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Mining companies face cash crunch

Jennifer Obleman
Northern News Services
Published Monday, August 27, 2007

IQALUIT - Two mining companies affected by a recent global credit market disturbance say both workers and bills will be paid on time for their Nunavut operations.

NNSL Photo/Graphic

There will be no disruption of payments to workers, such as Manasie Amagoalik, or suppliers at Baffinland's Nunavut operations as a result of recent market cash flow uncertainty. - photo courtesy of Baffinland Iron Mines Corporation

Baffinland Iron Mines Corporation has secured $21 million in financing through the Bank of Nova Scotia to provide short term cash flow after $43.8 million tied up in asset backed commercial paper (short term investments) could not be liquified this month because of market uncertainty.

"We're spending money at a prodigious rate now up at Baffin island," said Baffinland president and CEO Gordon McCreary.

"This is a midterm solution to allow us to keep things on track."

Baffinland currently has 200 people working on site at its Mary River project in Nunavut, about half of whom are Inuit from Pond Inlet, Arctic Bay, Iglulik, Hall Beach and Clyde River.

The company is in the process of shipping in supplies and diesel for the winter.

There will be no disruption to the payment schedule for workers or suppliers, McCreary said.

Baffinland had $33.9 million invested with Coventree Capital Group in asset backed commercial paper notes that matured between Aug. 13-16 and were not paid out. A note worth almost $10 million will come due Aug 30.

The company will be able to access that money eventually, McCreary said.

"This is not a credit issue; it's a liquidity issue ... That money is all there, and it's going to be available at some point in time," he said.

For now, the company will pursue alternate solutions to its cash flow situation, he added, and the Mary River project will progress.

This year Baffinland expects to complete a comprehensive feasibility study and bulk samples for its Mary River project, along with an estimated production timeline.

Another mining company with assets that can't be liquified is Miramar Mining Corporation, a gold company exploring in Nunavut. Miramar has $37 million tied up in asset backed commercial paper, but the company has said its Hope Bay project will not be affected by the cash flow situation.

Nicole Hoeller, Miramar's director of investor relations, confirmed last week the company had $98 million in cash not affected by the asset backed commercial paper that is available to fund its operations, and planned exploration and development activities at Hope Bay will not be disrupted.