Lawyers argue mine company’s fate

Whitehorse businessman Jon Rudolph insists he just needs - and rightfully deserves - more time to find the money required to save his troubled Ross Mining venture.

Whitehorse businessman Jon Rudolph insists he just needs - and rightfully deserves - more time to find the money required to save his troubled Ross Mining venture.

On the other hand, retired placer miner Norm Ross maintains Rudolph has had enough time, and now the matter should be put in the hands of a court-appointed receiver to look after the sale of the property so he can recover the $3.5 million owed to him for the sale of the business.

Lawyers for both sides were in Yukon Supreme Court arguing their points for several hours Monday.

Justice Ron Veale reserved his decision.

Rudolph has already paid Ross $6 million for the Dominion Creek placer mine in four instalments since he purchased Ross Mining for $9 million in November 2005.

The owner of Golden Hill Ventures, a large road construction company based in Whitehorse - defaulted on the $1.5-million payment scheduled for last January.

Under the terms of the purchase agreement, Ross is entitled to call in the full amount of the outstanding balance if Rudolph defaults, and he has.

As result, Rudolph and Ross Mining are now in arrears on the $1.5-million January 2009 payment, and the $1.5-million payment scheduled for January 2010.

The court heard the total debt to Norm Ross including interest is now $3.4 million, with additional interest accumulating at $2,054 a day.

Other outstanding debts owed by Ross Mining add up to another $1 million-plus, including almost $750,000 owed to MacKenzie Petroleum, the Dawson City fuel supplier owned by the Tr’ondek Hwech’in First Nation.

Golden Hill Ventures is also owed $11.1 million, according to court documents.

Whitehorse lawyer Murray Leitch, representing Norm Ross, argued his client has the right to have a receiver take control of the assets so he can arrange for the sale of the property as soon as possible - hopefully before freeze-up.

Rudolph, Leitch suggested, keeps insisting that securing $4.5 million to refinance Ross Mining and pay off Norm Ross and others is just days away.

But it’s been more than six months since the company defaulted, and it was likely months before that Rudolph saw the squeeze coming, yet there’s been no refinancing arranged, Leitch told the court.

He said when the matter was in court June 9, it was agreed to leave Rudolph in control, providing he co-operated with the court-appointed monitor to start building a sales and marketing plan. It was decided back then, Leitch reminded the court, that if by now the deal with Strategic Metals did not go through - and it hasn’t - that at least a marketing plan would be in place, ready to go.

But the PricewaterhouseCoopers monitor reported to the court last Thursday that it has been unable to build a marketing strategy because Rudolph and his son, Shaun, have been most unco-operative in providing the necessary information, Leitch pointed out.

“Virtually all steps taken by the monitor to fulfill its duties were met with resistance from either or both of Jon Rudolph and Shaun Rudolph,” reads the report to the court by PricewaterhouseCoopers.

The monitor reports that both Rudolphs went as far as making intimidating gestures to staff of PricewaterhouseCoopers.

The report also notes that goods and equipment were being moved off the mine site without properly documenting whether they belong to Ross Mining or Golden Hill Ventures.

Under the law, the lawyer argued, the courts are obligated to appoint a receiver when a secured creditor requests one, unless the indebted party can show very convincing reasons why one should not be appointed.

In this case, Ross Mining is insolvent, and there is no chance the company will be able to refinance, Leitch insisted, suggesting there is no credibility to the newest offer Rudolph says is all but in the bag.

He pointed out that Ross Mining, despite decades of lucrative success under Norm Ross, has lost money every single year since Rudolph purchased it.

And the company just shut down the mine site last week, Leitch said.

He said Norm Ross’s ability to recover the outstanding $3.4 million has already been hurt by the inability of PricewaterhouseCoopers to build a marketing plan because Rudolph has failed to make available the necessary information.

Even under a receiver, it would take another two to four weeks, then the court’s approval, before a marketing plan can be finalized, Leitch pointed out, suggesting Norm Ross wants to do what he can to sell the mine before freeze up.

Otherwise, he continued, everything’s on hold until at least next spring, with interest building at $2,000-plus a day.

Vancouver lawyer John Sandrelli said it would be a great injustice if the court did not allow Rudolph more time.

The Whitehorse businessman has already paid Ross $6 million and invested a significant amount more into Ross Mining, Sandrelli argued by phone.

Sandrelli countered Leitch’s suggestion that it’s almost automatic for the court to appoint a receiver when requested, and that such an appointment wouldn’t affect Rudolph’s ability to continue searching for new financing.

The court, he said, has to conclude that the appointment of a receiver is just and equitable.

“That is not the case,” Sandrelli told Justice Veale.

He said adjourning the case to give Rudolph more time to secure the refinancing arrangement would be in everybody’s interest; Norm Ross’s interest, MacKenzie Petroleum’s, and his client’s.

“In my submission, Mr. Rudolph, Ross Mining, is as close as it has ever been to raising the $4.5 million,” Sandrelli said.

Ross Mining, the lawyer said, shut down operations last week partly because of the cost of paying the court-appointed monitor, which has charged $145,377 in fees and expenses from June 8 to July 11.

He also suggested that PricewaterhouseCoopers’ description of unco-operative and aggressive behaviour by the Rudolphs was exaggerated and not a true reflection of what’s gone on over the last month.

Jon Rudolph welcomed PricewaterhouseCoopers staff from the beginning, and provided them with private office space at Golden Hill Ventures’ Whitehorse office to do their work, the court heard.

He chartered a plane to take them to the mine site for the initial visit, and a staff member has remained on site since to see how the operation runs and what the future mining plan is. A member of PricewaterhouseCoopers has accompanied Shaun on a trip into Dawson to sell gold.

Jon Rudolph testified Monday that indeed there were tense times between his son and the PricewaterhouseCoopers, as recently as last week.

As far as he knows, the differences that arose were smoothed over, and everybody was friendly and drinking beer together last Thursday night.

It must be remembered, Rudolph told the court, it is a tense time when your company is under such financial strain and there’s a stranger on site digging into your business.

Choking on a moment of emotion, Rudolph said his son is also at risk of losing what he has invested personally in Ross Mining.

The Vancouver lawyer told the court that appointing a receiver now would all but kill any hope of Rudolph attracting refinancing.

Investment markets are still shaky to begin with, Sandrelli said, adding bringing a court-appointed receiver into the picture would scare away any opportunities that might otherwise exist.

Geoffrey Thompson, a lawyer for PricewaterhouseCoopers, told the court the company reported last Thursday that it does not see any point in continuing as a court-appointed monitor on the existing relationship with the Rudolphs.

If the court chooses to reject the call for a receiver and continue with a monitor and the exercise of preparing a marketing plan, it must impose several conditions, he said.

Among those conditions, Thompson told the court, would be the requirement to compel Ross Mining to open up all its books, so PricewaterhouseCoopers can get a complete understanding of where the company’s at, and what its assets are.