September 17, 2008 in City

90 lose jobs at Sunshine Mine

Production halted; buyer backed out of acquisition
By The Spokesman-Review
 

Sterling Mining Co. has suspended silver production at the historic Sunshine Mine in North Idaho and laid off 90 employees – 60 percent of its work force there, the company said.

The move follows a decision earlier this month by the Canadian mining company Minco Silver Corp. not to acquire Sterling Mining, based in Wallace.

In July, Minco announced it would pay $62.3 million for 61 percent of Sterling, providing the owner of the Sunshine and mines in Mexico with much needed capital amid financial problems.

At the time, silver was trading around $17.50 an ounce on the New York Mercantile Exchange. On Tuesday silver was trading around $10.50.

“This has been an extremely difficult decision to make, and we share the disappointment of our employees and the local community, but we believe this is the only reasonable course of action at this time” Sterling’s interim president, Ken Berscht, said Monday in announcing the layoffs and suspension of the sale, which took effect immediately.

Sunshine Mine produced 354,000 ounces of silver in August, much less than Sterling anticipated or required to sustain operations, the company said.

On Tuesday, Berscht said several factors entered into the decision, including the state of capital markets at a time when Sterling needs money to operate.

“We are looking at other alternatives,” Berscht said, “including debt refinancing.”

Sterling Mining Co. closed at 36 cents a share Tuesday, down from more than $4 a share last September.

Sterling bought Sunshine Mine in 2003. After rehabilitating the dormant operation, it began production in December.

In June, the company told the Associated Press it was experiencing production delays due to a number of factors, including severe weather, safety inspections and equipment and financing problems.

A Sterling spokeswoman said the Sunshine Mine had employed about 170 workers before this week’s layoffs.

“We will continue to proceed on a care and maintenance program until market conditions improve and we can secure additional financing,” said Monique Hayes, investor relations manager.

The Sunshine Mine “still holds a tremendous amount of potential,” Hayes said.

Contact Kevin Graman at (509) 459-5433 or kevingr@spokesman.com.


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