New company rises from the ashes

Tom Gardner

Tuesday, Dec. 22, 1998 | 4:42 a.m.

RENO, Nev. -- More than 11 months of litigating and negotiating ended with handshakes on Tuesday as Pegasus Gold Inc. eased into history to be replaced by a scaled-down company that includes Nevada's Florida Canyon Mine and two other properties in Montana.

U.S. Bankruptcy Judge Gregg Zive approved a reorganization of the company that merges Pegasus Gold International, Florida Canyon and Montana's Diamond Hill and Montana Tunnels mines into a new company called Apollo Gold.

Thirteen other subsidiaries, mostly unprofitable mines, will be liquidated.

The effective date for the plan is Jan. 15, one day shy of a year after the company filed for Chapter 11 bankruptcy protection.

Zive conditionally approved the reorganization two weeks ago, but delayed a final okay until Tuesday to be sure interim financing would be available to operate the new company.

An agreement was signed on Monday with G.E. Capital Corp. to provide up to $20 million for as long as a year while Apollo Gold moves from being a new company with no ready cash to one that ideally will be showing a profit.

Another hurdle assures state and local governments in the areas where mines are being closed that reclamation of the sites will continue. Zive said the agreements are good for everybody because they will mitigate the effects of years of mining while providing work for people who otherwise would be losing their jobs.

The company turned to the court after a combination of dismal gold prices, high production costs and equipment failures at its Mt. Todd Mine in Australia left it with a $512.8 million loss in 1997.

Zive's challenge was to come up with a plan that would retain the most viable parts of the company while resolving as many concerns as possible by creditors, federal agencies, state and local governments, Indian tribes and environmentalists.

After months of petitions, cross petitions and intense negotiation among attorneys for the various parties involved, Tuesday's two-hour hearing was almost anticlimactic.

Michael Richman, the lead attorney for unsecured creditors, praised the judge for his stewardship.

"You have brought us finally to the end of a very long and difficult case," he said.

But Zive cautioned him not to start celebrating too quickly.

"There are still issues that have to be resolved," the judge said. "For many of us this may be another step in a long process."