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Sterling defaulted on a "bridge loan" and owes $1.5aEURemillion to the Utah company that arranged the temporary financing, according to a suit recently filed by the firm, Private Capital Group Inc. Other claims are flowing in from contractors, attorneys and suppliers of mining equipment.
Sterling gained control of the underground silver mine's lease about five years ago. The company reopened the Sunshine in late 2007, but stopped work at the mine and laid off 90 workers in September amid mounting financial troubles.
John Ryan, Sterling's chief executive officer, said the company is looking for investors willing to pay off Sterling's debt.
"Obviously these are very difficult times as the company is faced with numerous collection actions from creditor parties," Ryan said in a press release. Given the difficult economic climate, "there can be no assurance that we will have success at raising additional capital on any terms at this time," he said.
Sterling recently sold its mining claims in Mexico, but the sale brought in less than $250,000 in cash. Part of the payment was shares in another small mining company.
Ryan, who took over as Sterling's president and CEO earlier this month, did not return a phone call seeking comment Thursday afternoon. He also is a board member of U.S. Silver Corp., which owns the Galena Mine in Silverton, Idaho.
Sterling borrowed money from Private Capital Group in June and defaulted on the payments, according to Private Capital's lawsuit, which was filed in Shoshone County. In the suit, the Utah company is asking for the Sunshine Mine's lease, which it says was part of the security for the loan.
Other creditors also are seeking payment. An Arizona firm, Miller Sales and Engineering Inc., says Sterling didn't pay for $131,500 worth of equipment delivered to the Sunshine Mine, according to a lawsuit. Interwest Technology of Utah also says Sterling owes $14,300 for equipment and supplies.
Atlas Mining Co. of Osburn, Idaho, filed a claim for $99,000 worth of contract mining work.
Seattle law firm Byrnes & Keller says Sterling has accrued nearly $99,000 in unpaid legal bills. Wallace attorney Michael Branstetter says Sterling owes him $35,000 for legal work. And Summit Assurance of Tucson, Ariz., says Sterling failed to pay a $28,400 bill for consulting work.
To see more of The Spokesman-Review, or to subscribe to the newspaper, go to http://www.spokesmanreview.com. Copyright (c) 2009, The Spokesman-Review, Spokane, Wash. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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