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Mining company hit with lawsuit

Plaintiff's claim could lead to court-ordered sale

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The Bucko Lake Mine is currently closed.

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The Bucko Lake Mine is currently closed. Photo Store

DEPENDING on how it proceeds, a statement of claim against a temporarily shuttered northern Manitoba nickel mine could eventually lead to a court-ordered sale of the mine.

Hendrickson Construction of The Pas is suing CaNickel Mining Ltd. and its directors for $377,805.

The Bucko Lake Mine in Wabowden, southeast of Thompson, was completed in 2007. In the summer of 2012, Hendrickson placed a lien on the mine after not getting paid for several months' work on the construction of a paste plant that produces concrete used to provide engineering support for underground work.

It was around that same time the mine owners decided to halt operations and temporarily close the mine and put it under what is called care and maintenance.

Among other things, Hendrickson's claim under the Builders' Liens Act calls for an order from the court "that all of the estate and interest in the property or a component thereof be sold and that the proceeds be applied in payment of the plaintiff's claim."

Hendrickson's lawyer, Tom Frohlinger, a specialist in Builders' Liens Act matters, said such cases are typically settled before a court-ordered sale occurs.

A series of operational and management changes after the mine opened -- the company changed its name from Crowflight Minerals to CaNickel when Chinese steel company Hebei Wenfeng became a significant investor -- hampered production.

Then nickel prices started to decline. In early 2011, nickel was trading for $12.50 per pound on the global market. It has been declining gradually since then. On Wednesday, it was selling at $6.67 per pound.

Over the last four quarterly reports, the company has recorded total losses of close to $20 million.

Ed Huebert, executive director of the Manitoba Mining Association, said it is not uncommon for mines to be placed in care and maintenance and then revived when commodity prices make the operation of the mine economically viable.

When the mine was opened, it was hoped to become a boon to the town of Wabowden, with a population of about 700, 650 kilometres north of Winnipeg, representing economic development opportunities the likes of which it had never seen.

But in addition to the hardship Hendrickson has experienced because of unpaid bills, several other local businesses in Thompson and Wabowden were left with unpaid bills.

Officials from CaNickel did not respond to requests for an interview.

Allan Chu, owner of the Silver Leaf Hotel in the town, said CaNickel still has an outstanding bill for about $4,500.

But what makes Chu even angrier is even though the mine itself is closed, its worker camp is currently home to about a dozen workers engaged in early stages of construction of Manitoba Hydro's Bipole III transmission line.

Chu said those workers might otherwise be staying at his hotel.

"There is nowhere else to go," said Chu. "In the past, Silver Leaf has done business with Hydro and we have always looked after them well. It's a tough business, especially when you wait that long for business to come your way, then these things happen. It's very frustrating."

Manitoba Hydro spokesman Scott Powell confirmed it has a crew at the mine camp.

"There was a public tender issued in the fall of 2013 for the provision of camp and catering services (among other things)," Powell said. "We received seven proposals in response to the RFP, and after evaluating the proposals, our staff recommended awarding to CaNickel the provision of camp and catering services."

In its most recent financial report, the publicly traded CaNickel noted it had successfully negotiated enhanced debt financings through its largest shareholder, Hebei Wenfeng.

In its interim financial report for the period ending Sept. 31, 2013 and filed Nov. 1, 2013, it said, "Hebei Wenfeng advanced $6,289,050 to the company as of Sept. 30, 2013. The advance bears no interest and is due on demand and included as part of accounts payable and accrued liabilities on the statements of financial position."

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 23, 2014 B6

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