Former Revenue-Virginius owners owed more than $60M, but mine sold for only $1.8M

The recent $1.8 million sale of a historic silver mine above Ouray will leave its creditors — who collectively are owed upwards of $60 million — almost entirely out in the cold with no clear path to recouping their losses.

The Revenue-Virginius Mine in Yankee Boy Basin was auctioned off in early August after its most recent owners’ financial woes landed it in a court-ordered receivership. The bargain sale put the mine in the hands of Thorin Resources Inc., the same company that several years ago bought the nearby Camp Bird Mine.

Some portion of the $1.8 million from the sale will go to paying the court-ordered receiver – which was hired to protect the mine’s assets and which handled the auction – as well as its consultants. What’s left will go to creditors, who are currently waiting on rulings from a Ouray County district court judge to determine which claims will take priority. But it certainly will not be enough to repay the more than $60 million owed to several companies who loaned money, rented equipment or performed services at the mine.

Some creditors said they have already accepted that there’s nothing further they can do.

“I got zero,” said Tom Gillis, president, CEO and owner of Longmont-based Western Refractory Construction Inc., which had a lien against the mine for nearly $6.4 million. “I got absolutely nothing. … It’s nearly ruined me.”

Several creditors, including Gillis, told the Plaindealer they continued performing work even after payments stopped, at the urging of mine leaders who promised the money would eventually come. Some said they still have questions about how the situation unraveled under the previous owners.

“It’s very hard for me to imagine … how management of a company like that could do that without knowing that they were incurring bills that they could not pay,” said Mark Levin, manager and owner of Montrose- based Mining Equipment and Supply LLC, another creditor. “… You don’t just blindly spend $60 million. … That can’t be an accident.”

Ramp up, abrupt halt

The mine – which first went into production in the 1800s – was most recently owned by Ouray Silver Mines, Inc., a subsidiary of Aurcana Silver Corp., a Vancouver- based company.

Aurcana did not respond to requests for comment for this story.

After Aurcana acquired the mine in late 2018, it began working toward expansion – hiring employees, building an on-site mill and generally ramping up toward full production. In December 2020, the company secured a $28 million loan from Swiss giant Mercuria Energy Group, with the mine itself acting as collateral, according to court records.

By late 2021 and early 2022, though, the mine’s problems had started to become evident to contractors. The mine laid off nearly 200 employees and operations ground to a stop, according to earlier reports.

Gillis, whose company completed a number of projects at the site – including building its crushing and conveying system – said the mine paid its bills on time until about August or September 2021. They made one final payment in October 2021, Gillis said.

“They all said, ‘Oh, we’re going to start producing and everything’s going to be great,’” he said. “… When they came to me in January (2022) and said, ‘We’re broke,’ I was like, you gotta be kidding me.”

Nate Disser, owner/director of Ouray-based San Juan Mountain Guides, said his company, which is owed more than $100,000 for avalanche forecasting services, only received one of its monthly payments in about six months starting December 2021. Disser said mine leaders “strung us along” to keep his company performing services for months.

“They at that time were explicit with us about how important we were and that they needed us to stay on and that they were going to … ‘take care of us,’” said Disser, whose company’s claim isn’t included in the estimated $60 million. “… That never happened.”

In March 2022, Aurcana defaulted on its $28 million loan from Mercuria, prompting Mercuria to file a complaint asking Ouray County District Judge Cory Jackson to appoint a receiver to protect the mine’s assets.

Jackson named Alliance Management as receiver. For more than a year, Mercuria funded the receivership and Alliance’s work, before cutting off that funding in March.

Mercuria did not respond to a request for comment for this story.

Alliance held an auction and in April informed the judge that with a maximum $4.5 million, Canada-based Silver X Mining had submitted the best and highest bid to acquire the mine. The CEO of Silver X, which has mining operations in Peru, told Ouray County commissioners he was excited to relaunch operations at the mine as soon as possible.

Within a month, though, Silver X had backed out of the deal, citing concerns about continuing to fund the receivership process.

Alliance quickly held another auction, and informed the court in early August that Thorin Resources had acquired the mine for $1.8 million.

Impact on creditors

Gillis said the mine debacle has been a devastating blow for his business. He said he has been unable to pay his own creditors, and has been floating funds from one project to another to make sure he can keep his doors open and continue to make payroll.

“All my people got paid,” he said. “ … Except for me.” Gillis said it’s the first time he’s ever experienced something like this, calling the situation “unheard of.” In retrospect, he said, he wishes he had cut his losses earlier, although he felt invested in making sure the mine succeeded.

“(We) should have just walked off the job when they quit paying,” he said. “Then they wouldn’t have been able to finish it.”

Levin of Mining Equipment and Supply and Disser of San Juan Mountain Guides both said the mine’s woes hurt their businesses, but not to the same extent.

“It’s negligible,” Levin said of the effect of the mine’s auction on his company, which he said was owed about $150,000 for equipment the mine rented and damaged. “It’s an impact but it’s not catastrophic.”

Disser’s company, meanwhile, is primarily a backcountry guide service provider, with avalanche forecasting for third parties only making up a small part of its overall business. Disser said San Juan Mountain Guides was able to absorb the blow without affecting its staff.

“Would I have loved to see the mine be sold to a new owner that … could have satisfied all the creditors? Of course, I think that’s what everyone was hoping for,” he said. “… At this point, I’ve kind of put it behind me.”

‘The best bid they could’

Jack Tanner, an attorney representing Alliance in its role as receiver, told the Plaindealer the sale was “absolutely” the best outcome under the circumstances.

“They spent nine months trying to get the best bid they could,” he said. “ … I can’t imagine having done anything differently would have gotten a better result.”

Tanner said there was really no other option than to auction the mine. For one, Mercuria’s decision to stop funding the receivership meant Alliance didn’t have funds to continue. Additionally, Tanner said, all the prospective buyers were interested in the permits held by the mine at various levels, which in some instances carried requirements that some people be working at the mine.

“The mine had to be accessible. The roads had to be clear,” he said. “… If the people weren’t working, those permits would have been terminated. … There was really no choice but to have the sale when we did, because if we hadn’t gone to the sale, we would have had to lay off the employees, which would have resulted in termination of the permits.”

Loss of permits would have eroded the value of the mine even further, Tanner said.

“(We) obviously wish the results would have been different,” Tanner said. “… I wish everybody got paid. … Sometimes things happen in the market where something seems to be worth a lot of money and then it turns out not to be.”

What’s next?

It’s not clear what Thorin Resource’s timeline or exact plans are for the mine. Thorin Resources CEO Sturges Karban told Ouray County commissioners at a Sept. 12 meeting that his company is entirely devoted to the Camp Bird Mine, acquired several years ago, and now the Revenue-Virginius Mine. Karban added that he’s “very excited” about the acquisition.

“(We) are now working with some of the former employees at the Revenue and looking to integrate those assets for a long-term strategic plan over the next several years,” he said.

Some of the mine’s creditors said they’re hopeful operations will ramp back up.

“I certainly hope that the new owner can achieve a profitable mining operation and do a good job up there,” said Levin of Mining Equipment and Supply.

Disser of San Juan Mountain Guides said he doesn’t “hold any grudges” toward Thorin Resources, and that he’d be happy to consider working with them if requested.

“I wish the new owners the best of luck in succeeding where others have failed,” he said. “… You only get so much by holding onto the past.”