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Sunshine Mine sale advances

Fri., April 23, 2010, midnight

Texas firm bids $24 million for operation

A Dallas company has emerged as the top bidder for Sterling Mining Co., which controls the historic Sunshine Mine near Kellogg.

With a cash bid of $24 million, Silver Opportunity Partners LLC beat out two Canadian firms for Sterling’s stock and assets. The sale is subject to approval by U.S. Bankruptcy Court Judge Terry Myers at a May 3 hearing.

“This is really good news for the Silver Valley,” said Ford Elsaesser, Sterling’s attorney. “There’s a reasonable certainty that all creditors will be paid in full. … And presumably at some point, the mine will reopen.”

Sterling’s most valuable asset is the Sunshine Mine’s lease and an option to purchase the underground silver mine. The company filed for Chapter 11 reorganization last year. Money from the sale of Sterling’s stock and assets will be used to pay creditors. Sterling’s stockholders might also get a payment for their shares, Elsaesser said.

Silver Opportunity Partners did not return phone calls Thursday, and little was revealed about the privately held company. But community members expressed hope that the company would have both the financial backing and experience needed to re-start the Sunshine Mine, which once employed more than 200 people. The recession has taken a toll on Shoshone County’s heavily resource-dependent economy; 15 percent of the work force was unemployed in March.

The Sunshine Mine produced more than 360 million ounces of silver during 125 years of operations. It closed in 2001 amid heavy debts and depressed silver prices.

Sterling reopened the mine in late 2007, paying $10,000 per month to lease the mine from its owner, Sunshine Precious Metals. But less than a year later, Sterling was broke. The company laid off most of its workers and filed for Chapter 11 protection.

More than 600 documents have been filed in the bankruptcy case. Many are about a dispute between Sterling and Sunshine Precious Metals over who really controls the Sunshine Mine.

Sunshine Precious Metals officials are contesting Wednesday’s sale, saying that Sterling vacated the Sunshine Mine’s lease in 2009 and doesn’t have the authority to sell a financial interest in the mine. Myers, the bankruptcy judge, ruled that Sterling lawfully regained control of the lease. Sunshine Precious Metals is appealing that decision in federal district court.

“I’m not going to let these guys acquire this mine without a helluva fight,” said Robert Mori, Sunshine Precious Metals’ owner.

Mori also said Sterling is responsible for $4 million worth of damage to the Silver Summit shaft, a secondary escape route that must be operational before the mine can start producing ore. The shaft suffered a “catastrophic” collapse in January that plugged the shaft with 700 feet of timbers and other debris, according to court documents, which blamed the collapse on negligent work done by Sterling.

Sterling’s attorneys are disputing the $4 million claim. They said Sunshine Precious Metals filed the claim on the eve of the Sterling sale to confuse potential bidders.

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