COVER

CLEARING THE AIR

‘WE’VE FOUND THAT MAYBE WE’RE NOT PERFECT’

April 19 1993
COVER

CLEARING THE AIR

‘WE’VE FOUND THAT MAYBE WE’RE NOT PERFECT’

April 19 1993

CLEARING THE AIR

COVER

‘WE’VE FOUND THAT MAYBE WE’RE NOT PERFECT’

Frame: I don’t think that any economists in the world predicted the length of this recession.

The Westray accident also drained us very, very severely.

To review the events before and since the fatal Westray coal mine explosion on May 9, 1992, and to assess prospects for reopening the mine, Maclean’s Executive Editor Carl Mollins, Halifax Bureau Chief John DeMont and Associate Editor John Daly interviewed Clifford Frame, the head of Curragh Inc. and Westray, for two hours in his downtown Toronto office on March 23. Excerpts:

As a result, I think our banks got a bit nervous. They certainly had the right, because of falling zinc prices. But I think they might have been a little more tolerant had it not been for the combination of events. Since the accident, we’ve had to cough up close to $80 million out of our working capital. Maclean’s: Do you have to get the open-pit mine next to Westray up and running? Frame: There is $16 million insurance money in escrow that requires the release of the federal government. The rescue plan will take about $25 million—$16 million plus the open-pit revenues, from which we figure we’ll get, conservatively, about $10 million in cash flow.

Maclean’s: Westray is closed, your zinc and lead mines in the Yukon are shut down and you are trying to sell another zinc deposit in British Columbia. You are also trying to sell $50 million worth of preferred shares privately. Do you think that you can survive?

Maclean’s: Given what has happened at Westray, why should the Nova Scotia government let you start a strip mine?

Frame: To me, this whole Nova Scotia thing has taken a terrible tack. Only Curragh has said, ‘We’re going to find out the cause of the accident.” Everybody else has been looking for somebody to hang, they’re like vigilantes, they’ve been looking for blame. It’s like the old cowboy western, “Let’s go and find somebody to blame and hang the guy quick, let’s not find the cause of the acci-

to have an election this year. Frame: The politics could work against us. And if we have to walk away because the politicians throw us out, well that’s their decision. But if reason and sensibility prevail, we will be given the right to reopen the mine and find the remaining victims— or make a damned good attempt at it. We need the strip mine because we don’t have enough money and we’re not about to go and ask the feds or the province for any more money.

Maclean’s: Without meaning to sound callous, why is it important to get the bodies?

Frame: Well I think the underlying importance is that the major resource is there in Nova Scotia and the jobs are needed. If you agree with that, there’s a terrible responsibility to remove those victims’ bodies and not to ¿ work in an underground gravels yard. I think it’s a feeling of the I families that the victims are still I down there. It’s my feeling. But % it is not out of line with reopen! ing the mine itself.

“ Maclean’s: People say that you have a canny knack or a sinister knack for raising money from government. How do you respond to that? Frame: I’d love to deal with that question. How does a junior mining company or individual in this country get venture capital? When I took up Faro two years ago, Dominion Securities had been trying to sell it for two years, and the federal government. So I went to the federal government and I said, “I can do this project and this is what I need.” All the leading mining guys poohpoohed it. I told them what could be done to make it economic. So the federal government said to me, “OK, we’ll give you an 85per-cent-of-$ 15-million guarantee provided you can raise at least an equal amount of money.” So I raised that money down in the United States. And I got the federal money. When I went to pay it back ahead of schedule, they were so astounded that they didn’t have a means of collecting it because nobody ever paid them back ahead of schedule. Maclean’s: What about Westray?

Frame: I didn’t think I was interested in the

dent.” I promised to tell the families the cause of the accident. Now I’m not going to go down there and point fingers. I think it’s a terrible situation when we have a society where you’ve got 26 people killed and we’re only out looking for blame.

Maclean’s: How do you feel about people who point their finger at Curragh?

Frame: First, you had the commission set up and you had the commission judge saying that he’s going to investigate everything and we’re going to point fingers. And then you had the RCMP set up, well we’re going to find the cause, we’re going to find the blame. And before that, the media almost had Curragh convicted, of course. Like Susan Nelles—she wasn’t even there when two or three of the victims were murdered, she wasn’t even at work, but they had her convicted in the press. Like Donald Marshall down in Nova Scotia.

Maclean’s: Are politics working against you now? Both Nova Scotia and the feds have

COVER

Pictou idea at first. Then Bob Coates [then MP for Cumberland-Colchester] asked me to meet John Buchanan [then Nova Scotia’s premier] and I had two meetings with him. I hardly said anything. John Buchanan said to Coates, “Does this guy ever talk?” I don’t like to look at something and blow my horn if I can’t do it. Anyway, there was nobody who could raise money. So I went to the federal government and said, “I can do this project if you support this project for an 85-percent guarantee. That’s the only way it is going to be done. We can do this project but we can’t finance it.”

I went up there twice and my people carried on all subsequent negotiations. I saw Robert de Cotret [then minister of regional industrial expansion], I saw Elmer MacKay, because he was the local member. I didn’t see anybody else. I went in day one and told them what it would take to do it, do it or else.

Maclean’s: In Yukon, the government has attached some stijf conditions to their offer of a $29-million loan guarantee. They even want you to move your headquarters to Whitehorse.

Frame: Oh that’s tongue-in-cheek. I think it’s fair that maybe we would put a top operating executive up in Whitehorse again. You know, the take for the government for these sponsorships is just enormous. If I, as a private enterprise, could have the government take and they would have mine, I wouldn’t need a nickel from them. Every time you do a capital program, or hire a person, they take the tax. Every time you use a piece of equipment, they take the tax. Just from the income tax and sales taxes, the federal and provincial government would make $29 million in nine months. They will lose if we disappear from the scene.

Maclean’s: But they are clearly very skeptical about your finances.

Frame: Of course, wouldn’t you be? We’re down to a very low money and we’ve got three things out there we’re tiying to do. But they’ve got to look at what they are developing up there and what can keep going and stay competitive. From 1982 to 1986, it was a ghost town up there. To me, it’s a non-brainer if the two levels of government are going to lose by the thing shutting down. I mean my son, my 9-year-old son, should be able to figure that out.

Maclean’s: Whose idea was the take-or-pay contract that Westray signed with the Nova Scotia government, the obligation for them to pay for a minimum amount of coal each year, even if they didn’t take it?

Frame: You know, take-or-pay is a misnomer. Poor old Donny Cameron, sorry, the Premier, is being blamed for the take-or-pay.

He made one hell of a tough deal there. The federal government said we had to mine a million tons a year to qualify for assistance. We had contracts for 700,000 tons. Cameron knew that Trenton Works could get additional quantity, and that New Brunswick had additional needs. If we took any of that money, it was really just a reassurance to the feds.

We still had to pay back that money with full interest rates and under specified conditions. I take big exception to people down there who have called it take-or-pay and to allege any impropriety. I tell you, Donny Cameron made one hell of a tough deal.

Maclean’s: Some miners have said that

'It's a non-brainer if the governments are going to lose by the thing shutting down'

Westray was unsafe, that it was put it into production too quickly.

Frame: Well first of all, Gerald Phillips, the mine manager, had a very good reputation. Now since the accident, we’ve found that maybe we’re not perfect. As I said to you at the beginning, I’m not going to start pointing fingers. The company stated at the beginning that the mine would have all the most up-to-date safety and operating equipment and we did not stint ever, whether it was a new type of computerized methane detection system that they put down there, or equipment for training mine rescue teams, or special machines. I mean, if somebody like me, who operated 17 years over a period from

1957 to 1985 in the uranium business, and went through a horrendous amount of criticism for safety and the environment and did so many things to improve safety, would ever permit the building of any operation that wasn’t first class.

Maclean’s: Wasn’t the mine itself very volatile, and many of the miners inexperienced?

Frame: The criticism about the fellows not knowing anything about the rock I found misplaced because where the rock came down, it was almost exclusively in an area where they had some reinforcement steel, two sets. So they understood the rock very well. As far as the gas is concerned, the mine is a lowgas emanator compared with mines in Appalachia. But there has been a certain amount of, what’s the word, overconfidence that set in. Because of the low emanation rate, they may have got a little bit complacent. In many coal mines I’ve been in, you can actually see the effects of methane coming out of the wall. It swells up the coal. But there was nothing like that down there. And there were large fans. The basic ventilation was quite good.

Maclean’s: But then you had these series of safety inspectors asking for more.

Frame: We have since found out that they weren’t perfect. But if you go to DEVCO’S [Cape Breton Development Corp.] mines, you’ll find the same kind of inspection reports. Or if you go to Alberta. That’s the inspector’s job. And there should be a quick attendance to that. Again, I don’t want to point fingers, but there was a dual responsibility there, all right? And never at any time were we in this office made aware that that there was ever anything to worry about.

Maclean’s: What is holding up your plans to reopen Westray?

Frame: It’s the high-profile politics of it and the fact that the governments were involved in the financing. We’re strictly private enterprise. We got our applications ready, but we waited until it was reasonable to make those applications. We didn’t put any pressure on to immediately start mining again. That’s kind of abnormal too, but we had to recognize the conditions. It was highly political. Maclean’s: Are you facing personal financial ruin unless things go properly?

Frame: Oh no, I don’t think it’s got anything to do with finances at all or money at all. If I was in this strictly for money, during the peak of the operation I could have probably sold my shares for $75 million plus. Now my shares are worth nothing. Inasmuch as I am able, I want to get Pictou going again. If they want us down there, I want to do that. It’s professional pride as much as anything else, but responsibility too. □