Once again, Idaho's Silver Valley historic Sunshine Mine ceases production

After little more than six months of production, four years of hard work, and an estimated pre-production investment of $13.2 million, the grand dame of U.S. silver mines, Idaho’s Sunshine Mine, has again fallen silent .

RENO, NV - 

One of world's great silver mines, Idaho's Sunshine Mine, is once again dormant as the troubled Sterling Mining Company announced Monday that it had suspended commercial production.

First staked in 1884, the Sunshine mine was officially born in 1921. By 1982, however, the Sunshine Mining Company has suspended production due to low silver prices.

The mine remained closed until Wallace, Idaho-based Sterling Mining won control of the mine in 2003 by paying its back taxes. For four years Sterling worked to rehabilitate the mine and finally shipped its first new concentrate in December 2007.

This time around, the mine was supposed to have a seven-year life. However, Sterling Mining found itself plagued with litigation and problems. By May of this year, long-time Sterling CEO Ray DeMotte was suddenly dismissed and replaced by former Sterling director Ken Berscht.

On July 23^rd Sterling and Vancouver-based Minco Silver (TSX: MSV) announced they had signed a letter of agreement to have Minco acquire Sterling for an all-share offer valued at US$62.3 million. Minco also extended a $15 million line of credit to Sterling. The result, Minco had hoped, would allow the company to control the Fuwan Silver property in China and the Sunshine Mine.

On August 29^th, Sunshine Precious Metals Inc. (SPMI) accused Sterling of being in breach of its lease agreement. The precious metals company accused Sterling of being in breach of federal and state regulations. Sunshine also claimed that Sterling had been issued a mechanics lien from Miller Sales and Engineering for failure to pay Miller for services rendered.

By September 2^nd, Minco Chairman and CEO Ken Z. Cai announced that the company had completed its due diligence on Sterling and decided not to proceed with the acquisition of the Idaho junior miner.

An angry Sterling Mining blamed "misleading press releases issued by Sunshine Precious Metals," which the company said "has had an adverse affect on public perception and has adversely affected the public market in Sterling stock."

Sterling asserted that "it would seem SPMI is prepared to do anything to break the lease or force concessions on the lease terms from Sterling. SPMI is not a public company had has no duty to publish or disseminate press releases as it did on August 29 through PR newswire."

Meanwhile, Sterling said the company intended "to vigorously protect its rights and pursue its legal claims." The company also accused SPMI of disseminating "false and misleading information to advance its private agenda regarding the Sunshine Mine."

In its news release issued Monday, Sterling said, "Despite resuming production in late 2007 and the significant progress made in the first half of 2008, the operation has encountered a series of unforeseen and unavoidable delays."

"Production through the end of August totaled approximately 354,000 ounces of silver, which is substantially less than management's expectations and less that what is required for self-sustaining operations. This, combined with volatility as it relates to precious metals stocks, ultimately prevented the company from obtaining the financing required to continue operations at the current level," the release said.

The workforce at the Sunshine mine was immediately reduced by 60%. "This has been an extremely difficult decision to make and we share the disappointment of our employees and the local community, but we believe this is the only reasonable course of action at this time," Berscht said in a news release.

Nevertheless, Sterling declared that the Sunshine Mine is still "a tremendous resource and will apply its limited resources to maintaining the mine, continuing to dewater the mine, and pursue a limited exploration plan. There is no assurance as to if and when market conditions will improve and additional financing will be secured, so the company is unable to make any prediction or estimate with respect to the resumption of full operations at the mine."

 In a 43-101 report completed in April 2007, mining consultant Behre Dolbear estimated that Sunshine has 23,486,698 ounces of proven and probable silver reserves and measured and indicated resources of 31,154, 355 ounces.

MINEWEB UPDATES ITS SITE THROUGHOUT THE DAY - FOR THE LATEST MINING AND METALS NEWS AND ANALYSIS ARTICLES CLICK ON WHAT'S NEW

SUBSCRIBE to Mineweb.com's free daily newsletter now.

Print story      Email story      Subscribe to free newsletter
Related Links ARTILCES:  Sunshine silver mine ships 1st new concentrate in five years  OTHER PAGES:  SILVER NEWS USA

Back