Reuters....Royal Oak may shut down Kemess gold mine
TORONTO, March 18 (Reuters) - Royal Oak Mines Inc. [AMEX:RYO - news] said on Wednesday it will consider shutting down or selling its Kemess gold mine in northern British Columbia if it cannot arrange for more than $U.S. 50 million in emergency funding to pay off existing debts.
The announcement came one day after the U.S.-based company said it was in default of its senior secured debentures and that its mechancial contractor had terminated work at the Kemess mine with only four weeks of work left.
''We might have to do that (shut down Kemess). But we will still work on it to get the funding. We are very confident. Kemess is our crown jewel, that's the future of Royal Oak,'' said Royal Oak spokesman Graham Eacott.
The company estimates that the Kemess mine contains 250,000 ounces of gold and 60 million pounds of copper.
Royal Oak, like many companies in Canada's gold sector, has been hard hit by the collapse of world bullion prices, which have fallen to US$290.90 from a 1997 high of US$363.
The low gold prices have forced a number of mine closures, severe cost cutting and pushed some companies to the brink of financial ruin.
In January, U.S.-based Pegasus Gold Inc (OTC BB:PSGQF - news; PGU.TO - news), once a pioneer of low-cost gold mining, was forced to file for bankruptcy protection as a result of the poor gold prices.
''Our situation at Royal Oak is not even close to the same situation at Pegasus,'' said Royal Oak President Margaret Witte, who added that the company had not formally hired bankruptcy counsel.
''This is a short term liquidity problem, this is not a value problem. I don't know why this company would abandon the crown jewel, it's just a matter of reaching the finish line in the next few weeks,'' Witte said.
Witte said the company would continue to work on a financial solution to the company's current debt problems.
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