Colorado gold mines in play after dispute between prospector, investor
By STEVE RAABE | The Denver Post
PUBLISHED: January 31, 2014 at 12:06 pm | UPDATED: April 27, 2016 at 8:04 pm
NEDERLAND — A pair of historic gold mines possibly worth billions face a clouded future after a flurry of lawsuits that pit an old-school prospector against a former state legislator.
Tom Hendricks, known as “Miner Tom” among locals, has worked the Caribou District gold mines almost every day for more than 40 years.
He has found gold in the hills above Nederland, and he has explored enough to be certain that a vast fortune still awaits.
But the ambitious plans of Hendricks and his partners to recover the gold have been stymied after lawsuits filed by an investment group headed by former state Sen. Tom Wiens.
Wiens is attempting to foreclose on the Boulder County mining properties, claiming that Hendricks and partners in Calais Resources Inc. defaulted on $15 million in loans.
At stake is a trove of gold that Hendricks estimates could be as much as 15 million ounces, worth nearly $19 billion at current prices.
The legal battle is unfolding during an interesting period for gold mining in Colorado. Prices are high enough — about $1,250 an ounce — that several owners of mining claims are seeking to relaunch production in areas that first were developed in the gold rush of the 1860s.
But strict and expensive regulatory requirements, combined with wariness by prospective lenders and investors, have made it difficult to get the historic claims back into production.
The Caribou and Cross mines, operated by Calais Resources, are prime examples of the gap between eye-popping potential and capital-constrained reality.
Even as ownership of the properties lies in legal limbo, Hendricks, 64, dons a pair of Carhartt overalls and drives each day up a rutted dirt road to maintain the mines, whose last major production was in 1988.
Since then, he and David Young — officers of Calais Resources — have extensively explored their 500 acres of claims. They’ve drilled hundreds of core samples and discovered dozens of promising new ore veins.
Yet, one crucial requirement — operating capital — has kept them from restarting the mines and posting profits.
Calais Resources was created as a publicly owned company, but in 2012 the Securities and Exchange Commission revoked the firm’s registration for a recurring pattern of failing to file financial reports. Calais told regulators that the reports weren’t filed because the company couldn’t afford to pay its auditor.
An apparent breakthrough occurred later in 2012 when a group that included Wiens spent $6 million to purchase promissory notes representing loans made to Calais over the past decade. The notes gave the Wiens group the right to collect principal and interest payments from Calais.
Wiens, 61, served as a Republican state legislator in Colorado from 2003 to 2009. He owns a Douglas County ranch and operates a financial-services firm, New West Capital.
Wiens saw the Calais promissory notes not just as a financial instrument but as a mechanism to get involved in the quest for gold.
He and the mine partners launched a series of discussions about creating a partnership in which Wiens’ group would provide the funds needed to get the mines up and running again.
Calais says Wiens agreed to make an initial payment of $930,000 to pay off some of Calais’ debts, then invest more to make the mines operational.
Months later, the talks turned confrontational under claims by both sides of fraud and misdealing.
Wiens’ investment partnership, New West Minerals LLC, said the loans were in default and demanded full payment from Calais. When payment wasn’t made, New West filed suit in Boulder County District Court to foreclose on the mine property.
In addition, New West filed a lawsuit in Douglas County District Court, alleging that Hendricks and Young of Calais and their Boulder attorney John Henderson engaged in “self-dealings and intentional misrepresentations” to the detriment of New West.
Calais and related parties have filed counterclaims in both cases, claiming that it was Wiens who acted in bad faith.
Hendricks said he feels personally attacked by the suits and is concerned that they portray him in a bad light, contrary to the reputation he has established over decades of work and community involvement. His résumé contains a long list of civic awards and recognition.
He describes the legal dispute as “Wiens’ effort to steal my life’s work.”
“I’ve spent more than 40 years responsibly developing the mining property in the Caribou District in a manner that respects the environment and the surrounding community,” Hendricks said. “I’ve encountered countless obstacles in that time, though perhaps none bigger than someone who presented themselves as a partner turning out to be a predator intent on snatching it up.”
Wiens replied that New West filed the foreclosure suit “long after Calais had gone over the cliff to financial ruin.”
“Calais’ problems have been well documented and continuing for many years,” Wiens said. “It is unfortunate that Mr. Hendricks feels the way he does, but this situation is a result of a series of plans gone bad over a long period of time, resulting in bad outcomes for Calais’ creditors and shareholders.”
Like Calais, Wiens has endured his share of financial problems. Companies that Wiens has headed, including Recycling Industries and InteleCom, have filed for bankruptcy. Wiens also once filed for personal bankruptcy protection.
The outcome of the mines’ ownership is likely to hinge on one key legal question.
Wiens’ lawsuits state that he legally acquired four Calais promissory notes in a series of purchases. But he has acknowledged in related hearings that he does not physically possess three of the notes. Case filings refer to them as the “lost notes.”
Calais argues that promissory notes are negotiable instruments, and as with personal checks, a presumed owner must have physical possession of the original documents, not just copies.
Wiens’ attorneys claim that his ownership of the notes is clearly established and that physical possession is not required.
Calais has filed a motion to dismiss the case based on the possession issue. A ruling is expected this year.
Calais’ legal fees are being paid by unidentified investors who will acquire a stake in Calais if the company wins in court, said Calais attorney Tarek Saad of Patton Boggs.
Steve Raabe: 303-954-1948, firstname.lastname@example.org or twitter.com/steveraabedp http://www.denverpost.com/2014/01/31/colorado-gold-mines-in-play-after-dispute-between-prospector-investor/