Bay Street Wary of Frame

More adept at mining governments than ore bodies

Bay Street Wary of Frame

Is Frame the guy you're prepared to lend money to?

by Richard Mostyn

This article appeared in
Yukon News
Whitehorse, Wednesday, 22 January 1997

Re-Framing Anvil Range Mining Corp.'s lead and zinc mine in Faro may prove easy.

Reopening it may not.

Essentially, Bay Street investors are wary of base-metal mining guru Clifford Frame, says Barry Cooper, a mining analyst with CIBC Wood Gundy.

Last week, Frame, a controversial mining promoter and former CEO of Curragh Resources Inc., announced he was making a bid for his old mining property in the central Yukon.

His new venture, Mineral Resources, launched a plan last Friday to swap stock with Anvil Range investors.

Frame's goal is to acquire the seeming moribund operation, which has been temporarily shut down since December because of milling problems, depressed metal prices and a strong dollar.

Currently, he owns 10 per cent of the mine and he hopes to obtain controlling interest through the stock option.

If he pulls that off and can acquire the capital he needs, Frame told CBC Radio he could reopen the mine "tomorrow" at present lead and zinc prices.

Frame may be able to acquire the mine, but he's less likely to reopen it, cautioned Cooper, who is based in Toronto.

"Basically, what I see there is that the paper's not worth very much.

"He may acquire the assets, but he's unlikely to open the mine, largely because I don't see how Frame will raise the funds to get the mine back into production.

"It needs capital, and is Frame the guy you're prepared to lend money to?"

Frame's mining empire once included the Faro and Sa Dena Hes lead-zinc operations and Nova Scotia's Westray coal mine.

It collapsed in 1993 due to a combination of weak metal prices, heavy debt and a catastrophic cave-in at Westray that left 26 miners dead.

Frame pegs the company's failure solely on the 1992 cave-in. But Cooper believes his reputation was in decline among investors long before that.

However, that's just his impression, he added.

Frame's more optimistic about his chances of reopening the Faro operation, which employs about 1,000 people.

Though he was grilled by CBC host Janet Patterson, Frame seemed confident about his prospects about raising the money.

"Well, I've raised an awful lot of money in my times, Janet. Probably quite a few billions of dollars and a good project will command a following and I think there's a good project there.

"I raised $55 million in 1985 and the whole industry was saying we couldn't do it, so I raised it."

Before Frame's empire broke up, some saw the avid bear hunter as a master of making a go of marginal properties.

"He's able to get marginal mines open again," said Dennis Ouellette, manager of the Yukon Chamber of Mines.

"There are only a couple of promoters who are very good at that – Peggy Whitte (the owner of the Giant gold mine in Yellowknife) is another.

"They can take a marginal operation and cut operating expenses to make it profitable again."

But others, like Yukon Party leader John Ostashek, look at his Faro and Westray operations and believe he's more adept at mining governments than ore bodies.

In 1995, Frame finessed the $7-million sale of an old diesel turbine to the Northern Canada Power Commission, even though the utility didn't need it.

The deal was a thinly veiled subsidy to the fledgling company.

As well, Ottawa provided Frame's Curragh Inc. with a $15-million loan guarantee. And also power at a bargain basement price of 4.56 cents a kilowatt hour.

Its predecessor, Cyprus Anvil paid 10 or 11 cents.

A 1988 order-in-council signed by then-government leader Tony Penikett prevented the Yukon Utilities Board from tinkering with that below-cost rate.

It was rescinded in 1991, much to Frame's dismay.

Also, Penikett's NDP government guaranteed the project to the tune of $7.1 million.

Ottawa also kicked in a $3-million grant.

The Penikett government agreed to buy 122 Faro properties once owned by Curragh for $1.6 million.

It also gave another $3.4 million secured by mortgages on another 162 properties.

It also spent $700,000 to keep the Alaskan portion of the South Klondike Highway open year-round so that lead/zinc concentrate could be trucked to Skagway.

As well, it spent an estimated $20 million upgrading the highway for the heavy trucks hauling the concentrate around the clock.

In return, Curragh promised to hire 450 people to run the mine. It also spun off another 550 related jobs.

It bought $5 million in goods and services in the Yukon and promised to locate its head office here, creating another 25 jobs.

And hopes of a similar deal may be what's drawing Frame back to the Yukon, speculated a local history buff lately.

Piers McDonald's NDP government is predicting a loss of $4 million in the 1998 federal transfer to the territory if the mine closes indefinitely.

That loss gets greater the longer the mine is shut down.

In 1998-99, the territory's fiscal hemorrhage increases to $11.2 million. In 1999-2000, it grows to $20.2 million.

As well, power rates to residential and commercial users will be jacked up due to the loss of mine revenue.

Hoping to ward off the extended closure, McDonald met with Hyundai officials on a recent trip to Korea to discuss employee ownership in the mine.

And though direct loans and grants weren't asked for, Hyundai officials raised the subject of the territory's high power rates, taxes and royalty payments.

Frame may be gunning for similar government concessions in exchange for jobs because the New Democrats have been open to such arrangements in the past.

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