No. S152166 Vancouver Registry IN THE SUPREME COURT OF BRITISH COLUMBIA

No. S152166
Vancouver Registry
IN THE SUPREME COURT OF BRITISH COLUMBIA
IN THE MATTER OF THE
R.S.C. 1985, c. C-36, AS AMENDED
AND
IN THE MATTER OF THE BUSINESS CORPORATIONS ACT
S.B.C., 2002, c.57 AS AMENDED
AND
IN THE MATTER OF YUKON ZINC CORPORATION
Petitioner
THIRD REPORT TO COURT
[Prepared for the April 17, 2015 Comeback Hearing]
April 16, 2015
YUKON ZINC CORPORATION
HIRD REPORT TO COURT
April 16, 2015
TABLE OF CONTENTS
1.
INTRODUCTION .................................................................................................... 1
2.
CORPORATE BACKGROUND AND STRUCTURE ...................................................2
3.
RECENT HISTORY OF THE COMPANY................................................................. 4
4.
THE WOLVERINE MINE....................................................................................... 9
5.
ASSETS AT THE DATE OF FILING ............................. 15
6.
OVERVIEW OF THE COMP
7.
POST-FILING OPERATIONS ................................................................................22
8.
ACTIVITIES OF THE MONITOR TO DATE ...........................................................23
9.
RESTRUCTURING FRAMEWORK........................................................................26
10.
SOLICITATION PROCESS .................................................................................... 27
11.
OTHER RESTRUCTURING ACTIVITIES ............................................................. 28
12.
EXTENSION OF THE STAY ................................................................................. 28
13.
CASH FLOW STATEMENT .................................................................................. 28
14.
DIRECTIONS AND RELIEF SOUGHT .................................................................. 30
15.
CONCLUSIONS OF THE MONITOR..................................................................... 30
APPENDICES
A.
Historical operating results
B.
Aerial photo of the Mine site and main camp
C.
Cash Flow Statement updated as at April 10, 2015
........................................... 16
YUKON ZINC CORPORATION
April 16, 2015
1.
INTRODUCTION
1.1
On March 13, 2015, on the application of Yukon Zinc Corporation (the Company or
Yukon Zinc )
Court
Initial Order
ng the Company protection from its creditors pursuant to the
CCAA Under the Initial Order,
PricewaterhouseCoopers Inc. PwC was appointed Monitor of the Company (the
Monitor .
1.2
The Initial Order, as amended by an Order dated April 10, 2015, among other things, all
creditors are stayed from commencing or continuing any proceedings against the
Company until April 17, 2015, the date now set for the hearing to determine whether to
extend the relief granted under the Initial Order. This hearing is referred to as the
Comeback Hearing.
1.3
On March 19, 2015, the Court authorized the Company to borrow up to $1.5 million under
plus all interest, fees, costs and other amounts payable under the Interim Loan
Agreement between the Company and Maynards Financial Limited Partnership, dated
March 18, 2015. To date, the Company has drawn $1.0 million on this facility and the
facility is in good standing.
1.4
The Monitor has filed 2 reports in these proceedings. The First Report was filed a few
application for Interim Financing to fund operations through to the Comeback Hearing.
The Second Report was dated April 7, 2015 and was for the purpose of supporting the
proceedings to April 17, 2015.
1.5
This is the Third Report of the Monitor. It includes a review of the affairs of the Company
prepared for the Comeback Hearing. The purpose of this report is to provide relevant
information and analysis to the Court, creditors, stakeholders and other interested parties
in order that they are properly informed with regard to
restructuring. Specifically, this report is intended to provide:
1.5.1
A
1.5.2
An overview of the Compan
background, its operations and recent activities;
1
YUKON ZINC CORPORATION
April 16, 2015
2.
1.5.3
An overview of
coming weeks as it
continues its operations, addresses its financial and operational challenges, and
furthers its restructuring efforts;
1.5.4
T
stakeholders; and
1.5.5
T
Company, specifically:
potential impact on
1.5.5.1
Increase its Interim Financing
from $1.5 million to $5 million;
1.5.5.2
Authorize the implementation of a sales and solicitation process; and
1.5.5.3
Extend the stay of proceedings to June 12, 2015.
1.6
Unless otherwise stated, all monetary amounts noted herein are expressed in Canadian
dollars.
1.7
Capitalized terms not otherwise defined herein are as defined in previous reports of the
Monitor.
1.8
The Monitor has created a website at www.pwc.com/car-yukonzinc. All prescribed
materials filed by the Company and the Monitor relating to this CCAA proceeding are
available to creditors and other interested parties in electronic format on the Monito
website. The Monitor will make regular updates to the website to ensure that creditors
and interested parties are kept current and to add prescribed materials as required.
CORPORATE BACKGROUND AND STRUCTURE
2.1
The Company was incorporated in the Province of British Columbia on May 21, 1993
under the name Expatriate Resources Ltd. and subsequently changed its name to Yukon
Zinc on December 16, 2004.
2.2
Yukon Zinc was publically traded on the TSX Venture Exchange until July, 2, 2008 when
the Company was taken private, through a Canadian intermediary, Jinduicheng Canada
2
YUKON ZINC CORPORATION
April 16, 2015
Resources Corporation Limited ( JDC Canada and acquired by Jinduicheng
JDC Group together with another Chinese shareholder.
Subsequently, 4 additional Chinese businesses invested significant capital and became
shareholders of JDC Canada. JDC Group is the majority shareholder with 66.5% of the
shares. The other 5 shareholders have the remaining 33.5% shares.
2.3
JDC Canada is a British Columbia incorporated company and holds 100% of the shares of
the operating entity, Yukon Zinc.
2.4
corporate structure is depicted below:
JDC Group
66.5%
Other 5 Investors
33.5%
JDC Canada
100%
Yukon Zinc
Corporation
100%
Finlayson Minerals
Corporation
100%
Nitrosyl Technologies
Corporation
75%
Catalytic Sulphur
Corporation
50%
Nitrox Inc.
2.5
JDC Canada is a holding company and has no assets other than the shares of Yukon Zinc.
The operations of JDC Canada are limited to overseeing its interest in Yukon Zinc as well
as serving the interests of its shareholders. Since all of the shareholders of JDC Canada
are Chinese entities, virtually all of the operations, books and records, and ongoing affairs
of JDC Canada are recorded in Mandarin. Yukon Zinc shares its Vancouver head office
with JDC Canada and the head office employees of Yukon Zinc perform the day-to-day
functions of JDC Canada.
2.6
Based on discussions with the management and staff of Yukon Zinc, the Monitor
understands that JDC Canada reports directly to JDC Group who is its controlling
shareholder. The Monitor has not had any communications with JDC Group. The
Monitor has relied exclusively
inform it of the
3
YUKON ZINC CORPORATION
April 16, 2015
communications with, and the intentions of, JDC Group with respect to
Yukon Zinc.
3.
2.7
As shown in the corporate chart above, Yukon Zinc has 4 subsidiaries, 2 of which it owns
100%. The Monitor is advised by the Company that its four subsidiaries are inactive and
have no assets or liabilities. The Monitor is not aware of any specific issues with respect to
these subsidiaries. In time, the Monitor will undertake a review of the books and records
together with the general affairs of these subsidiaries and report any relevant findings in
its future reports.
2.8
office is located in leased premises in Vancouver, BC. There are
currently 13 employees based in the corporate office that oversee the
,
customer relations, accounting and treasury functions. Depending on the future direction
of Yukon Zinc, this head office function may change or be altered significantly. Until that
future direction is known and the resultant implications are better understood by
management, there are no plans to make meaningful changes to this head office function.
RECENT HISTORY OF THE COMPANY
Development of the
Mine
3.1
As noted earlier, JDC Group acquired its interest in Yukon Zinc in July 2008. At the time,
southeastern Yukon. There were
no roads, no power, no infrastructure or operating agreements in existence.
3.2
Between July 2008 and late 2011, the Company carried out exploration work on the
Wolverine Property, developed the underground mine, constructed the processing mill,
camp and administrative areas, as well as the infrastructure required for access to and
operation of the Mine. In addition, numerous licenses, permits and operating agreements
were obtained during this period.
4
YUKON ZINC CORPORATION
April 16, 2015
Commercial production
3.3
The Mine achieved commercial production in March 2012.
3.4
Operations continued from 2012 until late 2014 when operations were significantly
curtailed.
3.5
Attached as Appendix A and summarized in the table below are the consolidated
operating results for JDC Canada. The Company has not historically prepared financial
statements for Yukon Zinc as a single legal entity. Since JDC Canada as well as each of the
subsidiaries are non-operating legal entities, the consolidated financial statements should
be representative of the overall operating results for Yukon Zinc.
3.6
A summary of the financial performance for the period 2008 to December 31, 2014 is
provided below.
JinDuiCheng Canada Resources Corporation Ltd.
Consolidated Statement of Comprehensive Loss
As at December 31
Unaudited
2014
($000 CAD)
Unaudited
2013
Audited
2012
106,750
(142,249)
(35,498)
134,538
(178,074)
(43,536)
86,521
(118,886)
(32,365)
General and administrative expenses
Loss from operations
(3,145)
(38,643)
(4,373)
(47,909)
(11,903)
(44,268)
(8,411)
(8,411)
(5,506)
(5,506)
(4,971)
(4,971)
(2,543)
(2,543)
Other income (expense)
Income tax credit (obligation)
Other comprehensive loss
Net Loss
(32,990)
82
(71,551)
(5,721)
(1,640)
6
(55,264)
(27,745)
2,446
(487)
(70,054)
(2,019)
3,173
(166)
(7,423)
1,922
(989)
125
(4,448)
147
877
690
(3,257)
(565)
659
(2,449)
Revenue
Mine operating costs
Loss from mining operations
3.7
Audited
2011
-
Audited
2010
-
Audited
2009
-
Audited
2008
-
Since commercial production was achieved in March 2012, the Company has operated at
a loss each year. Over this 3 year period, losses totaled $196 million. The breakdown of
these losses is as follows:
3.7.1
The mining operations (i.e. before general and administrative expenses)
generated losses over the 3 years totaling $111 million; and
3.7.2
Non-mining activities contributed net expenses of $85 million over these 3 years.
5
YUKON ZINC CORPORATION
April 16, 2015
Temporary Closure of Operation in January 2015
3.8
Due to a lack of liquidity, the Company ceased operations at the Mine on or about
January 21, 2015. As a result, the Company temporarily laid-off all but 12 employees at
the Mine. These 12 employees rotate every two weeks on a 6-person crew who are
responsible for maintaining the Mine.
3.9
At the time the Company ceased active mining operations, it had urgent liquidity issues
and was unable to fund all aspects of the ongoing care and maintenance of the
underground mine and the surface infrastructure. After the cessation of operations, but
prior the CCAA filing, the Company stopped the maintenance activities of the
underground portion of the Mine. Currently, the underground is not accessible as a result
of an order dated February 16, 2015 from
Safety Board ( YWCHSB ). As explained later in the report (section 7), the Company
and YWCHSB have come up with a plan to enable access to the underground.
Summary of Financial Difficulties
3.10
Based on a review of the financial affairs and operations of the Company, together with
discussions with management at head office, staff at the Mine site and other stakeholders,
the Monitor has identified the following contributing reasons for the financial difficulties
of the Company:
3.10.1
The cost to acquire, develop, and operate the Mine were high:
3.10.1.1 Approximately $600 million of capital has been invested to acquire,
develop, and operate the Mine. Approximately $480 million in capital
was provided directly or indirectly by JDC Group and the remaining
$110 million was provided collectively by the minority shareholders of
JDC Canada; and
3.10.1.2 A portion of this capital was borrowed. A $328 million loan from three
Chinese banks was arranged for JDC Canada by JDC Group. JDC
Canada loaned the money to the Company interest free; however, the
Company is required to pay the interest costs of the bank loans. The loan
payments are in US dollars and therefore, have been adversely impacted
by the USD/CAD exchange rate over the past 2 years.
6
YUKON ZINC CORPORATION
April 16, 2015
3.10.2 The costs to maintain the Mine are significant:
3.10.2.1 The Mine is located 27km from the nearest public road. The Company
owns and therefore, must maintain all 27km of the road through all
seasons to ensure access, delivery of fuel, parts, and supplies to the
Mine, and compliance with various permits, licenses and statutory
safety requirements;
3.10.2.2 In addition to the access road, the roadways around the processing mill,
camp and administrative areas require regular and significant yearround maintenance;
3.10.2.3 The Mine has a 1,340m gravel airstrip used mainly for charter flights for
crew shift changes that must be maintained year-round;
3.10.2.4 The Mine is not connected to the power grid. There are 8 diesel-powered
generators on site that provide all electric power required for the
underground, processing mill, and camp/administrative areas; and
3.10.2.5 Diesel, propane, and gasoline are required for all aspects of Mine
operations and maintenance. Fuel is trucked to the site from various
locations within the Yukon, British Columbia, and Alberta. This is an
expensive form of power and the remote location causes the
transportation costs to also be expensive.
3.10.3 Operational Circumstances have contributed to the Financial Difficulties:
3.10.3.1 The Company utilized a third-party operator (Procon Mining &
Tunnelling Procon ) to physically operate the underground areas of
the Mine. The Company directly performs all other functions at the
Mine. This shared responsibility structure has resulted in complexities
for the overall operations and may not have resulted in the most
efficient or effective cost structure;
3.10.3.2 The Company is party to certain third-party agreements relating to such
things as royalty payments, transportation levies, as well as prepaid
7
YUKON ZINC CORPORATION
April 16, 2015
concentrate delivery quotas that fluctuate with commodity prices and
the quality of its concentrates;
3.10.3.3 The quality of the ore extracted from the Mine was variable; and
3.10.3.4 The commodity price fluctuations, the time for concentrate to reach its
destination, and the resulting change in moisture level, all have an
impact on the price the Company is able to generate for its concentrates.
3.10.4 Proximity of the Mine to shipping and transportation routes contributes to the
high costs of Operations:
3.10.4.1 The majority of concentrates from the Mine are transported by truck to
the deep-water port in Stewart, British Columbia. This is a distance of
860km. From there, the concentrates are stored until ready to ship, are
then loaded on vessels bound for various destinations; and
3.10.4.2 Some concentrates are trucked to other ports within British Columbia,
namely Prince Rupert and Vancouver, depending on availability of space
and delivery requirements to its customers.
Further challenges to profitability in the near term
3.11
The commodity price for the metal concentrates that the Company produces are currently
low and are forecast to remain low in the short-term.
3.12
Until the Mine is returned to operation, ongoing care and maintenance must be
performed on a continual basis, the cost of which is not insignificant.
3.13
Shortly after returning to operations, the Company will be required to install a water
treatment facility at the Mine to treat the water discharged from the tailings pond, at a
roughly estimated cost of more than $10 million.
8
YUKON ZINC CORPORATION
April 16, 2015
4.
THE WOLVERINE MINE
Overview
4.1
. The Mine is located more than
200km northwest of Watson Lake, Yukon Territory, the nearest town. The map below
provides a visual of the location and the neighboring areas.
4.2
The Mine is a significant infrastructure project and consists of the surface and
underground developments, the mineral claims and the associated ore bodies, and the
numerous required permits, licenses and approvals. Each of these components is further
detailed below.
The Mine Infrastructure
4.3
The underground Mine infrastructure includes ramps, tunnels, ventilation system and a
heating system. The surface infrastructure includes the roads, an airstrip, a tailings pond,
a 1,700 metric ton per day processing mill, as well as the camp and administration
buildings. An aerial photo of the main camp is attached as Appendix B.
4.4
The Mine employs approximately 300 people when in full operation. The Mine was last at
full operation in the Fall of 2014.
9
YUKON ZINC CORPORATION
April 16, 2015
4.5
The Mine produces zinc, lead, and copper as the primary concentrates, with silver and
gold as by-products.
4.6
An airstrip adjacent to the main camp provides for air access to the Mine site to allow for
the transportation of work crews and the delivery of supplies, which is generally done on
a weekly basis.
4.7
The waste from the mill as well as waste water from the Mine is pumped to a tailings
pond. The tailings pond is not yet at capacity and therefore, waste water can continue to
be dumped into the pond until production recommences, shortly after which a water
treatment facility will be required.
The Mineral Claims
4.8
The Company holds 3,281 mineral claims and exploration rights covering approximately
700 km2 in the Finlayson and Rancheria districts of the Yukon Territory.
4.9
All of the claims are in good standing and there are no known issues.
4.10
Some of t
following parties:
4.10.1
(677) are subject to royalty agreements with the
Royal Gold Inc.;
4.10.2 8248567 Canada Limited;
4.10.3 David Caufield;
4.10.4 Henry Awmack; and
4.10.5 Mark Baknes.
10
YUKON ZINC CORPORATION
April 16, 2015
Licenses, Permits and Approvals
4.11
The Mine operates under several licenses and permits issued by the Yukon Government
YG
Type
Mining Land Use Permit
Water Use License B
Quartz Mining License
Water Use License A
Land Treatment Facility Permit
Waste Management Permit
License / Permit
Number
Approval Date
LQ00140
18-Jan-05
QZ01-051
4-Apr-05
QML-0006
5-Dec-06
QZ04-065
3-Oct-07
24-022
1-Jan-13
81-014
1-Jan-15
Expiry
Date
17-Jan-15
11-Jan-15
1-Dec-21
31-Dec-27
31-Dec-15
31-Dec-19
4.12
Mining Land Use Permit LQ00140 and Water Use License B QZ01-051 expired on
January 17, 2015 and January 11, 2015, respectively. Both licenses related to exploration
and development activity, which is now complete. As such, both licenses are no longer
required and therefore, were not renewed.
4.13
In its early exploration phase, the Company established an all-weather camp at the east
end of Wolverine Lake. The camp is located approximately 3km northwest of the main
camp and is connected by an access road. The exploration camp is no longer used by the
Company and is required to be decommissioned pursuant to the permits.
4.14
On February 18, 2015, YG issued a direction to, among other things, complete the
reclamation work related to the exploration camp and access road by March 15, 2016. The
Company is aware of its obligation under the permit, although no steps have yet been
taken to address this matter. In order to be compliant by the required date, the work must
be performed over the summer of 2015, since the decommissioning work cannot be
performed once the winter conditions arrive. Accordingly, the Company must commence
the process of planning and estimating the cost of the remediation work over the next
several weeks.
4.15
The remaining licenses and permits issued to the Company by YG are currently active and
the Company is operating under their authority.
4.16
The licenses and permits issued by YG require the Company to submit a permanent
closure plan which is used by YG to set a reclamation security deposit to be paid by the
Company. This security deposit is currently set at approximately $10.6 million; however,
11
YUKON ZINC CORPORATION
April 16, 2015
the Company has only provided $7.5 million to date. Accordingly, the Company is
required to post a further $3.1 million under the current requirements.
4.17
The licenses and permits currently issued to Yukon Zinc are essential for its ongoing
operations and therefore, represent a vital asset. Obtaining these licenses and permits
anew would likely take several years.
Agreement with the First Nations
4.18
rights are within Kaska First Nation
Kaska traditional territory
traditional territory covers over 240,000 km2 in the southeastern Yukon, the southwest of
the Northwest Territories, and part of northern British Columbia as depicted in the map
below:
Source: http://www.kaskadenacouncil.com/kaska-dena/our-land
12
YUKON ZINC CORPORATION
April 16, 2015
4.19
Kaska is comprised of 2 First Nations from the Yukon: Liard First Nation and Ross River
Dena Council, as well as 3 First Nations from northern BC: Dease River First Nation,
Daylu Dena Council and Kwadacha Nation.
4.20
The Ross River Dena Council currently acts as the principal negotiator for Kaska.
4.21
The Company and
Agreement
4.21.1
Kaska
Kaska agreed to work together to further each
Successful permitting, financing, development, and operatio
mining operations;
4.21.2 Advancement of the social and economic development of Kaska, its members,
communities, and governments; and
4.21.3 Minimization of the adverse environmental and socio-economic effects of the
mining operations on Kaska.
4.22
The Company is required under the Kaska Agreement to, among other things, fund
certain community programs and compensate Kaska for the use of its traditional
territory.
4.23
This agreement represents a vital operating agreement for Yukon Zinc and therefore, is a
significant asset of the Company.
Potential Value of the Mine
4.24
The Monitor has not undertaken a comprehensive analysis in order to determine a range
of values for the Mine itself. Such a review is not considered a useful exercise because it
would be time consuming, expensive, highly subjective, and dependent on market
conditions that are extremely challenging to predict in the short term.
4.25
Despite the above challenges, the Monitor has reviewed readily available existing
information that might assist stakeholders in understanding, in broad terms, the nature,
significance and implied value of the Mine asset.
13
YUKON ZINC CORPORATION
April 16, 2015
4.26
As summarized
approximately $598 million to acquire the mineral rights and property, and to develop
and construct the Mine site infrastructure:
Property
Equipment
Infrastructure
Access Road
Tailings Pond
Claims / Property
Mill
Equipment
Building
Mine
Equipment
Infrastructure
Underground
Camp / Admin
Equipment
Infrastructure
Vehicles
Computer System
Total Site Costs
48,792,000
180,718,000
9,307,000
14,310,000
221,457,000
474,584,000
44,137,000
58,894,000
103,031,000
21,000
456,000
17,156,000
17,633,000
162,000
1,340,000
231,000
1,377,000
3,110,000
598,358,000
4.27
The cost of developing the Mine cannot be used as direct indication of value; however, the
Monitor notes that this expenditure was made over the past 7 years and therefore, is
relatively current. At the very least, it indicates that the Mine is a significant asset.
Furthermore, JDC Group was clearly of the view that in appropriate market and
operating conditions, the Mine was expected to have significant value.
4.28
The Monitor has reviewed an independent valuation report commissioned by the
Company and completed in February 2015 that estimated the value of the Mine and
equipment assets at more than $400 million. The Monitor notes that this valuation
report is based on information and assumptions that are out of date. As a result, the
Monitor has chosen not to rely on such report.
4.29
The Monitor has also reviewed a report prepared by Maynards, the Interim Lender, which
lists the identifiable equipment at the Mine site and provides 2 values for each: an orderly
liquidation value and a forced liquidation value. This report is the result of the due
diligence work that Maynards performed on site as part of its assessment of the collateral
that would be subject to the Interim Lender
. Since the Company compensated
Maynards for this due diligence, Maynards agreed to provide the Company with this
14
YUKON ZINC CORPORATION
April 16, 2015
report. As the report is still preliminary, Maynards has asked that the report not be
disclosed to anyone else without Maynards consent.
4.30
The Monitor notes the following with respect to the report prepared by Maynards:
4.30.1 The values support an extension by Maynards of its loans to the Company to a
total of $5 million; and
4.30.2 The items valued did not include any non-Mine assets (e.g. inventory and other
working capital assets), the mineral claims, the Mine infrastructure or any aspect
of the going concern venture.
4.31
The Monitor is of the view that the only certain method of ascertaining the value of Yukon
assets, either collectively or individually, is by exposing the assets to the market
and seeing what value the market places on them.
5.
ASSETS AT THE DATE OF FILING
5.1
This section of the report addresses those assets which are not intrinsic to the Company
mining operations. Each of the assets is described below.
5.2
Cash:
5.2.1
At the date of the filing, the Company had the following amounts:
5.2.1.1
$162,000 of cash on hand or in the control of the Company;
5.2.1.2
$1.034 million with Bank of China (Canada) as collateral for a letter of
credit issued to AFD Petroleum
AFD , which may be called by
AFD as it is owed more than this amount; and
5.2.1.3
$97,000 with Bank of Montreal as security for corporate MasterCards,
which may be called by the bank in whole or in part if the Company fails
to make payments on its credit cards.
15
YUKON ZINC CORPORATION
April 16, 2015
5.3
6.
Prepaid amounts:
5.3.1
$33,000 security deposit with the corporate office landlord;
5.3.2
$321,000 in respect of insurance premiums; and
5.3.3
A total of $251,000 paid as deposits on account with various suppliers that will
likely be set off against pre-filing amounts owing to those suppliers.
5.4
Accounts receivable at the filing date totaled $1.41 million, comprised of $560,000
received to date post filing and $850,000 expected to be collected before the end of
August 2015.
5.5
Inter-company receivables at the filing date totaled approximately $850,000 which had
been advanced to the four subsidiary companies. The Company has advised that these
entities are inactive and the amounts are not collectible.
5.6
Inventories of concentrate totalled $8.6 million, of which $7.7 million had been sold to
Transamine (discussed later in the report section 6). The Company is seeking the
authorization to sell the remaining inventories which are held at third party warehouses.
5.7
There may be tax attributes associated with the
historical exploration and
development expenditures but the Monitor has not yet investigated this potential benefit.
OVERVIEW OF THE COMP
6.1
There are many stakeholders having varied interests in the business and affairs of the
Company. This overview has been prepared to provide the Court and all stakeholders
with some perspective on the interests of others. These interests include the following:
6.1.1
The shareholders;
6.1.2
YG;
6.1.3
The Kaska;
6.1.4
Creditors who have security interests in the Company assets;
16
YUKON ZINC CORPORATION
April 16, 2015
6.1.5
Counter parties to executory contracts such as royalty and lease agreements;
6.1.6
Customers who paid deposits for future deliveries of concentrate but may or may
not receive the balance of these deliveries; and
6.1.7
Employees and trade creditors.
6.2
The Monitor s expanded comments on each are set out below.
6.3
The most significant creditor (approximately $600 million) is JDC Canada (the owner of
all shares of the Company) and its Chinese parent company, JDC Group. Though the
Monitor has not yet had any direct discussions with JDC Group, Yuk
Lu, reports that it appreciates the urgency of the situation and support the Solicitation
Process now being proposed by the Company.
6.4
YG has broad interests in these proceedings which arise as a result of its following roles:
6.4.1
The issuer and custodian of permits, licenses and approvals necessary for the
operation or closure of the Mine;
6.4.2
The regulator regarding environmental, health and safety, and employment
standards issues;
6.4.3
An indirect beneficiary of the economic activity generated by the Mine
operations;
6.4.4
Potential responsibility for the environmental clean-up or site remediation in the
event the Company fails to do so; and
6.4.5
A creditor in respect of:
6.4.5.1
Workers compensation premiums;
6.4.5.2 Unpaid wages as it may advance wage claims on behalf of employees
pursuant to its Employment Standards Act;
17
YUKON ZINC CORPORATION
April 16, 2015
6.4.5.3 The $3.1 million outstanding for the security deposit for site
remediation; and
6.4.5.4 Any potential shortfall in clean-up costs if the Company fails to
remediate and the security deposit is inadequate.
6.5
6.6
The Kaska has a continuing interest in this matter, as follows:
6.5.1
As detailed earlier in this report, the Kaska Agreement provides a multi-faceted
arrangement between the Company and the Kaska.
6.5.2
The Kaska are presently owed $137,000 as at the date of filing in respect of
unpaid economic benefits payable under the Kaska agreement.
6.5.3
As the Mine is located on the Kaska traditional territory, any environmental
matters that arise could have a meaningful impact on the Kaska.
6.5.4
The Kaska Agreement is intended to operate for the life of the Mine and
accordingly, the future fate of the Mine and the Company are of significant
interest to the Kaska.
Royalty agreements are a common form of consideration in relation to the acquisition of
mining properties. Although the Monitor is still gathering information on these
agreements, the Company records identify several agreements that attach to 678 mineral
claims, including:
6.6.1
In respect of one mineral claim, the Company is obligated to pay a royalty of o.5%
to 1% of the net smelter returns from production derived from that property to a
maximum of $500,000. The company records indicate the royalty holder,
8284567 Canada Limited, was owed $76,727 at the date of filing.
6.6.2
Four royalty agreements in favour of Royal Gold and three individuals, which
require the Company to pay royalties of up to 10% of net smelter returns of silver
and gold mined from 677 mineral claims. At the date of filing, the Company
calculates that there was $3.1 million owing to Royal Gold and the three
individuals for unpaid royalties.
18
YUKON ZINC CORPORATION
April 16, 2015
6.7
Creditors having security interests in the Company assets are summarized below:
6.7.1
JDC Canada is owed approximately $600 million for loans provided to the
Company. Earlier agreements in respect of this lending called for security to be
provided by the Company if requested. Prior to the filing, JDC Canada requested,
and in February 2015 received, a General Security Agreement dated February 24,
2015 granting JDC Canada a security interest on all present and after acquired
property of Yukon Zinc.
6.7.2
Procon claims an interest in the Co
and related background are as follows:
. The source for such claims
6.7.2.1
A General Security Agreement dated January 2014 over six CAT
generator sets and three Bolter units at the mine site. In respect of this
security, Procon delivered a Notice of Intention to Enforce Security on
6.7.2.2
ing Procon is owed
$6,582,210 consisting of unpaid invoices of $4,139,091 and unbilled
charges totaling $2,443,119.
6.7.2.3
claim to its records and has not yet received invoices for the unbilled
charges referred to in the Claim of Lien.
6.7.2.4 The Monitor has requested details from Procon in respect of the total
amounts owing to it. To date, the Monitor has not received this
information but has been verbally advised by Procon that it is owed
approximately $7 million in respect of its total claim, plus costs.
6.7.2.5
The Company believes it owes Procon approximately $3.6 million in
respect of services provided by Procon, but this is subject to setoff
arising in relation to claims asserted by Yukon Zinc against Procon for a
variety of matters. The Company has recently engaged Hunter Litigation
to advance these claims. These claims will clearly take some time to
resolve.
19
YUKON ZINC CORPORATION
April 16, 2015
6.8
6.7.3
Sandvik Customer Finance LLC is owed a total of approximately $2.1 million on
eight financing leases of underground drills, trucks and loaders.
6.7.4
AFD is owed approximately $2.3 million for fuel deliveries to the mine site. As
noted earlier in this report, it is partly secured by way of an irrevocable letter of
guarantee in the amount of $1 million issued by Bank of China (Canada).
6.7.5
Caterpillar Financial Services Limited has two equipment financing leases in
relation to a CAT 730 haul truck and a CAT 14M grader. The total owing on these
contracts is approximately $400,000.
6.7.6
Ford Credit Canada has three leases covering: four pickups, a 2015 F550 bare
chassis and a Ford Edge. The total due to Ford Credit Canada is approximately
$160,000.
6.7.7
Pitney Bowes has two leases in respect of a photocopier and postage machine
totaling about $2,500.
Transamine Trading LLC is a zinc concen
6.8.1
Transamine claims title to zinc concentrate presently located at the mine site
(2,378 wet metric tons), at the Stewart shipping terminal (11,422 wmt) and in
possession of P.S. Sidhu Trucking (327 wmt).
6.8.2
Transamine made partial payments (US$7.74 million) toward these deliveries in
August and September 2014.
6.8.3
The Monitor estimates the value of the zinc concentrate on hand, having regard
to its location and state, is US$6 million (CAD 7.5 million).
6.8.4
Company management is of the view that title to this concentrate was transferred
to Transamine and therefore, the Company has no further interest in this
product. Procon has asserted a lieu over the concentrate, which is disputed by
Transamine.
20
YUKON ZINC CORPORATION
April 16, 2015
6.8.5
6.9
6.10
The Monitor notes that the concentrates are stored in a third party facility and on
third party trucks. Accordingly, ongoing costs are accruing while this matter is
disputed.
Shaanxi
into an agreement (on March 26, 2014) to purchase 60,000 wmt of zinc concentrate from
the Company for delivery between May 2014 and April 2015.
6.9.1
On April 2014, Bank of Communications Co. Ltd. ( B of C ) entered into a loan
agreement with Yukon Zinc for a revolving credit loan of up to US$24 million.
Shaanxi had guaranteed this loan. The full amount was advanced to the Company
on April 17, 2014 and followed by two additional advances totaling US$1.7 million
used to pay interest on this loan.
6.9.2
Pursuant to its arrangement with Shaanxi, Yukon Zinc has delivered only 20,000
wmt having a value of approximately US$12 million. Accordingly, 40,000 wmt
are still to be delivered under this arrangement, which correlates to
approximately the amount owing under the loan to B of C.
6.9.3
In the event the Company cannot deliver the further 40,000 wmt, Shaanxi or the
B of C will suffer a net loss of approximately US$14 million, which appears to be
an unsecured claim.
There are approximately 330 general trade suppliers owed a total of $13.5 million based
on the books and records of the Company, including
6.10.1
The AFD unsecured amount; and
6.10.2 13 logistics companies which are collectively owed $1.9 million in respect of
6.11
Most of the Company
Severance claims
that would become due to those employees if the layoff is deemed permanent are
estimated to total $714,000. Accrued vacation for continuing employees is estimated to
total $92,000.
21
YUKON ZINC CORPORATION
April 16, 2015
7.
POST-FILING OPERATIONS
7.1
active operations at the Mine site since the Filing Date have been limited
to the care and maintenance of the surface areas and include:
7.1.1
Maintaining access to and around the Mine, as required. This includes but is not
limited to the 27 km access road, airstrip, and surface roadways around the Mine;
7.1.2
Servicing and maintaining site infrastructure;
7.1.3
Managing the surface water runoff around the Mine, including exposed ore and
waste rock piles;
7.1.4
Working with suppliers to ensure continued supply of required goods and
services;
7.1.5
Working with the Monitor in relation to the CCAA proceedings; and
7.1.6
Meeting with representatives from YG (i.e. the Yukon Department of Justice;
Yukon Energy, Mines and Resource;
th
and Safety Board), on and off-site, for discussions and inspections relating to the
status of the Mine from a regulatory perspective.
7.2
In February 2015, YG issued various directions and orders to the Company with respect
to its obligations under health and safety, land use, and environmental statutes. The
Company is working, as financial and workforce resources allow, to comply with the
various directions and orders issued to it.
7.3
As previously mentioned, access to the underground area of the Mine has been sealed for
health and safety reasons. The Company has developed a plan to re-enter and assess the
Re-entry Plan
-Entry Plan has been
submitted to YG for review and approval. Once approval of the Re-entry Plan is obtained,
the Company will execute the Re-entry Plan as soon as possible. It is anticipated that this
will occur towards the end of April 2015.
7.4
The Company continues to work to sell the remaining concentrate inventory. There are a
number of competing interests in the concentrate inventory that will be resolved over the
22
YUKON ZINC CORPORATION
April 16, 2015
coming weeks. The Company is working with its customers to ensure any transactions are
compliant with the Initial Order, as amended by any subsequent orders of the Court.
7.5
7.6
8.
From an administrative perspective, the Company has:
7.5.1
Negotiated the Interim Loan Agreement with Maynards Capital Financial
Partnership on March 18, 2015 for an $8 million interim financing facility. The
Court authorized an initial draw of up to $1.5 million, of which the Company has
drawn $1.0 million to date;
7.5.2
Met with JDC Group and other possible investors in China to explore all available
options for restructuring or further investment in the Company; and
7.5.3
Worked with the Monitor and various stakeholders to develop a solicitation
process to obtain offers to invest in the Company or purchase its assets, whether
as a going concern or liquidation. In this regard, the Company has engaged
PricewaterhouseCoopers Corporate Finance to assist in the solicitation of offers.
The Company continues to deal with certain of its stakeholders, particularly Procon,
Transamine, and Royal Gold in attempt to resolve disputes in an efficient manner that
ACTIVITIES OF THE MONITOR TO DATE
8.1
The Monitor has previously issued two reports to the Court, dated March 17, 2015 and
April 7, 2015, respectively. To assist the readers of this report, a summary list of all of its
activities since the filing date has been included. In this regard, the Monitor has:
8.1.1
Provided assistance to the Company in the preparation of the cash flow forecast
Initial Cash Flow
ort of the initial
filing;
8.1.2
Atte
office employees to review t
operations and ongoing affairs, as well as discuss its plans going forward;
23
YUKON ZINC CORPORATION
April 16, 2015
8.1.3
Established a protocol to revi
disbursements,
the Initial Cash Flow;
8.1.4
Provided regular reporting to the Interim Lender and discussed future borrowing
and related matters;
8.1.5
Undertaken its statutory notice requirements pursuant to the CCAA and the
Initial Order. In particular, the Monitor has:
8.1.6
cash receipts and planned cash
ative to
8.1.5.1
Sent notice, in the prescribed from, along with a letter from the
Company, to the Company
8.1.5.2
Deployed its website www.pwc.com/car-yukonzinc. All documentation
related to the CCAA proceedings is updated on a regular basis;
8.1.5.3
Established a telephone hotline (604) 806-7237 and an email address
[email protected] to field inquiries; and
8.1.5.4
Arranged for notice of the CCAA proceedings to be published in the
Yukon News on Wednesday, March 18, 2015 and Wednesday, March 25,
2015;
Attended the Mine from March 30, 2015 to April 2, 2015 to meet with operations
personnel to:
8.1.6.1
Understand the current environmental and safety issues at the Mine;
8.1.6.2
Understand the day-to-day care and maintenance activities at the Mine
and begin to assess the ongoing funding requirements;
8.1.6.3
View the surface areas of the Mine and assess the condition of the
machinery, equipment, and on-site inventory;
8.1.6.4
Understand the historical and potential future operational challenges of
the Mine; and
24
YUKON ZINC CORPORATION
April 16, 2015
8.1.6.5
Discuss the CCAA proceedings and address any questions with the onsite crew;
8.1.7
Held several discussions with YG and facilitated a meeting on April 2, 2015
between the Company and representatives from all departments within the
Yukon Government that may have an interest in the Mine;
8.1.8
Assisted the Company in its communications with YG regarding developing an
underground re-entry plan;
8.1.9
Reviewed the
with Transamine Trading
SA and its claim to ownership of certain of the zinc concentrates and participated
in discussions with the Company regarding potential resolutions of the dispute
between Transamine and Procon; and
8.1.10
Exchanged numerous communications and engaged in significant discussions
with Procon regarding its position on numerous matters.
8.1.11
More recently, the Monitor continues to:
8.1.11.1
cash flow forecast, as revised;
8.1.11.2 Work with the Company to understand and develop a plan to deal with
its concentrate inventories, wherever situated;
8.1.11.3 Work with the Company to develop a solicitation plan for an investment
in the Company or a sale of the Company or its assets;
8.1.11.4 Maintain the website with status updates and posting of relevant
documents;
8.1.11.5 Monitor and ensure response to inquiries received through the
telephone hotline and email account; and
8.1.11.6 Attend numerous meetings and discussions with creditors, stakeholders,
and interested parties to understand their specific issues and concerns
25
YUKON ZINC CORPORATION
April 16, 2015
proceedings.
9.
RESTRUCTURING FRAMEWORK
9.1
cturing was
required before JDC Group would provide any additional funding to the Company.
9.2
to meet with representatives of JDC Group and other potential investors. Mr. Lu has
advised the Monitor that JDC Group continues to be supportive of a restructuring, but at
this time, is not prepared to extend any further financial commitments until it better
understands the restructuring options.
9.3
The Company acknowledges that time is of the essence. The ongoing cash burn is
meaningful and rehabilitation work is needed to the underground in the near term to
preserve and protect this aspect of the Mine. In that regard, Yukon Zinc is proposing a
framework that allows the Company to pursue all of its restructuring options
concurrently. With the support of JDC Group, the Company is seeking the approval of the
Solicitation Process
to:
9.3.1
Continue negotiations with JDC Group for a commitment to provide additional
financing to the Company and support a conventional restructuring of Yukon
Zinc;
9.3.2
Seek potential investors to partner with the existing shareholders of JDC Group;
and
9.3.3
Commence a sales process that will offer the assets of the Company for sale:
9.3.3.1
On an en bloc
basis; and
9.3.3.2 On a piecemeal (i.e. liquidation) basis.
9.4
The Monitor is of the view that the restructuring framework proposed by the Company is
a reasonable compromise that addresses the concerns raised by various stakeholders
while providing the Company with an opportunity to pursue its preferred restructuring
26
YUKON ZINC CORPORATION
April 16, 2015
alternative. Further, the proposed timeline of the Solicitation Process and estimated cash
funding requirements over the period (both discussed in detail below) do not, in the view
of the Monitor, prejudice the remedies available to certain parties under a liquidation
scenario as a similar process with similar timelines would likely have to be implemented
under that option.
10.
SOLICITATION PROCESS
10.1
Key elements of the proposed Solicitation Process include:
10.1.1
The Solicitation Process will commence on April 20, 2015 and will continue
through to June 12, 2015, subject to further order of the Court. It is anticipated
that a recommendation from the Monitor will be available June 12, 2015 as to
which option/direction will be pursue.
10.1.2
A data
Data Room will be maintained and will include materials
the Monitor and the Company deem necessary to allow potential investors and
purchasers to conduct such due diligence as those parties may require; and
10.1.3
Interested parties will be required to first sign a non-disclosure agreement with
the Company in a form satisfactory to the Company and the Monitor prior to
being provided access to the Data Room.
10.2
The Monitor will prepare a report and serve such report by April 24, 2015 outlining the
specifics of the Solicitation Process including relevant steps and timelines attached to
each. The Monitor will accept input from key stakeholders who wish to provide their
views.
10.3
At the completion of the Solicitation Process, the Company and the Monitor will review
and consider all offers made for an investment in the Company and for the purchase of all
. The offers will be shared with JDC Group, on a
confidential basis at the conclusion of the Solicitation Process. The Monitor expects that if
JDC Group decides to pursue a conventional restructuring, then it will be ready to
advance the restructuring and provide reasonable financial security by June 12, 2015.
10.4
The Company and the Monitor shall advise the Court which transaction the Company
intends to proceed with by June 12, 2015.
27
YUKON ZINC CORPORATION
April 16, 2015
11.
OTHER RESTRUCTURING ACTIVITIES
11.1
12.
EXTENSION OF THE STAY
12.1
13.
To date, the Company has focused most of its efforts on dealing with the issues related to
the Mine as discussed above and holding discussions with JDC Group and other potential
investors. To that end, the Company has not completed its review of executory contracts,
leased equipment and corporate office operations. The Company will be working with the
Monitor over the coming weeks to complete its assessments of these areas and will do so
in conjunction with the developments that arise from the Solicitation Process.
The Monitor is advised that the Company has requested an extension of the Stay of
Proceedings until June 12, 2015 to allow it to:
12.1.1
Complete the Solicitation Process and
restructuring plan; and
12.1.2
Assess the condition of the underground areas of the Mine which will provide a
more accurate assessment of time and cost involved to rehabilitate and dewater
the Mine.
CASH FLOW STATEMENT
13.1
2015.
13.2
The Cash Flow Statement provides actual results from March 13, 2015 to April 10, 2015,
and forecasted amounts from April 11 to June 12, 2015.
13.3
The planned net disbursements for the period April 11, 2015 to June 12, 2015 total $4.1
million and will require the Company to borrow a further $3.7 million from the Interim
Loan Facility.
13.4
The Company is seeking the approval of the Court to increase the authorized borrowing
limit of the Interim Loan Facility by $3.5 million. In addition to the $1.5 million already
authorized by the Court, this will bring the borrowing limit of the Interim Loan Facility to
$5.0 million. The Company is forecasting that it will require $4.7 million ($1.0 million
28
YUKON ZINC CORPORATION
April 16, 2015
already drawn plus $3.7 million projected requirements) of the $5.0 million Interim Loan
Facility.
13.5
At June 12, 2015, the Company is projected to have approximately $250,000 of cash on
hand, plus $300,000 available under the Interim Loan Facility, for total liquidity of
$550,000.
13.6
For the period ending April 10, 2015, the Company had $692,519 cash on hand, which is
$180,888 greater than forecast. The variance is a timing difference as projected
disbursements were delayed and will be made in subsequent periods.
13.7
Significant items in the Cash Flow Statement include:
13.7.1
$2.3 million for surface care and maintenance activities.
13.7.2
There is a provision of $850,000 for equipment refurbishment costs. The
Company is working to establish a more refined estimate of what the required
refurbishment costs might be. Once the refurbishment costs are established, the
Company, along with the Monitor, will consult with Maynards to determine if
such costs will provide meaningful incremental net value to the Company.
Refurbishment costs will only be incurred if there is value in doing so.
13.7.3
Until the Re-entry Plan is completed, the costs related to the rehabilitation and
dewatering of the underground areas are unknown. This work will not be
undertaken until after June 12, 2015.
13.7.4
Head office costs are forecasted to be $472,000 over the forecast period. Cost
reductions have taken place in the months since production at the Mine ceased;
however, there are still many functions which are ongoing, including dealing with
the CCAA proceedings. The cost area will continue to be reviewed over the
coming weeks.
13.7.5
CCAA Restructuring Costs to April 10, 2015 total $8,250 and relate to the
payment of pre-filing employee expense and travel costs. A further $25,000 is
projected to deal with additional pre-filing employee and other critical vendor
payments.
29
YUKON ZINC CORPORATION
April 16, 2015
14.
DIRECTIONS AND RELIEF SOUGHT
14.1
15.
The Company is seeking an Order of the Court authorizing:
14.1.1
An increase in the borrowing limit under the Interim Loan Facility and the
14.1.2
The immediate commencement of the Solicitation Process as detailed earlier in
this report;
14.1.3
The engagement of PricewaterhouseCoopers Corporate Finance Inc. as the
Financial Advisor
creation of a Financial Advisor Charge in the amount of $300,000. The Financial
Advisor Charge is to rank behind the Administration Charge and the Interim
14.1.4
The Company, with the approval of the Monitor, to dispose of its inventory,
subject to certain limitations, not exceeding $1 million in any one transaction or
$2 million in the aggregate, free and clear of all charges and encumbrances, and
pay the net proceeds to the Monitor; and
14.1.5
An extension of the Stay of Proceedings to June 12, 2015.
CONCLUSIONS OF THE MONITOR
15.1
The Company is seeking an extension of the stay of proceedings to June 12, 2015. The
Monitor recognizes that this is a significant extension, which will necessitate additional
Interim Financing of approximately $3.7 million. These borrowings by the Company,
while essential for its continuation of operations, has the impact of priming certain
creditors who believe they might otherwise be fully covered by their existing security and
related collateral. However, the extension together with the incremental borrowings
allows the Company and its broad stakeholders, the following benefits:
15.1.1
It allows for the continued care and maintenance of the Mine. The Mine is in a
delicate environmental condition at this time and any curtailment of the current
care and maintenance could have a significant impact to the area, and require
government intervention; and
30
YUKON ZINC CORPORATION
April 16, 2015
15.1.2
If the Solicitation Process culminates with a liquidation, then the liquidation will
be on a more orderly basis, rather than a distress basis. In this regard, the
Monitor notes that the Maynard s report provides for an estimated increase in the
value of the equipment on an orderly versus forced liquidation basis that more
than covers the additional amount proposed to be borrowed by the Company over
the extension period.
15.1.3
It will allow the Company to move forward with re-entering and assessing the
status of the underground areas, and decommissioning of the mill. This work is
essential for the Mine to maintain regulatory compliance and to preserve value
for the various stakeholders.
15.1.4
It allows for the immediate commencement of the Solicitation Process. The
Solicitation Process is expected to lead to a definitive transaction or conventional
restructuring, which should provide the best available outcome to a broad range
of stakeholders.
15.2
The Monitor notes that in the alternative scenario (i.e. an immediate liquidation of the
Company's assets), a similar timeline would be required and many of the costs
contemplated in the Company's plans would be incurred in a similar quantum, albeit
perhaps funded by different stakeholders.
15.3
In the view of the Monitor, the Company is acting in good faith and with due diligence.
15.4
Based to the above, the Monitor supports the relief sought by the Company.
31
YUKON ZINC CORPORATION
April 16, 2015
This report is respectfully submitted this 16th day of April, 2015.
PricewaterhouseCoopers Inc.
Court Appointed Monitor of
Yukon Zinc Corporation
Michael J. Vermette, CA, CIRP
Senior Vice President
Christopher Stocco, CIRP
Vice President
32
APPENDIX A
Historical operating results
JinDuiCheng Canada Resources Corporation Ltd.
Consolidated Statement of Comprehensive Loss
As at December 31
($000 CAD)
Unaudited Unaudited
2014
2013
Audited
2012
Audited
2011
Audited
2010
Audited
2009
Audited
2008
Revenue
106,750
134,538
86,521
-
-
-
-
Mine operating costs
Cost of sales
Royalties
Delivery costs
Depletion and amortization
Impairment of inventory
Loss from mining operations
(89,344)
(4,018)
(7,283)
(41,604)
(35,498)
(107,176)
(5,936)
(9,259)
(52,689)
(3,014)
(43,536)
(76,240)
(4,957)
(5,851)
(31,838)
(32,365)
-
-
-
-
General and administrative expenses
Depreciation and amortization
Salaries and benefits
Professional fees
General and administrative expenses
Loss from operations
(56)
(1,925)
(557)
(607)
(38,643)
(68)
(2,230)
(143)
(1,932)
(47,909)
(96)
(4,356)
(4,505)
(2,946)
(44,268)
(520)
(3,717)
(1,644)
(2,530)
(8,411)
(591)
(2,744)
(289)
(1,882)
(5,506)
(358)
(2,601)
(431)
(1,581)
(4,971)
(167)
(1,531)
(845)
(2,543)
(22,259)
(10,859)
128
(71,633)
-
(17,974)
33,241
(8,632)
(12,479)
123
(53,630)
(1,640)
1,886
(15,751)
(13,975)
95
(72,013)
2,446
(2,105)
(73)
263
(104)
(10,430)
3,173
1,892
(16)
46
(3,584)
(989)
115
(13)
45
(4,824)
877
95
(660)
(3,108)
659
(71,633)
(55,270)
(69,567)
(7,257)
(4,573)
(3,947)
(2,449)
82
(71,551)
6
(55,264)
(487)
(70,054)
(166)
(7,423)
125
(4,448)
690
(3,257)
(2,449)
Other (income) expense
Foreign exchange gain (loss)
Realized gain on derivative instruments
Loss on derivative instruments
Loss on derecognition of loan
Loss on disposal of mineral properties, plant and equipment
Finance costs
Interest and other income
Impairment loss on available-for-sale marketable securities
Loss before income taxes
Income tax credit (obligation)
Loss for the year attributable to the shareholders of the
Company
OTHER COMPREHENSIVE LOSS
Change in fair value of available-for-sale marketable
securities, net of taxes
Net Loss
APPENDIX B
Aerial photo of the Mine site and main camp
Truck Shop
Crusher Building
Power Plant
Batch Plant
Mine Portal
Office &
First Aid
Airstrip
Warehouse
Tailings Facility
Assay Lab Camp
Concentrate Mill Process
Building
Building
APPENDIX C
Cash Flow Statement updated as at
April 10, 2015
6
7
8
9
10
11
Notes
1
2
3
4
5
1,500,000
1,000,000
500,000
1,000,000
1,000,000
692,519
(337,640)
354,878
(337,640)
(487,640)
(74,000)
(25,000)
(67,425)
(166,425)
(74,000)
(3,000)
(77,000)
(450)
(27,411)
(130,500)
(39,000)
(15,000)
(31,854)
(244,215)
150,000
150,000
17-Apr
5,000,000
1,300,000
3,700,000
1,000,000
300,000
1,300,000
354,878
(520,813)
300,000
134,066
(520,813)
(520,813)
(294,299)
(294,299)
(20,000)
(34,161)
(54,161)
(60,650)
(8,500)
(80,722)
(22,481)
(172,353)
-
24-Apr
5,000,000
2,700,000
2,300,000
1,300,000
1,400,000
2,700,000
134,066
(1,379,445)
1,400,000
154,620
(1,379,445)
(1,379,445)
(21,263)
(21,263)
(49,000)
(15,000)
(64,000)
(1,087,217)
(38,159)
(168,806)
(1,294,182)
-
1-May
5,000,000
3,500,000
1,500,000
2,700,000
800,000
3,500,000
154,620
(900,781)
800,000
53,840
(900,781)
(900,781)
(109,978)
(109,978)
(29,000)
(7,000)
(11,926)
(47,926)
(314,659)
(331,321)
(96,897)
(742,878)
-
8-May
5,000,000
3,600,000
1,400,000
3,500,000
100,000
3,600,000
53,840
(128,750)
100,000
25,090
(128,750)
(128,750)
-
(54,000)
(54,000)
(65,000)
(9,750)
(74,750)
-
Forecast
15-May
5,000,000
3,700,000
1,300,000
3,600,000
100,000
3,700,000
25,090
(108,278)
100,000
16,812
(108,278)
(108,278)
(76,891)
(76,891)
(8,778)
(8,778)
(19,659)
(2,949)
(22,608)
-
22-May
5,000,000
3,900,000
1,100,000
3,700,000
200,000
3,900,000
16,812
(207,772)
200,000
9,040
(207,772)
(207,772)
-
(49,000)
(49,000)
(13,000)
(5,000)
(120,063)
(20,709)
(158,772)
-
29-May
5,000,000
4,700,000
300,000
3,900,000
800,000
4,700,000
9,040
(724,980)
800,000
84,060
(724,980)
(724,980)
(156,383)
(35,644)
(192,026)
(29,000)
(7,000)
(27,110)
(63,110)
(408,559)
(61,284)
(469,843)
-
5-Jun
5,000,000
4,700,000
300,000
4,700,000
4,700,000
84,060
165,500
249,560
165,500
(134,500)
-
(54,000)
(54,000)
(70,000)
(10,500)
(80,500)
300,000
300,000
12-Jun
5,000,000
4,700,000
300,000
1,000,000
3,700,000
4,700,000
692,519
(4,142,958)
3,700,000
249,560
(4,142,958)
(4,592,958)
(711,550)
(25,000)
(124,332)
(860,882)
(58,000)
(314,000)
(99,975)
(471,975)
(74,100)
(40,911)
(2,296,379)
(408,480)
(15,000)
(425,231)
(3,260,101)
450,000
450,000
Forecast
Total
5,000,000
4,700,000
300,000
4,700,000
4,700,000
162,545
(4,612,985)
4,700,000
249,560
(4,612,985)
(5,657,132)
(994,145)
(95,000)
(33,256)
(194,250)
(1,316,650)
Costs relate to the reentry into the Mine to assess the current conditions and estimate the cost and time involved to rehabilitate and dewater the Mine.
No costs related to the rehabiliation and dewatering of the Mine have been included in the period as it is not forecasted to begin until after June 12, 2015.
The majority of the decommissioning work on the mill processing facilities is forecasted to occur after June 12, 2015
Includes the head office lease, executive residential leases and relevant utilities.
Includes wages and related benefits.
Includes head office staff travel costs and restructuring professionals disbursement and taxes.
(78,164)
(404,269)
(152,273)
(634,706)
(75,100)
(40,911)
(2,740,528)
(408,480)
(15,000)
(425,756)
(3,705,775)
980,294
30,387
33,466
1,044,147
Actual + Forecast
Total
The purpose of this Cash Flow Statement is to determine the liquidity requirements for Yukon Zinc Corporation during the CCAA proceedings.
Receipts related to final settlements of pre-CCAA concentrate sales.
Includes costs to store and transport non-Transamine identified concentrate inventory. Additional amounts forecasted to dispose of hazardous materials at the Mill site.
There are a few shipments in transit and as a result sales contracts have not been finalized. The Company is required to fund assay services by an independent third party prior to the final settlement of the sales contract.
Includes costs for basic care and maintenance of the Mine such as food, fuel, propane and travel expense to transport maintenance staff to the Mine. The forecast includes $850,000 for the repair and maintenance of equipment. An assessment is required by qualified
maintenance staff to determine the cost/benefit of undertaking repairs. Only repairs that will significantly enhance the realizable value of the equipment will be undertaken.
1,500,000
1,000,000
500,000
Interim financing availability
Interim financing approved authorized limit
Total interim financing borrowings
Interim financing availability at end of period
162,545
(470,027)
1,000,000
692,519
(470,027)
(1,064,174)
(282,595)
(95,000)
(8,256)
(69,918)
(455,769)
(20,164)
(90,269)
(52,298)
(162,731)
(1,000)
(444,149)
(525)
(445,674)
530,294
30,387
33,466
594,147
1,000,000
1,000,000
12
9
10
11
3
4
5
6
7
8
2
Actual
Mar 13 - Apr 10
Interim financing borrowing
Interim financing borrowing at beginning of period
Interim financing borrowing in period
Interim financing borrowing at end of period
Cash Balance
Opening cash balance
Net receipts (disbursements)
Interim financing borrowing in period
Ending cash balance
Net receipts (disbursements)
Total disbursements
Non-operating costs
Restructuring professional fees
Professional fee retainers
CCAA restructuring costs
Interim financing interest & fees
Total non-operating costs
Head office costs
Lease / utilities
Employee
Other head office costs
Total head office costs
Operating costs
Raw material / freight / storage / disposal
Assay / royalties
Surface maintenance
Underground re-entry
Rehabilitation / dewatering
Mill decommissioning
Other
Total operating costs
Receipts
Collection of pre-filing accounts receivable
GIC interest
Other miscellaneous
Total receipts
Canadian Dollars
Yukon Zinc Corporation
1
CCAA Cash Flow Statement
For the Period March 13, 2015 to April 17, 2015