A British Columbia Supreme Court has approved the sale of the mothballed Pure Gold Mine in Red Lake to West Red Lake Gold Mines.
Pure Gold has been under CCAA (Companies' Creditors Arrangement Act) since Oct. 31.
All of Pure Gold Mining’s issued and outstanding shares now go West Red Lake under a reverse vesting order, according to a news release from Pure Gold.
The sale closes on June 28, subject to regulatory approvals.
West Red Lake will acquire an underground mine, processing mill and 47-square-kilometres of property outside the community of Red Lake in northwestern Ontario. The fledgling mine operation was built on the site of the former Madsen Mine, a historic gold producer in the Red Lake mining camp.
As part of the CCAA process, the mine was put on the selling block in early November.
West Red Lake, which holds a nearby exploration property, announced in mid-April it signed a definitive agreement with Pure Gold.
Court documents filed by the monitor said the cash-and-share deal is valued between $49.4 million and $54.4 million.
The sale was structured around a reverse vesting order (RVO), a new and increasing popular tool in the CCAA process designed to keep distressed companies as ‘going concerns.’
RVOs allow the transfer of liabilities and unwanted assets out of the debtor companies – basically anything the purchasing company doesn’t want – into specially created residual companies (ResidualCos) which are then liquidated or placed into bankruptcy. The RVO process was used in the sale of Harte Gold last year.
The hearing was contested by investors in Pure Gold, who launched a class action lawsuit against the company and its managers in 2022, as well as by contractors owed money and had placed liens on the Red Lake property in the Ontario courts.
The companies are among a number of people, including dozens of mining contractors and service and supply companies, collectively owed $149.3 million but are categorized as unsecured creditors. Sprott Resource Lending, Pure Gold's primary lender before and during CCAA, is the largest secured creditor.
The Pure Gold Mine went into commercial production in August 2021 and ran into major production and cash problems within a year before entering CCAA in the fall of 2022.
Gold production was halted on Oct.24 and the company entered creditor protection within a week. The mine is currently not in production but is on care and maintenance status with a skeleton crew of 38 on the site out of an original operating workforce of 271.
West Red Lake holds the Rowan exploration property in the Red Lake camp, host to three historic gold mines. The company recently raised $25 million through a share offering to fund the restart of the mine.