National security concerns send miner into bankruptcy
A Lovelock company tipped into bankruptcy by a federal decision says it expects to get its mining plans back on track.
Firstgold Corp. filed for Chapter 11 reorganization in federal bankruptcy court in Reno. The petition listed assets of $17.96 million and liabilities of $26.98 million.
The company spent $16 million during the past two years developing an ore-processing facility at Relief Canyon near Lovelock, site of the previously producing Pegasus Gold Mine.
In July, publicly held Firstgold, which had run out of money and suspended operations at the mine three months earlier, struck a deal to sell a 51 percent ownership stake to Northwest Mining and Geological Exploration Group Co. for Nonferrous Metal, a large mining company controlled by authorities in China’s Shaanxi Provincial. Northwest also agreed to make a new loan to Firstgold.
But the Committee on Foreign Investment in the United States, a federal agency, recommended in late December that President Obama reject the proposed investment.
The committee said the Relief Canyon project and other properties owned by Firstgold in northern Nevada are so close to Fallon Naval Air Station and its facility that the Chinese investment posed a security threat.
When the decision was announced, Firstgold executives voiced amazement that the federal committee would draw a connection between their company’s facilities and the Naval Air Station, which is 50 miles away.
“Northwest had thought they were making a simple investment in a mining property and had not anticipated on getting involved in what became a contentious national security issue,” said Terry Lynch, chief executive officer of Firstgold.
But Theodore Kassinger, a partner with the international law firm of O’Melveny & Myers LLP headquartered in Los Angeles, said the decision shouldn’t have come as a surprise.
Kassinger noted that defense facilities are common throughout northern Nevada, and at least one facility associated with the Naval Air Station at Fallon appears to be quite close to the Relief Canyon mine.
“Investments by Chinese state-owned entities are bound to attract closer attention than others as an initial matter, particularly when national security issues surface,” Kassinger wrote in an analysis of the situation last month.
He said, too, that Firstgold executives apparently didn’t account for the national security concerns when they struck their deal with Northwest.
Lynch said the company hopes its reorganization will allow it to develop another plan to get the Relief Canyon property into production.
The property produced 141,000 ounces of gold from 1986 to 1989, Firstgold has said.
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