How shipping challenges and a cash-flow crunch have pushed a St. Lawrence mine to the brink

Despite growing production and a thirsty market, logistical challenges and a cash crunch have pushed the fluorspar mine in St. Lawrence, N.L., to the brink, sending economic shockwaves throughout the Burin Peninsula.

More than 200 employees at Canada Fluospar Inc. received layoff notices this week, leaving justdozens ofworkers on site to maintain and secure the assets.

The sudden announcement that a court-appointed interim receiver accounting and advisory firm Grant Thornton had been installed to oversee the business while creditors scrambled to keep CFI from going bankrupt was being felt in homes all over the peninsula.

"It was a good job. I was home every night in my home," said St. Lawrence resident Daryl Doyle, who received his layoff Tuesday.

Doyle had worked on and off at the mine for nearly five years, most recently as a truck driver, movingconcentrate.

"It was pretty good pay for this area," he said. "It's a big blow for a lot of people."

Hefty grant to the town in jeopardy

The Town of St. Lawrence is also in a pinch, with a large part of its 2022 operating budget now in jeopardy ifCFIgoes under.

CFIpays agrant in lieu of taxes to the town, with $450,000 expected from the company this year.

That's a large share of the $1.7-million annual budget for a town of just 1,100 citizens, according to the latest census.

"We're going to be doing everything in our power to ensure that our residents are not hit again by this," said Mayor Kevin Pittman.

If the worst-case scenario unfolds, Pittman said, the town may have to do some restructuring as well.

"But our current plan is not to lay this at the feet of our residents who are already hurting," he said.

Days away from total shutdown

According to an application this weekto the Newfoundland and Labrador Supreme Court by Bridging Finance, which has provided $55 million in loans to CFI, the business was within days of exhausting all its cash, and having to cease operations completely.

Bridging Finance asked the court to appoint Grant Thorton as interim receiver, a request that was granted Monday by Chief Justice Raymond Whalen.

Despite the dire outlook, Bridging and other creditors believe "there may be a viable path forward," according to the court document.

Faced with the prospect of "significant losses," Bridging said it's having "urgent discussions" with CFI and other secured lenders to develop a restructuring plan.

Part of that plan includes maintaining the site in order to attract a new buyer or investor, and that's exactly what community leaders are hoping for.

One of the creditors is the government of Newfoundland and Labrador. In 2017, the government issued a $17-million repayable loan to Canada Fluorspar that matures at the end of this year.

Growing production, but shipping problems

"The mood is pretty sombre," said Pittman. Several local companies that supplygoods and services to the mineare among the creditors awaiting the outcome of the restructuring proces, he added.

CFI, the only active producer of fluorspar in Canada and the United States, exported its first shipment of the mineral in 2018.

By late last year, the company had shipped some 300,000 tonnes of fluorspar to markets in the United States, Europe and Asia, according to a presentation to a mining conference in November by former CEO Bill Dobbs.

During his presentation, Dobbs raved about the surging market for fluorspar, especially its growing use in refrigeration and lithium ion batteries.

He said the company hadinvested $500 million in goods and services in the businessand paid $108 million in wages to its workforce.

Production ramped up considerably last year, and CFI has "consistently been able to sell its products into the markets," according to court documents.

So what happened? Why is the St. Lawrence operation now on life support?

Bridging Finance hinted at it in its court filing, referring to "financial and logistical problems."

The court application said CFIsales have been "constrained by operational and COVID-19-related matters that have slowed production in recent months."

In the past, cash shortfalls were covered byGolden Gate Capital, the American private equity firm called that holds 100 per cent ownership of CFI.

New port facility not up to the job

But late month, Golden Gate decided it would no longer invest any more money into CFI.

The court document says Golden Gate has invested $238 million into the mine since acquiring it in 2014

As for the logistical problems, Pittmansaid it's well known in the area that CFI was having trouble getting its concentrate on a ship and off to market.

CFI announced last summerit had commissioned a new marine terminal at Blue Beach, a short distance from the mine, and it was described last fall byDobbs as a "big cost saver."

It was to allow the company to move its product quickly onto awaiting ships, without having to travel the extra 42 kilometres to a port facility in Marystown.

But Pittman said the Blue Beach facility, which uses a barge as a moveable dock, didn't work out as planned.

"One of the major issues that's leading to this demise is the fact that theyhaven't been able to come up with a system that ships out of here and make it workable," said Pittman, adding that Blue Beach is exposed to harsh wind and waves, making it unavailable for loading operations except under ideal conditions.

"If they end up somewhere down the road being reactivated, they're looking for a solution which allows them to ship out of here in order to cut their costs," he added.

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