Gold Mountain: the contractor bought the mine, and its own release

The Elk Gold mine lies about 57 kilometres southeast of Merritt, midway to West Kelowna: 32 mineral claims, two mining leases and an open pit whose crushed ore, containing gold and silver, was transported off site for processing, per the First Report of the Receiver, Aug. 27, 2025, paras. 5–6, 27. The pit was worked by a contractor. Nhwelmen Construction Limited Partnership, whose units and whose general partner's shares are held by the Nlaka'pamux Nation Tribal Council, provided mine operation services to Elk Gold Mining Corp. under a contracting agreement dated January 19, 2021, per the Affidavit #1 of H. Mazinani, Dec. 10, 2025, paras. 2, 11. Gold sales, on the receiver's reading of company filings, went from 5,644 ounces in the year ended January 31, 2023 to 4,916 the next year and 1,070 in the twelve months to January 31, 2025. Elk Gold ended the operating contract effective February 1, 2025. In May its parent, the TSX-listed Gold Mountain Mining Corp., cautioned investors against relying on its technical report on the mine; on June 17 Elk Gold told the province that production would stop by June 26, per the First Report, paras. 8–10, 36 and the Notice of Application of Nhwelmen, May 14, 2026, Part 2, para. 13.

On July 31, 2025 the contractor returned as the creditor. Nhwelmen, the debtors' primary secured creditor, obtained an order from Justice Gropper appointing MNP Ltd. receiver and manager of Gold Mountain, Elk Gold and their intermediate holding company, Bayshore Minerals Incorporated, under s. 243(1) of the Bankruptcy and Insolvency Act and s. 39 of the Law and Equity Act, per the Receivership Order, July 31, 2025, para. 1 and the First Report, paras. 11–12. It then funded the receivership, credit-bid its own debt for the mine, and was prepared to complete the deal, its representative swore, only if the order approving it included a release of claims against Nhwelmen, per the Affidavit #2 of L. Thompson, Dec. 10, 2025, para. 9. On August 6, 2026, Justice G.C. Weatherill approved MNP's final accounts and made the order providing for its discharge. Among the counsel before him was a lawyer for Foreman Equipment Ltd., an equipment lessor whose lawsuit against Nhwelmen, Nhwelmen says, that release discharged, per the Discharge Order, Aug. 6, 2026, Sched. "A" and the Notice of Application of Nhwelmen, May 14, 2026, Part 2, para. 25.

A creditor that had worked the pit

The receiver put Nhwelmen's secured claim at approximately $18,877,432 as of November 12, 2025, made up of Nhwelmen's 12% debenture, a debenture held by a Nhwelmen affiliate, $4,855,288 owed under the mining agreement and $404,007 in estimated enforcement costs. The receiver's counsel opined that the security was valid, enforceable and, with two exceptions, first-ranking, per the Second Report of the Receiver, Dec. 3, 2025, paras. 40–46.

Apart from a lien of Nhwelmen's own, four claims of builders' lien had been recorded against Elk Gold's mineral tenures, among them Rock Construction & Mining Inc.'s, for approximately $4.3 million, and Foreman Equipment's, for approximately $594,000. The receiver noted that all of them were recorded after Elk Gold granted its security to Nhwelmen and considered them subordinate to it. Unsecured trade payables came to approximately $6,234,716, and two royalties were recorded against the tenures: a 2% net smelter returns royalty to Star Royalties Ltd. and a 90% royalty on gross proceeds from silver sales to Silver Crown Royalties Inc., per the Second Report, paras. 52, 54, 57–58, 64.

The mine manager put the cost of bringing the mine into full compliance with its existing permits at approximately $9.3 million, per the First Report, para. 55. Care and maintenance ran at approximately $300,000 a month, per the Second Report, para. 76(b). Nhwelmen lent the receiver the money, under a non-revolving demand facility of up to $5,000,000 at 12% a year; the receiver said it had canvassed other possible lenders and no other was willing to offer funding at that rate, per the First Report, paras. 69–70.

One late letter, and no cash at closing

On September 2, 2025, Justice Weatherill approved a sale process with Nhwelmen's credit bid as stalking horse, "solely for the purposes of being the 'Stalking Horse Bid'," per the Stalking Horse and SISP Approval Order, Sept. 2, 2025, para. 6. The receiver approached 62 prospective parties directly; seventeen groups signed non-disclosure agreements, and none asked to visit the site. In consultation with Nhwelmen, the receiver set the minimum qualifying price at $21,450,000. Nothing arrived by the November 12 deadline. On Saturday, November 15, a late letter of intent offered to buy the shares of Gold Mountain for cash payable over five years, with, so far as the receiver could determine, no cash at closing; the receiver found that the discounted value of those payments "falls far short of the Minimum Consideration," per the Second Report, paras. 84, 86–95. The letter itself sits in a confidential supplement that Justice Weatherill sealed until 90 days after the discharge order takes effect, per the Sealing Order, Dec. 10, 2025, para. 3.

The receiver described the stalking horse's subscription price as approximately $21 million, made up of Nhwelmen's secured indebtedness, the receiver's borrowings from Nhwelmen, and the claims ranking ahead of Nhwelmen's security. The priority amounts were to be paid in cash and the rest by credit bid, per the Second Report, para. 101(d)–(e).

The receiver's case for a reverse vesting order rested on two things the structure would keep inside the company. The first was the permits, which were not in good standing; the receiver expected the two ministries involved to require that they be brought into good standing as part of any transfer; it called the RVO "a practical necessity." The second was tax: the receiver estimated the debtors' cumulative 2024 non-capital losses at $44,771,471 and understood their preservation to be "an integral part of the Stalking Horse Bid," per the Second Report, paras. 109–118. The contracts left behind were the New Gold Inc. arrangements, including the agreement to sell Elk Gold's ore to New Gold for milling in Kamloops, and agreements with the Nicomen, Lower Nicola and Upper Similkameen Indian Bands, per the Second Report, para. 103 and the Approval and Reverse Vesting Order, Dec. 10, 2025, Sched. "C". The deal, the receiver wrote, "will not generate recoveries for creditors junior to Nhwelmen (such as the Builders' Liens)," and neither, it said, would an asset sale, a liquidation or a CCAA proceeding, since no bid had exceeded what Nhwelmen was owed, per the Second Report, para. 119.

The release

"Although an effect of the Release is to release Nhwelmen from claims or potential claims against Nhwelmen existing as at the date of the proposed RVO, relating to the Mine (with corresponding adverse effects on parties who have or may have claims against Nhwelmen), the Receiver is not aware of any viable alternative transaction that would not include the Release," the receiver wrote. The release, it noted, did not reach fraud, wilful misconduct or gross negligence, or claims against the debtors or their management or directors, per the Second Report, paras. 123, 130.

Nhwelmen's reasons were sworn by Lindsay Thompson, the Chief's Representative of the Nlaka'pamux Nation Tribal Council. When it negotiated the bid, she said, Nhwelmen knew of claims asserted against both itself and Elk Gold for unpaid work allegedly performed on the mine, Rock Construction's among them; its ability to finance and develop the mine would be "significantly impaired" if those claims survived closing, and the release "formed part of the consideration and the economic bargain for the Stalking Horse Bid," per the Affidavit #2 of L. Thompson, paras. 1, 7–8.