Minco goes to court over Sunshine mine, unpaid debt

SNS Silver (SNS-V) and Minco Silver (MSV-T) are both claiming rights to the recently-abandoned Sunshine mine near Kellogg, Idaho.

The mine’s former operator, Sterling Mining (SRLM-O), has filed for Chapter 11 bankruptcy.

In a Feb. 23 press release, Sterling said that its board voted to vacate the mine lease during Feb. 19 meeting, because it didn’t have the money to keep up care and maintenance costs. Sterling said it would have lost power any day because it wasn’t able to pay its bills. Sterling said it would officially give control back to the owner, Sunshine Precious Metals on Feb. 24.

In the same press release, Sterling announced that it had accepted the resignation of director, David Greenway, from the board of directors. David Greenway is the president and CEO of SNS Silver, which owns the Crescent silver mine property adjacent to the Sunshine mine.

In the last few days, SNS Silver has taken over care and maintenance duties at the mine site and is in the midst of working out a deal with Sunshine Precious Metals to become the Sunshine mine operator.

However, Minco says Sterling has not begun to repay a US$5-million loan that it says was secured by all assets including the personal and real property of Sterling, including the Sunshine mining lease. O

n Feb. 18, Minco was granted a temporary restraining order that prevented Sterling from removing, selling, destroying, disposing of, or concealing collateral – anything in which Minco has a secured interest. On Feb. 23, when Sterling announced it was vacating the lease, Minco filed an action to foreclose on Sterling with the local Shoshone County District Court.

Minco says it offered more than once to take over as operator of the Sunshine mine, maintaining the lease in good standing.

Neither Sterling nor SNS Silver have mentioned Minco in their announcements. SNS says it is only dealing with Sunshine Precious Metals, the owner of the property.

The Sunshine mine was in operation for more than 100 years and produced more than 350 million oz. of silver.

Sterling put the mine on care and maintenance last September after a series of start-up troubles.

Sterling is also negotiating a settlement for violating the Clean Water Act. The company violated its permit 185 times between April 2007 and November 2008, by exceeding its discharge limits. In most cases there was too much manganese in the water, a problem related to pumping at the mine.

That problem was fixed recently, but that wasn’t the end of Sterling’s problems. On Oct. 9, 2008, the company’s tailings line broke and a significant amount of tailings spilled into Big Creek, near Kellogg, Idaho.