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Oct 22 Whitehorse Star

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					12 Y UKON                                                                                                                                                    The Whitehorse STAR, Friday, October 22, 2004




UKHM is prepared to be auctioned            ment as no management. It was impos-                                                                                                  principal with Norvista.
 By JANE GAFFIN
                                            sible for decision-makers, holding the                                                                                                    United Keno had originally
    Keno, the venerable old gentle-         purse strings, to revive old mines with                                                                                               acquired its two-thirds interest in the
man mine, refuses to die a natural          occasional site visits and long-distance                                                                                              Marg as a result of “taking over” NDU
death as long as a probable hundred         calls from Toronto.                                                                                                                   Resources, which was heralded to be
million ounces of silver keep its heart         Whatever remained of United                                                                                                       a merger — not presumable one where
beating. Yet, the federal government        Keno’s tattered bank account had to be                                                                                                United Keno was to assume majority
is bent on subjecting the mine to           spent to try keeping a large package of                                                                                               position.
euthanasia.                                 mineral leases in good standing with                                                                                                      That is not clear and neither is it
    I believe the mine deserves a dig-      the Mayo mining recorder so there                                                                                                     clear if Atna Resources bought the
nified burial.                              were properties to explore, mine or sell.                                                                                             Marg property through the court or pos-
    In a series of articles being pub-      Nevertheless, many were allowed to                                                                                                    sibly directly from Norvista.
lished in the Star each Friday, I’m         lapse.                                                                                                                                    A February 2000, StockHouse Bull-
saying last rites and farewell to a             Other payments had to be made to                                                                                                  board Internet posting stated that
great mine that served as the               the Whitehorse expediter on time and                                                                                                  United Keno’s financial documents
Yukon’s lifeblood off and on for            in-full. And, as inadequate as they                                                                                                   indicated issuance of convertible
more than 80 years.                         were, payments were sent to the Yukon                                                                                                 debenture shares to a number of com-
    Here’s part 12.                         Energy Corp. in an attempt to keep the                                                                                                panies. Those debentures were
    United Keno Hill Mines (UKHM)           lights on.                                                                                                                            defaulted, evidently.
had to suspend development work on              It was a constant battle to keep the                                                                                                  Through a promissory note, United
its property in 1997 while company          company afloat. Without secure tenure,                                                                                                Keno had eventually drawn $200,000
officials desperately sought a financial    a bank couldn’t help with the financial                                                                                               from the $500,000-debenture issued to
angel.                                      dilemma.                                                                                                                              Norvista Development in July 1998 —
    On-site people guesstimated the             While Stephen Powell, the United                                                                                                  one month before Archer and Stephen
company had been unnecessarily out-         Keno chair and CEO, wasn’t a mining                                                                                 Star file photo   resigned from United Keno’s board of
laying $1 million a year to satisfy         man, he was a stock broker who knew         INTERVENTION SOUGHT – Some United Keno Hill Mines work-                                   directors.
overblown environmental demands of          the financial end of the business. As he    ers and a local politician described the mine-site realities in                               As with any contract, the terms are
federal agents who held the power to        magically pulled dollars from hats,                                                                                                   negotiated between the parties
                                                                                        letters to Robert Nault (above), then the minister of Indian
revoke licences and take the company        names of directors changed in direct                                                                                                  involved. A debenture acknowledges
and directors to court.                     proportion to deals sealed.                 Affairs and Northern Development. They went unanswered.                                   a debt. This specific contract may have
    A few irked employees — even a              On March 20, 1998, NDU                  merger went sour very quickly. Archer      he was skunked before he started.              included some kind of charging pro-
local politician — spelled out on-site      Resources, an Archer Cathro associ-         and Stephen resigned from the United           Gauthier’s first task was to send out      visions relating to the grantor’s prop-
realities in a flow of unanswered let-      ate, merged with UKHM. Several new          Keno board in August 1998.                 a news release. The Ontario Superior           erty.
ters to Robert Nault, the minister of the   United Keno directors appeared on the           About the same time, it became         Court had granted United Keno cred-                Regardless, the Marg forfeiture
federal Department of Indian Affairs        board: Alan Archer, Douglas Goss and        harder to trace corporate particulars.     itor protection pursuant to an order filed     came about because of the 1999 court
and Northern (I say “No” ) Develop-         James Stephen.                              United Keno had stopped filing pur-        in Toronto under the Companies’ Cred-          proceedings in Whitehorse where the
ment (DIAND) in Ottawa.                         By now, Donald Rogers of Romith         suant to the Yukon Societies Act, as       itors Arrangement Act on Feb. 18,              group of creditors holding miners’ liens
    The once-rational thought about         Investments, whose money was being          had been done religiously each year        2000.                                          had been sanctioned to sell the Elsa sil-
being able to live cleaner, healthier       used or misused, had relinquished his       since 1952.                                    The order stayed all proceedings           ver properties to pay outstanding debts.
lives while continuing to fuel an econ-     directorship.                                   Who was right and who was wrong        against United Keno till March 16,                 The total amount owed to all those
omy with human activity and resource-           The NDU-UKHM union sounded              in the merger is a Gordian knot that       2000. On that date, the court extended         who came forth to make claims at the
based jobs went out the window when         too good to be true. It was arranged to     would take a roomful of corporate          the protection deadline to June 23,            time was about $8.2 million. Fourteen
a set of contradictory environmental        facilitate a rapid evaluation of NDU        lawyers eons to untangle.                  2000, and later granted the last exten-        local creditors, including the Yukon
regulations were dumped into the            Resources’ neighbouring Marg and                Without space to go into sordid        sion up to Jan. 10, 2001.                      Energy Corp., which said it was receiv-
Yukon Quartz Mining Act.                    Blende properties and their incorpora-      details, it appeared that United Keno          The initial ruling prolonged the           ing some arrears payments, were owed
    It had zippo to do with protecting      tion into a production schedule.            may have made a sneaky end run out-        inevitable. But it was not clear if the        $1.7 million; unsecured private credi-
and preserving the environment but              A feasibility study was needed to       side the known zone of what was sup-       court protection was meant to overturn         tors claimed roughly $4.9 million; and
had everything to do with giving            establish the economics of shipping         posed to be a deal.                        a previous judgment from Whitehorse.           a numbered Ontario company claimed
DIAND ministerial control over min-         ore from the Marg property to the Elsa          By May 26, 1998, the position of           A 1999 ruling, handed down by              $1.6 million.
ing claims.                                 townsite where a new mill was pro-          Dominion Mineral Resources and Ster-       Yukon deputy justice Mary Moreau,                  The Ontario court granted Gau-
    Under section 151.1, an inspector       posed for construction.                     ling Frontier Properties Co. as United     had forced United Keno to reluctantly          thier’s request for extra time to restruc-
could interpret United Keno’s tempo-            The grandiose plan was formulated       Keno’s majority shareholder had            sell the Marg property, which seem-            ture and refinance. His faint hope was
rary work stoppage as an abandonment        to augment Elsa mill feed with Marg         slipped to 12.16 per cent, and the com-    ingly went to a mystery company,               to enter into a financial agreement with
of its development program and as a         material in hopes of grinding nearly        pany had taken on a new crop of direc-     believed to be Norvista Development            Pacific Cart Services Ltd. of Nevada
violation of its “approved” operating       3,000 tons per day of rock, although        tors.                                      Ltd.                                           to provide the required working capi-
plan.                                       nobody knew much about the ore’s                On Dec. 31, 1999, Energold Min-            The Yukon court action had                 tal until commercial production
    Sinners would be shown no mercy.        metallurgy or recovery methods at this      erals took over a majority position with   resulted when MacKenzie Petroleum              resumed at Elsa.
The authorities could take whatever         point.                                      12.2 per cent shares. Powell only lasted   of Dawson City, one of United Keno’s               Pacific Cart would loan an initial
measures they deemed necessary to               The Marg deposit, located 40 kilo-      as CEO another year; he stayed on as       many secured creditors, came forth first       $150,000 on the basis of a loan con-
“remedy” any real or fabricated             metres northeast of Keno City, is a vol-    chairman.                                  to obtain a judgment from the Yukon            vertible into common shares at nine
offences thrust on the so-called frag-      canogenic massive sulphide (VMS)                In 2000, Gerald Gauthier assumed       Supreme Court in September 1999.               cents each, with the option to advance
ile environment and send the sinner the     deposit. It contains copper, lead, zinc,    the role as president and CEO, turning         Other creditors followed MacKen-           up to a further $4 million on a similar
bill or have the judge send him to jail.    silver and gold, which see-saw back         over his former vice-chairmanship to       zie’s lead. United Keno was ordered            basis.
    As proved later, no company can         and forth in the marketplace.               Robert Granger, a director of several      to put its assets on the auction block as          United Keno was supposedly in dis-
run a specialized mining operation on           When one commodity sinks in             years.                                     per a marketing plan proposed by all           cussions with an undisclosed third
over-regulation and too much hands-         value, another metal should be rising.          Gauthier inherited bills and a         the secured creditors.                         party concerning the balance needed
on interference from government.            Theoretically, it should be profitable      bankrupt company. But the mining               In February, 2000, when Gauthier           to meet its $6.5-million obligation.
    It was the unpaid employees, con-       to continuously mine either for base        engineer thought he could save the pro-    was putting out a news release, Atna               The refinancing agenda must have
tractors and service providers who took     metals or for precious metals.              ject. He had faith in himself and his 30   Resources purchased two-thirds major-          cratered.
the full brunt of the so-called environ-        United Keno had historical con-         years of technical expertise in under-     ity interest in the Marg property from             It was the bitter end. An Ontario
mental liability. The federal govern-       nections with the Marg. It was first        ground and open pit operations in          an “undisclosed company” for                   court decision extended creditor pro-
ment had an imbecilic notion to date        staked in 1965 by Canadian Superior         Canada, the United States and Mexico.      $250,000. (This property had been              tection to Jan. 10, 2001. United Keno
historic clean-up obligations back mil-     Exploration, one of the financial back-         Some of his credentials included a     appraised at more than $1 million).            couldn’t come up with the $6.5 million
lions of years to the extensive glacial     ers of United Keno’s exploration divi-      15-year employment record with Lac             A1 Archer, an astute businessman           that would cover only the debts of
activity of the Ice Age when Mother         sion.                                       Minerals Ltd. From 1979 to 1994, he        and head of the Vancouver-based                secured and unsecured creditors.
Nature was the biggest bulldozer grind-         Together, CanSup and United Keno        was mine manager of the Bousquet           Archer Cathro & Associates, was a                  Secured creditors, who were owed
ing through the Keno Hill area.             had prospected the Marg claims for sil-     Gold Mine in Quebec; general man-          principal in a private company,                the most money individually and first
    That is not to say United Keno did      ver in 1965-66.                             ager of the Hemlo (Ont.) Page              Norvista Development. He also was a            on the list to collect, were awarded
not fritter away investors’ money in            Over the years, the ground came         Williams Gold Mine; and elevated to        principal in NDU Resources, plus               court flexibility to garage-sale the
other ways. There were strangers on-        open and was staked by various com-         senior vice-president of Lac’s North       another affiliate, Expatriate Resources,       assets piecemeal or as a whole unit.
site who nobody knew or understood          panies.                                     American operations.                       which was engaged with Atna                                       ***
what they were supposed to be doing,            By 1986, All-North Resources Ltd.           Under an ordinary business venture,    Resources in a joint venture elsewhere             Jane Gaffin is author of Cashing
much less why they might be getting         held more than 66-per-cent interest in      he possibly could have saved the day,      in the Yukon.                                  In, a definitive history of the Yukon’s
paid.                                       the property. Its interest was bought       attracting financiers and taking United        Following the NDU-UKHM agree-              hardrock mining industry, 1898 to
    From abject neglect, the roof caved     out in 1987 by NDU Resources, which         Keno to commercial production.             ment, Archer sat only about five               1977. You can e-mail her at janegaf-
in one of the valued underground work-      added more claims to the package.               But loaded down with corporate         months as a United Keno director, as           fin@canada.com or visit her at
ings being developed and the mill fell          A 1996 diamond-drill program            baggage, and without careful thought       did his colleague, James Stephen, who          www.diArmani.com.
into a sorrier state of disrepair.          expanded the mineralization to almost       to the lurking environmental regula-       had NDU Resources connections                      Next week: unbelievably, the United
    This was not so much mismanage-         four million tons.The NDU-UKHM              tions negating legal security of tenure,   through All North. Stephen also was a          Keno epic tale gets more convoluted.

				
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