Sterling Mining Co. was expected to vacate its lease of the storied Sunshine Mine today, five months after ceasing operations and almost six years after it signed a 15-year lease that also included a purchase option.
Instead, according to a statement released Monday, Sterling will focus on resolving numerous creditor claims, and U.S. Environmental Protection Agency concerns about mine waste discharges.
Sterling has not filed bankruptcy, but spokeswoman Monique Hayes noted the company has said in the past it would not rule out that option.
Sterling shares, sold over-the-counter, opened at 15 cents Monday but fell sharply to less than 4 cents at the close. Volume, at more than 2.5 million shares, was 13 times the daily average. Shares traded at $3.53 within the last year.
Chief Executive Officer John Ryan said Sterling’s board of directors voted Thursday to vacate the Sunshine lease. A power shutoff was expected at the end of the month, he said, as was the cancellation of its commercial insurance.
“Returning the property to the owner in a manner that preserves the integrity of the mine and prevents damage to the facilities is the only reasonable option at this time,” he said.
Hayes said a skeleton crew of six to eight people has maintained and secured the mine in Pinehurst since the shutdown was announced in September. She said she did not know how the handoff to Sunshine would occur.
Sterling still owns equipment at the mine, as well as the tailings pond, which it purchased for $4 million. The company still owns various mining claims near the Sunshine Mine, as well as other places in the Silver Valley, Western Montana, and outside the United States.
Attorney Andrew Grundman, a former Sunshine spokesman, joined the Sterling board of directors in January in an attempt to heal a rift between the companies. He said Sterling’s future is uncertain.
“It is my hope that Sterling is able to take care of its debt and remain a trading company,” he said.
Grundman, speaking for himself, said many of the issues between Sterling and Sunshine were being resolved. But he was surprised by Sterling’s debt burden, he said.
Sterling’s directors will meet again shortly, possibly by the end of the week, to explore the company’s options.
One possibility, he noted, was again becoming a holding company.
The Sunshine Mine, opened in 1884, and has produced 360 million ounces of silver. Reserves have been estimated at another 260 million ounces.
But Sterling has been plagued with financial and management problems since it restarted production at the mine in December 2007. Ryan is the third president at the company in the last nine months, and a proposed acquisition by Minco Silver Corp. of Canada collapsed last summer.