Victoria Gold legal woes continue as creditor list goes public
Court-appointed receiver issues statement detailing company's assets and money owed
The receiver appointed to oversee the Victoria Gold Corporation has released more details about the company's financial affairs following a major failure at the company's Eagle mine in central Yukon earlier this summer.
PricewaterhouseCoopers (PwC) was appointed on Aug. 15 by the Ontario Superior Court of Justice after the Yukon government asked that the company be put into receivership.
In a statement sent to Victoria Gold's creditors on Monday and also posted online, PwC details the value of the company's assets as of June 30 and the money it owed to hundreds of creditors as of Aug. 14.
According to the statement, Victoria Gold had assets totalling $824.75 million, though PwC said the figures listed do not necessarily represent the value of the assets when they are sold or liquidated.
Victoria Gold's Eagle mine, north of Mayo, Yukon, began operations in 2019 using a heap-leach process to extract gold from stacks of ore. On June 24, the heap leach facility failed, causing a slide that released cyanide into the environment and immediately halted operations at the site.
According to the PwC statement, at the time of the failure, Victoria Gold employed 464 people and had an additional 134 "direct-hire contractors."
Some of the largest assets belonging to Victoria Gold at the time included $442.6 million in property and another roughly $300 million split between inventory and evaluation and exploration assets.
Meanwhile, the receiver said Victoria Gold owed at least $300 million to 424 creditors, 416 of which are unsecured.
Whitehorse-based lawyer Lenore Morris, who represents at least one of the unsecured creditors, said that secured creditors have a claim against a specific piece of property.
"Then the borrower, in this case Victoria Gold, had to have signed documents specifically committing certain assets to be attached to certain loans and saying, in essence, 'If I don't pay back this money, then you can come and take this piece of equipment,'" Morris said.
Unsecured creditors, she said, are those that were responsible for supplying goods or services to Victoria Gold.
$300M owed
Of the money owed to secured creditors, Victoria Gold owed $185.3 million to a number of banks, including the National Bank of Canada and a further $47.84 million to Caterpillar Financial Services. The total amount owed to an additional six secured creditors is still unknown.
Included within the secured creditors list are Finning International Inc., and Whitehorse-based Tutchone Air Leasing. Both Tutchone Air and Finning's Canadian division are listed as unsecured creditors as well.
Tutchone Air is a partnership between the development corporations of the White River, Na-Cho Nyäk Dun, Selkirk and Kluane First Nations in the Yukon. Director Stephen Mooney said much of the money owed to the company is from transporting employees to and from the mine. He added that PwC is currently leasing mining equipment from Tutchone Air, which is being used to build a safety berm.
Of the 416 unsecured creditors listed, 89 are companies based in the Yukon. Despite making up less than a quarter of the total list, Yukon companies are collectively owed just under $42 million, which equates to 50.7 per cent of the $82 million owed to all unsecured creditors.
Rounding out the list of creditors were a number of consulting companies, telecommunications providers, and mining equipment contractors. Among the largest outstanding debts were $14 million to Finning and $9 million to Pelly Construction, both of which are based in Whitehorse, along with another $8 million to Mayo-based Mayo Fuel Supply.
Tutchone Air is owed $31,353 in unsecured credit, though it is still unknown how much it is owed in secured credit.
Morris said that creditors had up to 45 days to file a miner's lien after the heap leach failure. The liens allow companies to file a claim against the physical value of the property, similar to a builders lien.
The companies then have up to 60 days after filing the lien to file a legal petition to the Yukon Supreme Court to have the lien formally recognized.
However, Morris said that it's not guaranteed that any of the unsecured creditors will ever receive their money back.
"It really is going to come down to how much money there is and whether this mine either gets sold or whether it starts operations again," Morris said.
Class action
In the meantime, a B.C.-based investor has filed a proposed class-action lawsuit against Victoria Gold, alleging shareholders lost money when the company's stock price plummeted after the heap leach failure.
The civil claim, filed in the Supreme Court of B.C. on Aug. 13, describes a number of alleged "misrepresentations" by the company about its safety and environmental record at the mine site in the years leading up to the June 24 incident.
It claims the company failed to tell investors about a series of licence violations and other incidents — including another smaller slide at the heap leach facility in January — that preceded the June slide, and allegedly showed that the facility was not being operated safely.
"The stability and safety of the Heap Leach Facility was of utmost importance to investors," the claim states.
"There were numerous undisclosed red flags and operational and safety issues with the Heap Leach Facility."
The claim alleges Victoria Gold effectively lied to investors about the heap leach facility, which the company was operating in "an unsafe and dangerous manner," and with a "lax safety and compliance culture."
The plaintiff, Robert Jacob van Santen, alleges his family trust lost more than $234,110 after the June 24 incident, when Victoria Gold's share value dropped by over 80 per cent — from $7.43 on the TSX to $1.36 — in a single day. Within a few weeks, shares were trading at 72 cents on the TSX.
The suit details a number of alleged decisions, incidents and licence violations at Eagle mine between the start of operations in 2019 and the day of the slide in June.
For example, it says Victoria Gold initially refrained from stacking ore on the heap leach pad in the winter months because doing so is more difficult when there's ice or snow, but then changed tack at the beginning of 2023.
"Facing weak results and pressure to increase profitability and pay off its debts, Victoria Gold switched to year-round stacking," the claim states.
It also highlights a consultant's report done for the Yukon government in 2022 that highlighted a "variety of issues" associated with the first two years of operations at the Eagle mine, including cyanide spills at a frequency considered "high by industry standards."
That report included recommendations that the Yukon government ordered Victoria Gold to implement over the following months. The company "did not fully implement these recommendations," the claim states.
Natural resource officers with the Yukon government have since laid a number of charges against the company related to water storage issues within its heap leach facility — according to court files, Victoria Gold faces a total of 11 counts under the territorial Waters Act and three counts under the Quartz Mining Act.
The allegations date between Oct. 2, 2022 to Feb. 10, 2023 and May 3, 2023 to June 7, 2023, with the company accused of failing to maintain "desired available storage," transferring water into the heap leach facility when storage was below desired levels, and failing to implement plans to stop water transfers and maintain desired storage.
Victoria Gold most recently made court appearances on the counts Tuesday, with its next appearance scheduled for later in the fall.
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With files from Jackie Hong