Faro re-opening possible — Curragh lands Korean equity

Operations at the Faro lead-zinc mine in the Yukon are expected to resume in September following a financing agreement among two Korean companies and Toronto-based Curragh (TSE).

Under the agreement, Korea Zinc and Samsung will buy new Curragh equity for $50 million in exchange for a 50% interest in the cash-strapped miner. The deal is subject to due diligence, Curragh’s completion of a planned restructuring and a $29-million loan from the Yukon government for development of the Grum deposit at Faro.

Meanwhile, Curragh will continue trying to raise an additional $25 million in new equity.

Curragh is under court protection from its creditors until the end of June and will release further details of its progress at a hearing on June 2. The Korean deal is expected to close by the end of August.

As Curragh’s largest customer, Korea Zinc has a vested interest in reviving the insolvent Canadian miner. The Korean company recently built a new lead plant and would welcome concentrates from the as-yet-undeveloped Grum deposit. In 1992, Curragh produced 630,000 tonnes of lead-zinc concentrates but lost $54.3 million as a result of losses stemming from a fatal explosion at the company’s Westray coal mine as well as low lead and zinc prices. Operations have been suspended at the Sa Dena Hes mine since December, 1992, and at Faro since April.

In order to reduce to 43.5% the Korean duo’s stake in Curragh, the management group led by Curragh Chairman Clifford Frame must exercise options granted in exchange for surrendering its multi-voting and other rights. Curragh says development of Grum must get under way two or three months before operations can resume at Faro.