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Archive for March, 2010

Emgold: Time to Pull the Plug?

Emgold announced in a March 4, 2010 press release that it is offering its creditors the “opportunity” to convert debt Emgold owes them into Emgold stocks, which have continued to fall in price (from 35 cents/share Canadian just after consolidation in December to 25 cents today):

Emgold announces that it is offering the opportunity to creditors to convert up to US$300,000 of indebtedness into shares in the capital of Emgold. For those companies and individuals who elect to take advantage of this offering, debt will be converted at a share price of US$0.25 per share. Shares issued for debt will be subject to regulatory hold periods. The Company anticipates closing of this offering as soon as practicable subject to receipt of all necessary regulatory approvals.

Wouldn’t Emgold’s creditors find it more beneficial to write off their debt? Say, for the tax advantage, which would at least lock in the value at today’s stock price, before it falls further? Rather than invest in a junior mining company that has never generated any cash flow from the sale of minerals in all its years of trading on penny stock exchanges?

Emgold’s press release also suggests they will approach the city of Grass Valley to discuss whether a revised DEIR is still necessary:

Upon completion of the revised Project Description, the Company will meet with the City of Grass Valley and determine if a Revised Draft Environmental Impact Report is required or whether the Final Environmental Impact Report can be prepared.

The city already specified in a council meeting on August 25, 2009 that Emgold must revise and recirculate its DEIR, so there should be nothing to negotiate.

The need for reworking the DEIR is driven by a long list of issues which were not dealt with adequately in the original, including in part the following:

Complete disclosure regarding the immediate and longer-term effects on humans and wildlife from cyanide spills, during transportation and on-site, including the secondary but still toxic cyanates and thio-cyanates.

Complete disclosure regarding alternatives to cyanide.

Complete disclosure of heightened risks of contamination of adjacent water supplies, wells, creeks, streams, ponds, wetlands, and downstream water users (see USGS news release 2/11/10 “Studies Reveal Why Drinking Water Wells are Vulnerable to Contamination”)

Will the city be held liable for ground subsidence associated with the mine operation?

Complete disclosure of risks and health impacts to Grass Valley residents from exposure to dust and diesel exhaust from the mine operation (see Rand Corp study, “Impact of Air Quality on Hospital Spending”).

Complete disclosure of health risks from night noise pollution  (see World Health Organization report on noise impacts on human health).

Complete disclosure regarding the effectiveness of proposed mitigation measures. (See “New Scientific Research Reveals Widespread Failure to Keep Mines from Polluting Water“).

Emgold’s press release also refers to “the current recession and the difficulties we and other junior mining companies are having raising capital in the present market conditions.”

But Emgold’s problems are due to its unique weakness, not to the recession. Potential investors likely see that its prospects for re-opening the Idaho-Maryland Mine are poor, given the multitude of serious environmental consequences that would follow from allowing the world’s dirtiest industry to operate in such close proximity to developed business and residential areas.

Contrary to Emgold’s claim, some other junior mining companies are doing well. See, for instance, “High-Flying New Gold continues to look for ounces.”

Emgold’s current financial woes strongly suggest the need for a complete reworking of the Economic Viability Study (the original was done in July of 2005).

It’s time for Grass Valley to set a clear deadline for completion of the revised DEIR, or simply pull the plug on the whole project, so that we as a community may move forward with more viable economic projects, uninhibited by the uncertainty clouding the current abortive effort to re-open the Idaho-Maryland Mine.

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