DENVER – State regulators revoked Red Arrow Gold Corp.’s mining permit Wednesday after the company failed to follow orders to clean up an illegal, mercury-tainted mill just outside Mancos.
Red Arrow also lost its permit for a mine near Silverton.
The company had already been slapped with numerous fines and a cease-and-desist order after state inspectors found an unpermitted mill that used mercury to extract gold from ore just west of Mancos town limits.
The company’s owner, Craig Luikko, had written to regulators to ask for a delay in Wednesday’s hearing at the Mined Land Reclamation Board.
Liukko has been embroiled in an ownership dispute with a bankrupt partner company and a New York hedge fund that invested in Red Arrow’s Out West Mine north of Mancos. Liukko is out of state and waiting to testify in the Texas bankruptcy of his partner company, American Patriot Gold.
“Red Arrow Gold Corporation still has high hopes to provide testimony on its own behalf when it becomes appropriate,” Liukko wrote.
But mining board members said their patience had reached an end. Liukko has never appeared before the board several hearings since last summer.
“We’ve given them lots and lots of chances,” said Barbara Green, chairwoman of the Mined Land Reclamation Board.
The state cited Red Arrow with a litany of violations after it discovered the mill Liukko had installed in a pair of buildings on the west end of Mancos. The state and the Environmental Protection Agency have had to step in and clean up mercury and arsenic at the mill.
Under Wednesday’s order, Red Arrow forfeits the $16,783 bond it had posted with the state years ago. However, the cleanup costs are expected to be significantly more than the bond will cover.
Another $386,000 in fines will be sent to the state’s collection agency, said Julie Murphy, an attorney for the Division of Reclamation, Mining and Safety.
Cleanup on the mill should be done by summer, and contaminated soil will be removed, Murphy said.
“EPA’s done a really fantastic job with getting the pieces in place to decontaminate the illegal mercury mill,” Murphy said.
Liukko has told the board in the past that he could not comply with its orders to clean up the mill because his company was taken over by a bankruptcy receiver requested by a major investor, Maximillian Investors of New York City.
A Montezuma County judge removed the receiver from the picture in November, and now Maximillian appears to want to take over Red Arrow’s assets.
A lawyer for Maximillian asked for a delay in Wednesday’s hearing, saying that losing the mining permit would diminish the value of Red Arrow. But the board revoked the permit anyway.
Any new owners of Red Arrow could ask to have the permit reinstated, but they would have to pay the fines that Red Arrow has accumulated, Murphy said.
Also Wednesday, the mining board revoked Red Arrow’s permit for the Freda mine just west of Silverton. Inspections revealed water pollution and erosion problems, but the company has done nothing to clean up the site, said Wally Erickson, a Durango-based mine inspector.
The board also made a move to confiscate Red Arrow’s bond for the Freda mine, but by law it can’t claim the bond until its next meeting in a month.
The bond of $8,685 will not be enough to clean up the Silverton site, Erickson said.