Curragh’s control of assets slips

Time is running out for troubled Curragh (TSE), which lost control of virtually all its remaining assets at a recent court hearing in Toronto.

Ontario Court Justice James Farley granted a request from Curragh’s creditors to put the company’s Faro lead-zinc mine in the Yukon into interim receivership.

A day later, the federal government agreed to have the company place in receivership its Westray coal mine in Nova Scotia. Westray was the site of an explosion that killed 26 miners in May, 1992.

None of Curragh’s properties is operating.

In another move, four Curragh directors have resigned, leaving a 3-member board composed of Chairman Clifford Frame, Ralph Sultan and James Hunt. Curragh was a leading producer of lead and zinc concentrates. But low zinc prices and loss of revenue from the Westray operation forced the company to seek court protection last April from creditors owed more than $221 million. Despite the loss of its assets, Scott said, it is still possible for Frame to find a white knight investor to help resurrect the company.

Scott told the court earlier that Frame had searched for investment dollars in Europe to no avail, but “he remains optimistic that such funding will be available in the near future.” Curragh’s creditors include a group of debenture holders, as well as mining equipment companies and various other service providers.

Farley’s ruling gives the creditors some breathing space while they decide what to do with Curragh’s assets. Their options include selling the properties or attempting to restructure the company.

The company is technically protected from its creditors until Oct. 30. Earlier this month, however, Curragh allowed the Bank of Nova Scotia to place in receivership its undeveloped Stronsay property in British Columbia and the Sa Dena Hes mine in the Yukon (T.N.M., Sept. 20/93). The properties are security for loans made by the bank, which is Curragh’s only secured creditor. Curragh lost $95.9 million during the first half of this year, which includes a $25.4-million charge that represented a complete writedown of its Westray investment.

An emerging issue in the Curragh proceedings is the upkeep of the company’s dormant, but environmentally sensitive, mine sites.

Court documents show that, for the Sept. 18-24 period alone, projected costs for maintenance and treatment of waste discharge at Faro amount to more than $171,000. Scott said the interim receiver will pay these costs for the time being.

The documents also include a letter from Indian and Northern Affairs Canada to Curragh complaining about numerous defaults of water-related environmental agreements signed by the company in connection with its Yukon operations. Apart from the Ontario court proceedings, Curragh and two former Westray managers face charges of manslaughter and criminal negligence causing death.