Emgold's Grass Valley office up for sale; financing deal with Dunn is off

Published on Oct 14, 2009 - 2:02:18 PM

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By: YubaNet

GRASS VALLEY, Calif. Oct. 14, 2009 - In yet another sign of Emgold Mining Corporation's dire financial straits, the junior mining company from Canada can no longer continue to lease its approximately 45,000 sq. ft. offices and tile manufacturing pilot plant in Grass Valley at 179 Clydesdale Court. This week, the owner of the building put it up for sale or lease to a new tenant.

In the wake of a $210,000,000 lawsuit filed by a California company against Dunn Capital Partners -- the Canadian investment firm Emgold was counting on to provide the cash needed to complete its long-stalled environmental review process for the proposed Idaho-Maryland gold mine in Grass Valley -- Emgold's deal with Dunn to raise money to pay for the Draft Environmental Impact Report (DEIR) has been "cancelled", according to Dave Watkinson, Emgold's president and chief operating officer.

For details on the legal proceedings against Dunn announced on Sept. 30, go to Fountain Healthy Ageing Inc. to Commence Lawsuits Claiming Over US$210,000,000 Against Dunn Capital Partners.

"We have another party with a new interim financing option," said Watkinson, although he declined to offer any details. He also would not offer any details on the lawsuit, saying, "I don't know much about it and can't comment on it."

Emgold is not renewing its lease with the owner of the building "in an effort to lower our operating costs", said Watkinson. "We could end up staying in part of the building with a sublease with the new owner or tenant or going to a smaller building." According to Watkinson, Emgold has 5 full time employees.

Last month, the Grass Valley Planning Department updated city council members on the the status of Emgold's Draft Environmental Impact Report (DEIR). The public review period for the DEIR ended on January 20, 2009. Since then, the environmental review process has been on hold while the city waits for Emgold's revised project changes to address issues raised in the DEIR by the public as well as several state and local agencies. (To read some of these concerns, go to www.claim-gv.org/.) The city is also waiting for an updated reimbursement agreement with Emgold to cover the cost of conducting the environmental review process. Based on anticipated project changes and technical studies, a new DEIR is being required by the city.

With gold commodity prices at record highs, Emgold's financial outlook is at the lowest ebb since it announced plans to reopen the abandoned Idaho-Maryland mine. Why doesn't the price of bullion at over $1000 an ounce translate into senior mining companies scrambling to get a piece of the action at the old mine?

In a nutshell, Emgold doesn't have proven gold reserves at the Idaho-Maryland mine that shut down in 1956. Mineable reserves aren't just waiting to be dug up, processed and sold. Like the approximately 2000 Canadian junior mining companies that trade on the Toronto Venture Exchange - an exchange reserved for new or unproven companies - what Emgold is proposing is to explore for gold at the now-flooded underground mine -- with no guarantees they'll find any -- even after they dewater the 70 miles of flooded mine shafts and put the town's drinking water supply at risk of depletion and pollution from exploration activities.

Emgold's track record isn't helping to attract major investors. It has been trading on TSX Venture since 1989 and has yet to open or operate a mine of any kind.

What Emgold has, according to its disclaimer language published on its website, are "measured", "indicated", and "inferred" resources -- terms that are recognized by Canadian regulators but not by the U.S. Securities and Exchange Commission. What senior mining firms are looking for when shopping around for junior mining companies to partner with or acquire outright is a sure bet -- not the chance of finding proven reserves.

In its Interim Financial Consolidated Financial Statements filed on August 31, 2009 at www.sedar.com Emgold states:

"As at June 30, 2009, the Company has no source of operating cash flow and has an accumulated deficit of $44,916,782. In addition, the Company has a working capital deficiency, which is defined as current assets less current liabilities, of $957,618 and has capitalized $984,933 in acquisition costs related to the Rozan, Stewart, Jazz and Idaho-Maryland mineral property interests. The Company had a loss of $1,144,175 for the period ended June 30, 2009. Operations for the period ended June 30, 2009, have been funded primarily from the redemption of the Company’s short-term investments, private loans to the Company and a private placement completed during the period.

The Company is in the process of exploring its mineral property interests and has not yet determined whether its mineral property interests contain mineral reserves that are economically recoverable. The Company’s continuing operations and the underlying value and recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of its mineral property interests and on future profitable production or proceeds from the disposition of the mineral property interests or other interests. The Company’s ability to continue as a going concern is contingent on its ability to obtain additional financing. The current equity and financial market conditions, the challenging environment for raising monies, and the low price of the Company’s common stock make it difficult to obtain additional funding by private placements of shares. The junior resource industry has been severely impacted by the world economic situation, as it is considered to be a high-risk investment. There is no assurance that the Company will be successful with any financing ventures. It is dependent upon the continuing financial support of shareholders and obtaining financing to continue exploration and/or development of its mineral property interest. While the Company is expending its best efforts to achieve its plans by examining various financing alternatives including reorganizations, mergers, sales of assets, or other form of equity financing, there is no assurance that any such activity will generate funds that will be available for operations.

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