.25 million shares) is Teck (TSE).

“We are wondering if the asset was really up for sale at all,” said Manz.