A B.C. court has given Yukon Zinc another month and a half to get its finances in order.
The owner of the Wolverine mine has been under creditor protection since March 13 on $646 million in debt.
The Chinese-backed company appeared in court last week to ask for an extension until Aug. 31 to continue working on its financial restructuring. The court gave them until Aug. 14.
The extension was supported by the court-appointed monitor even though it had “grave concerns” over $4.4 million it was never told about.
The money was being held in a San Francisco bank account and came from a prepaid sale of zinc concentrates to Shaanxi Zinc, a Chinese company, in March 2014.
There was nothing fishy about the deal itself, but when the mine shut down it was unable to fill two-thirds of the order, according to documents filed in court.
“The company appears to have deliberately concealed from the monitors the existence of the excess funds and its attempts to return the excess funds to Shaanxi Zinc,” according to the PriceWaterhouseCoopers’ latest report.
The same report says senior management at the company told staff on April 14 not to tell the monitor about the money until they decided what to do, as it would “cause much trouble.”
The company insists this is all a misunderstanding.
According to the report, the company believed it needed to return the money to Shaanxi Zinc because it was a result of an overpayment since they never got the product they paid for.
“As I say above, at the time, I believed any overpayment belonged and would be repaid to Shaanxi Zinc,” wrote Yukon Zinc’s CEO, Jing You Lu, in an affidavit.
“In retrospect, and now having a better understanding of the process and, more specifically, the company’s duties it is apparent that I should have advised the monitor of this matter.
“I had no intention of deceiving the monitor; I was just of the view that any overpayment was not the property of the company.” Yukon Zinc and Shaanxi Zinc are both majority-owned by the same Chinese state-owned company.
Yukon Zinc is owned by Jinduiheng Canada Resources Corporation Limited. The largest shareholder of that company is JDC group.
JDC group is a wholly-owned subsidiary of Shaanxi Nonferrous Metals Holding Group, a Chinese state-owned company that also owns 80 per cent of Shaanxi Zinc.
Despite its concerns over the hidden money, the monitor appears to believe Yukon Zinc’s explanation. It suggested the court approve the company’s request for another deadline extension.
“Notwithstanding that concern, the monitor is of the view that, on balance, the company is generally acting with sufficient good faith and due diligence that the relief sought is appropriate,” according to court documents.
Along with approving the extension, the court released $90,000 to cover bonus payments for 11 employees still at the mine.
The employees are at the mine doing jobs that would normally be done by several people, according to the monitor’s report. The employees are concerned about their job security. Yukon government regulations require that a certain number of trained employees stay on site.
Yukon Zinc announced a temporary closure of the Wolverine mine in January.
Almost all employees were notified of temporary layoffs. If those layoffs become permanent, $714,000 would be owed to employees in severance, according to court documents.
The company also owes the Yukon government $3 million in mine security. That money is meant to be for the eventual mine closure and reclamation. It has been out of compliance with its mining licence since October for failing to make payments on an agreed upon schedule.
Contact Ashley Joannou at
ashleyj@yukon-news.com