Doug Ashbury
Northern News Services

NNSL (Feb 17/99) - On the verge of bankruptcy, Royal Oak has been given brief court protection from creditors.

An Ontario judge made the ruling Monday under the Companies Creditors Arrangement Act.

The order provides for an immediate injection of working capital and allows Royal Oak to not only continue to operate its mines but also to restructure its debt.

Two months ago, Royal Oak set itself a Feb. 15 deadline to restructure its debt. That deadline came and went with the company owing senior debt holders an interest payment of about $16 million.

The order also stays all legal action against Royal Oak until March 18.

Trilon Financial, which rescued Royal Oak last year with $180 million, will provide Royal Oak with an additional $34.7 million. But only $8.4 million of the $34.7 million will be available to the company over the next month. Over half the new loan will go to pay interest arrears, future interest and royalties to Trilon. Trilon, part of the EdperBrascan Group, has first call on the Kemess South mine. EdperBrascan, one of the country's largest conglomerates, owns big chunks of Noranda and Falconbridge.

Royal Oak has $500 million in senior debt. The company also had trade payables, taxes and payroll totalling $43.6 million. In Yellowknife, Royal Oak owes the city about $750,000 and money to the NWT Power Corp.

As well, Royal Oak has failed to meet B.C. government tailings dam requirements at the Kemess South. Kemess South has an estimated resource of 3.9 million ounces of gold.

Royal Oak was to come up with a new tailings dam schedule Monday. B.C. officials could force Royal Oak to shut down certain operations and concentrate on the dam.

In an affidavit filed with Ontario Court of Justice, Royal Oak president and CEO Margaret Witte said the company lacks the working capital and equipment to raise the height of the dam to levels required by the B.C. government.

Also in the affidavit, Witte said: "Should the company not succeed in its restructuring efforts, some of the responsibility and costs for care, maintenance, and reclamation would fall to government authorities."

Witte said Royal Oak spends $2.7 million each year on environmental costs at operating mines and $1.7 million a year for environmental costs at its dormant mines.

She also said: "The Giant mine continues in operation, despite low gold prices at essentially a break-even level owing largely to a reduction in cash costs and the impact of mining higher grade ore at the Supercrest deposit.

"The company has been exploring ways in which costs could be further reduced, including an examination of alternatives for generating electrical power at the mine."