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Blue Note hopes to reduce $23 million tab with province

Published Tuesday January 20th, 2009

Should the Caribou and Restigouche mines near Bathurst fail to reopen, the Government of New Brunswick could be on the hook for $23 million.

Blue Note Mining Inc., a junior mining company in Montreal, shut down its two local zinc mines last December due to plummeting metal prices. In the time between beginning operations in the summer of 2007 and last month's shutdown, Caribou incurred a $85 million debt with creditors and suppliers – $23 million of which is taxpayers' money.

Ryan Donaghy, a communications officer with Business New Brunswick, said a $15 million loan guarantee was given for the start-up costs of the two local mines. On top of that, just under $8 million was owed to the government from the previous owner.

Mr. Donaghy said should Blue Note be unable to repay their debt, the government will foot the bill.

"What we do is we guarantee that loan...which allows them to go access private capital through a bank or a private institution. If they were to go under, we would have to pay that amount to the bank," he explained. "If it's shut down and (Blue Note) continues to make payments on the bank loan, then that's not affected. If they go into default on that bank loan, then the government would have to pay out whatever was owing.

Added Mr. Donaghy: "At this point, we have not paid that out. That would be our hope (that the mines reopen). That's why we had provided assistance in the first place."

Last week, Robert Therriault was hired by Blue Note as the new chief financial officer and vice-president of finance in charge of drafting a repayment scheme and business plan to move the company forward. Blue Note is meeting with suppliers and creditors this month to discuss repayment.

Mr. Donaghy said he doesn't believe Business New Brunswick is privy to the latest payment scheme plan but the two sides will be in contact.

"We were in contact with them subsequent to their shutting down. We have been in contact with them since then and we certainly continue to monitor the file with regards to payments, loan payments and any other issues that surround Blue Note mining," said Mr. Donaghy.

In August 2006, Blue Note officially announced their purchase of the Caribou and Restigouche mines. The mines, located off Route 180 (the Road to Resources), had been dormant since August 1998, when they closed due to low metal prices and low mineral recovery rates.

Blue Note is expected to decide on reopening the company's two zinc and lead mines some time this summer. Just a few factors to consider in reopening are cost of production, exchange rates, fuel prices and of course, metal prices.

Mr. Donaghy said the mine closures have been difficult on many and he's hoping for good news in a few months but he's also aware of the current situation.

"Certainly for those affected by this, both the residents in Bathurst and those in the area, this has had a tremendous impact. There's no doubt and we would have obviously preferred a different outcome than the shutdown but that's where we're out at this point in time."