Just a few months ago, Liberty Mines seemed destined to wind up in that special graveyard reserved for junior mining firms that fly too close to the sun, and flame out.

After flying high for a year or so, the small Edmonton-based company-- which owns the Redstone and McWatters mines near Timmins, Ont.--was crushed by a savage meltdown in nickel prices last year, triggered by the brutal global recession.

From a record high of about $24 US a pound in mid-2007, and a still-robust$15 in early 2008, nickel prices slumped to just$4as last year drew to a close, well below the cost of production.

The disastrous price plunge effectively derailed a critical bank financing last fall. That forced Liberty to shut its Redstone mine, halt development at its McWatters mine, and lay off virtually its entire staff.

"That was a very tough day. We had about 160 employees, and we had to let them go," recalls Liberty's CEO, Gary Nash.

"We kept a skeleton crew on-site for care and maintenance, but other than that, by the end of December, everyone was gone except for myself."

The company was so broke, Nash had to dig $25,000 out of his own pocket just to pay the bills and keep the lights on at Liberty's modest head office. The future looked bleak.

"The worst point for me was probably the first two weeks of November, when I realized I was all alone," says Nash, a former local high school teacher who seized control of Liberty in 2005, just as nickel prices were beginning their record run.

By mid-2007, Liberty had raised tens of millions of dollars from investors, built a 2,000-tonne-per-day mill at Redstone, and its stock had soared to a high of nearly $5 a share on the Toronto Stock Exchange, briefly giving it a market value of more than $300 million.

But Liberty's bright future quickly turned to ashes. As the corporate vultures circled in hopes of forcing Liberty into a fire-sale of assets, Nash forged on, trying to cut a deal to keep the company alive.

In particular, Nash hoped to secure a financing with Jilin Jien Nickel Industry Co., a sizable Chinese company that Liberty regarded as a strategic partner, and the best hope for gaining access to China's huge metals market.

"In October, I started talking to the Chinese, and knew we'd put a deal together, although it wasn't quite clear what it would be. Unfortunately, not everyone on our board saw the potential, so we did have a bit of dissension," he confides.

"But talks progressed with the Chinese, and we put together a memorandum of understanding by November, and it went from there," he says.

"In the end, we made a deal for $30 million (in funding), and it was consummated in April. It was split into about $9.5 million of common shares, and $20.5 million of (convertible and redeemable) preferred shares, which carry an eight-per-cent dividend."

The financing, which closed in late May, makes Jilin Jien Liberty's largest shareholder, with a 51-percent stake. But Nash says he doesn't expect it to increase its stake by converting the preferred shares.

If nickel prices continue to rebound from last year's lows--nickel currently trades for about $8 a pound in London--Nash says Liberty will slowly buy back the preferred shares, reduce its debt, and get back into growth mode.

The first step is a scheduled restart of the shuttered Redstone mine, slated for this week. The second is a gradual increase in production, provided nickel prices continue to firm up.

"With the production we anticipate next year--when we see nickel prices (averaging) in the$7 to$7.50 area--we'll be able to pay back our commitments, and be in a nice solid position. In the longer term, we'd like to do some further deals together with acquisitions, and continue to build the company."

Liberty's stock, which was halted for months pending release of the company's 2008 and early 2009 financial statements--a process that was delayed while the company searched for a new CFO--is now trading actively again on the TSX. The shares closed Friday at just 17.5 cents apiece, on volume of about 144,000 shares.

That gives Liberty an implied market value of about $30 million, based on roughly 167 million shares outstanding, on an undiluted basis. Although that's about 90 per cent below the company's peak market value in 2007, Nash is intent on getting Liberty back on investors' radar screens. Over time, he says he hopes to buy back stock and cut the number of outstanding shares to about 100 million.

As for the role of Liberty's new Chinese shareholder, Nash has nothing but praise.

"There were 14 other companies who had shown expressions of interest in one part of our company or another, and they were just sitting there like vultures waiting to pick us apart," he says. "After the deal (with Jilin Jien Nickel) was done, two of them said,'We made a mistake, and we should have done something with you guys.'But the Chinese beat them to the punch," he says.

"They could have allowed us to go into receivership, and take us back out. They could have taken the company private, and the shareholders would have lost all their equity. But they took the high road, so I think we need to respect their honour as business people. They're not here to rape anybody."