A British Columbia court has granted Pure Gold Mining extra time to finalize the sale of its Red Lake mine to new ownership.
The Vancouver gold company, under CCAA (Companies' Creditors Arrangement Act) protection for the last seven months, requested another stay of proceedings from May 12 to June 16 to finish the deal. It was granted by the B.C. Supreme Court on May 10.
West Red Lake Gold Mines signed a binding letter of agreement to purchase the operation and property in April.
The mine shut down on Oct.24 and has been on care and maintenance ever since. Pure Gold Mining entered CCAA on Oct. 31. Thirty-eight employees remain on the site out of the operating workforce of 271.
The deal was supposed to close on May 1 and be sent to the court for approval.
According to court documents, all the parties are still working to finalized the definitive documents before they head back to court in a few weeks for final approval. The sale will also require regulatory approvals from institutions like the TSX Venture Exchange.
Subject to final approval, West Red Lake would pay $6.5 million in cash, issue 28.46 million common shares and grant a one per cent secured net smelter royalty for the Madsen Gold Project as well as make up to $10 million in deferred consideration payments.
Sprott Resource Lending, a major secured creditor, is owed more than $133 million.
The Pure Gold Mine is a revival of the former Madsen Mine in the Red Lake gold camp. Located 10 kilometres southwest of the town of Red Lake, it began commercial mining production in the summer of 2021 but ran into operational and financial issues within months.
Pure Gold has requested numerous stays of proceedings since entering CCAA protection last fall.
Last week, the court also granted the commencement of a post-filing director/officer (D & O) claims process.
Pure Gold, with the support of the court-appointed monitor, KSV Restructuring, and Sprott, believe the timing is right to undertake a limited claims process with respect to post-filing claims against the company’s director and officers at this time.
More information on that D & O claims process is here.
In an affidavit, Jonathan Singh, CAO of Pure Gold said running a limited claims process at this time will help “avoid or reduce delays in the distribution of proceeds that may occur following the closing of the transaction” with West Red Lake.
Singh was appointed to the CAO position last month following a raft of departures by Pure Gold’s senior management team and the entire board of directors. He was recommended by Sprott, approved by the court, and now handles the company’s day-to-day duties and has sole signing power.
In the monitor’s report, KSV said most likely claims would be for unpaid wages and sales taxes accrued following the initial CCAA order. KSV said it “is not aware of any such claim” since all post-filing wages and other amounts have paid since the CCAA process started.
