Bre-X Fiasco Threatens Mine Financing

The Bre-X Mineral fiasco has cast a shadow over a North Idaho mining company’s proposed venture in Mexico.

ConSil Corp., a part of Hecla Mining Co., has pushed back its deadline date of Aug. 1 for financing its Mexican venture.

The silver mining company needed $6 million to finance its purchase of Mexican mining company Minas la Colorada S.A.

ConSil’s purchase would have pushed it into independence. But that’s been suspended indefinitely, thanks in part to wary investors, still shy from one of the world’s biggest gold frauds, that of Canadian gold company Bre-X Minerals Ltd.

Bre-X’s demise made it more difficult for ConSil to drum up support from investors, causing the company to extend its financing deadline indefinitely. Either company can cancel the arrangement at anytime, said spokesman Terry Swanger.

The company put the financing package together in March, just as Calgary-based Bre-X was collapsing on the stock market, falling from $200 a share to $6 a share. In May, Bre-X filed for bankruptcy.

“Financing for those things just disappeared after the Bre-X deal,” Swanger said. “If Bre-X had never happened, I think a deal would have been done.”

Industry analysts say the fallout from Bre-X has hurt the junior mining companies more than big mining companies.

It has been devastating for small companies just getting off the ground, said Jeffery Christian, managing director of CPM Group Ltd. in New York City.

“I think what ultimately will need to happen is something in the broader economy that will make people interested in gold again,” he said. “It’s going to take a long time, people are still licking their wounds.”

The recent dip in gold prices will hurt junior companies more in the long run, said Doug Silver, senior partner at Balfour Holdings Inc. in Englewood, Colo.

With Australia selling off its gold bullion en masse, “It ain’t gonna get any better,” he said.

Silver has tracked North American precious metals companies that have received more than $1 million in financing.

During the first six months of last year, 381 companies received financing. That number is down to 293 this year.

The first three months of the year were good for mining companies seeking investors, but when Bre-X hit in March, everything evaporated, he said.

, DataTimes