To Westray and Beyond

The story of Clifford Frame



To Westray and Beyond

The story of Clifford Frame

By Paul McKay

This article appeared in
The Ottawa Citizen
Monday, 8 September 1997

Paul McKay tells the story of Clifford Frame,
who wants to put Westray behind him and
get back in business.

Just after midnight last July 4, businessman Rhett Drew's fax machine in Sydney, Australia, switched on. Mr. Drew waited as three pages, relayed from Toronto, emerged.

The first, under the letterhead of Mineral Resources Corp., had a blunt, hand-scrawled ultimatum. Mr. Drew had 2½ hours to hand over the company he chaired, Greenfields Coal: "If signed by you as a firm undertaking to execute Friday, July 4, and to release as requested to the press and returned to me by fax by 2:30 a.m. July 4th Australian time, then MRC will withhold as so stated. Sorry to get you up, but on the other hand I was up all night. Thx."

The next two pages outlined the takeover terms. A director must be fired. New technology and new financing must be pursued. Everything must be done to obtain the maximum tax credits available on Greenfields' chief asset, a coal property in West Virginia.

Most important, there would be a new majority on the five-man Greenfields board. That was non-negotiable. The new directors would be John Joseph Byrne, an Australian businessman with a record of multi-million dollar flame-outs and liquidations in both Australia and Canada. Until May 1997, Mr. Byrne had been the executive director of the Greenfields U.S. subsidiary. He was also executive director of the TSE-listed MRC.

The second new director would be Leslie Smyth, a former Greenfields director and Byrne associate. The third new director would be the new Greenfields chairman. That designate was Clifford H. Frame, the man sending the midnight fax.

Mr. Drew was stunned. The message was explicit. He could agree to a quick, quiet coup, or MRC would begin a hostile takeover bid that morning — an Australian holiday. Just below the nine carefully crafted demands and Mr. Frame's signature, was a blank space for Mr. Drew to sign, then fax back to Toronto.

Mr. Drew refused. He still had no idea what MRC would pay for Greenfields shares. He knew little about Clifford Frame. What he did know was that John Byrne had failed companies in his past, including a Canadian venture called First Toronto Mining, and an Australian flame-out, Walhalla Mining, which left bankers holding close to $48 million in bad debts.

When the midnight ultimatum passed, MRC chairman and CEO Clifford Frame released a 14-paragraph takeover bulletin in Toronto.

"MRC strongly disagrees with Greenfields business plans to date ... It is absolutely essential that Greenfields bring its coal project into operation by July 1998," warned Mr. Frame. "To do so requires immediate action to arrange project financing in order to purchase delivery equipment. If Greenfields fails to take action by this August, it will risk losing tax credits of up to $80 million U.S. It is essential that this not happen."

The MRC takeover bid was barely noticed at the TSE, or in Canada's business press. MRC was a junior company. As of September 1996, it had $28,000 in cash, assets of $285,000, and a liability of $4.2 million. Its shares were trading in the 70-cent range.

Greenfields, listed on the Australia stock exchange, was a mining junior too. Its shares were trading in the 20-cent range.

It had rocky financing, shaky leadership, and its major asset was its planned coal project in the U.S., which qualified for alluring tax credits.

When Rhett Drew read the MRC takeover terms later, he got his second big surprise. There was no cash offer. Instead, MRC wanted a paper trade — one share of MRC for eight shares of Greenfields. At the currency exchange rate, that would give Greenfields shares only half their market value. Why would any Greenfields shareholder vote for that?

Mr. Drew's third surprise came when he checked the Greenfields accounts. He discovered that at least $1.4 million in low-interest loans had gone to companies directed or co-owned by Mr. Byrne, Mr. Frame, Mr. Smyth or their associates. None had been repaid. He re-checked Greenfields trading patterns. MRC's share in Greenfields had plunged from more than 40 per cent to 18 per cent leading up to the takeover bid.

Mr. Drew's fourth and biggest surprise came when he saw that the resume of Clifford Frame — the proposed new Greenfields leader — omitted any business activities after 1988.

When Mr. Drew did fill in the missing sections of Mr. Frame's resume, he found that Mr. Frame's defunct Canadian companies had left a debt trail exceeding $200 million. And that a Nova Scotia coal mine he built and ran had left 26 miners dead.

Nobody can claim Clifford Frame hasn't worked and played hard for most of his 64 years.

Now, he's fond of Jaguars, Wyoming powder skiing, single-malt Scotch, Monte Cristo cigars and gold-nugget cufflinks. He's a gentleman farmer, with a herd of purebred Black Angus cattle north of Toronto.

The 250-acre estate, called "Curraghdale" after a famed horse-racing track in Ireland, has cattle with names such as "Goldback," "Fortune" and "Magnum," a secluded mansion, and a gated driveway.

But he grew up in Trail, British Columbia, where the main employer was the giant nickel smelter, Cominco. During and after the Second World War, it had a reputation for breeding hard-as-metal people.

There wasn't much choice. Trail's downwind valleys were scarred black and treeless by the plume from the smelter stack. Its hockey club, proudly named the Smoke Eaters, won a world hockey championship, mostly on lunch-bucket grit. Mr. Frame himself was good enough to be scouted by the New York Rangers as a teenager. In the summer, he worked in the smelter. So did his father and brother.

Trail's fortunes, and those of everybody who lived in the town, rose and fell with worldwide swings in metal prices. Mine accidents and fatalities were a fact of life. Mr. Frame's younger brother Mervyn was killed at Cominco — crushed between two ore cars in 1965.

By then Mr. Frame had escaped Trail forever. Armed with a 1956 mining engineering degree, and determined to learn the mining business from the ground up, he signed on as a shift boss at Denison, the world's largest uranium mine, in Elliot Lake, Ont. Three years later, he was mine captain for a 150-man crew.

During those years, Denison paid the highest miner wages in the country. It also had the highest worker turnover rates, the most accidents, and the most fatalities of any hard-rock mine in Ontario. The high toll triggered a provincial inquiry in 1959, which produced a scathing condemnation of safety practices at Denison.

Later, a 1976 royal commission would confirm that hundreds of early Denison miners had been stricken by deadly or debilitating radiation and silica dust levels. And that the miners' safety had been put at risk by two Denison tactics: driving shafts through the richest ore regardless of structural, radiation and dust conditions, and failing to provide proper ventilation.

When the bottom fell out of the uranium market in late 1959, Mr. Frame didn't remain to watch Elliot Lake become the world's most modern ghost town. He joined an exodus to the huge Inco nickel mine in Thompson, Man., where he was hired as a mine planner. Soon he was in the company office, mapping out new ore bodies and working out how to reach them fast.

In 1966, he moved back to Elliot Lake, this time as the Denison assistant mine engineer. The federal government had breathed life back into the town by promising to buy uranium and stockpile it for future resale. It didn't hurt that the MP for Elliot Lake was also the prime minister, Lester Pearson. Or that the Denison boss, the brash, belligerent Stephen Roman, was also a master at mining money from politicians of all stripes.

Mr. Frame returned to Inco in 1969, this time to lead the planning and construction of a $135-million nickel mine in Indonesia.

Then it was to Ireland, to build a $150-million lead-zinc mine with the help of tax incentives and a $30-million Canadian export loan. He was hitting his stride. And he was a hot prospect in the Canadian mining fraternity.

In 1975 he returned to Denison's headquarters. This time, Stephen Roman told him, he would be executive vice-president of exploration and mining. That could lead straight to the coveted job of Denison president — if Mr. Frame kept Denison's $2.5-billion empire, and stock prices, on an upward curve.

It was his game to lose. With the secret support of Ottawa, Denison had been a leading member of an international uranium cartel that fixed prices and drove up world prices 600 per cent between 1972 and 1976. Ontario Hydro, panic-stricken that Ontario's fleet of nuclear reactors might run short of fuel, signed 40-year, $6.6-billion contracts with Denison and its Elliot Lake rival, Rio Algom.

The contracts guaranteed the companies up to $2.2 billion in profits — after the public paid for all mine capital, labour, and operating costs, plus all taxes except corporate income tax. One clause in the Denison contract even guaranteed that no uranium producer within 50 miles of the Elliot Lake post office would make a higher profit than Denison. It took until 1992 for Hydro and the Ontario government to terminate the contracts — after spending nearly $1 billion extra for above-market cost uranium and contract curtailment costs.

Backed by the cost-plus contracts, Mr. Frame launched a massive expansion at the Denison mine in Elliot Lake. Money was no object. But safety was. A bitter steelworkers's strike triggered a royal commission, which excoriated Denison for two decades of appalling safety practices. A new provincial health and safety act was enacted, and the Canada Labour Code was reformed.

Then a provincial inquiry confirmed the Elliot Lake mines had dumped about 75 million tonnes of toxic mine wastes into nearby ravines and lakes, badly polluting the local watershed.

Denison was the worst offender.

For Mr. Frame it was five years of unrelenting pressure from politicians and labour unions. By the early 1980s, he was ready for a change of scene.

He found it in northwest British Columbia, where Denison had optioned a coal property called Quintette. There was little doubt the ore body was mammoth. But no one really knew where the best coal seams were buried, since only 18 test holes had been drilled in the geologically complex site. And getting the coal from the remote site to Japanese steel mills would require new roads, railroads, coal-handling terminals, and improvements in Pacific ports.

Mr. Roman and Mr. Frame began seeking support, first from regional politicians, then the British Columbia government, then the federal government.

By the time Quintette opened, about $1.5 billion in public infrastructure funds had been spent. Once that government money was committed, the Japanese coal purchasers signed long-term, cost-plus contracts for Quintette coal. Then Mr. Frame persuaded 55 banks to loan $700 million for the $800-million project. Then Denison kicked in $100 million.

Soon after, with Canada's newest and largest coal mine under construction, the Northern Miner magazine declared Mr. Frame its "Mining Man of the Year." One of the peaks at the Quintette site was named Frame Mountain. Denison stock surged.

But the triumphant mood didn't last long. The main Quintette pit was located in the wrong place. There was a cost overrun of $100 million. The coal had a high ash content, which made tons of coal unsaleable to Japanese blast furnaces. And, despite the public subsidies, Quintette coal was arriving at Pacific ports costing $100 per ton. Coal from southwest B.C. was arriving in Vancouver at $69 per ton. The world market price was $60.

The Japanese demanded big price cuts. Quintette's unsubsidized coal competitors in B.C. were livid. The 55 banks wanted their money. The politicians ran for cover. Quintette production was way below target.

In the spring of 1985, Stephen Roman summarily fired his once-most-promising protege. Mr. Frame preferred to call it a divorce. But there was no doubt it was final. Or that Mr. Frame would be the one moving house.

In January 1986, Stephen Roman wrote off Denison's $241-million investment in Quintette, leaving the banks to eat $700 million, his Japanese customers with high-priced, sub-standard coal, and the public to deal with $1.5 billion in dubious public expenses. The Quintette mine was eventually taken over by Teck Corp., which had developed a nearby coal mine. Both are still operating.

And Quintette's early safety record?

Ed Pittman is now a certified mine inspector for the B.C. government. He inspects coal, gold and copper mines in north-central B.C. from his Prince George office. From 1982 to 1996 he worked at Quintette.

"It was production first, safety second," says Mr. Pittman. "That caused a lot of grief and led to very poor morale. In some cases (Quintette's safety record) was atrocious. There was an awful lot of pressure to produce. Everyone knew there were billions riding on it."

Mr. Pittman confirms that Quintette had a high rate of accidents and lost time during its early years, due to a poor corporate attitude and an annual worker turnover rate of 300 per cent. He recalls plastic bags being placed over mine methane meters so high readings would not automatically shut down machinery.

Huge rotary ore drills regularly toppled. In one case, leaking hydraulic fluid caught fire, then destroyed a $7.5-million German ore shovel.

"The fire was so hot, the metal caught on fire," says Mr. Pittman. "By the time is was put out, that shovel was a smoking heap of slag."

When Teck Corp. took over the failed Quintette mine, Mr. Pittman says, safety conditions improved dramatically.

"It was like night and day. It was literally like somebody turned the lights on. I was very impressed with Teck. If they said they'd do something about safety, they'd do it."

Two years after being named Canadian mining executive of the year, Clifford Frame was trolling Bay Street, looking for venture capital. But despite past successes in Ireland and Indonesia, the smell of Quintette was on the wind. Nobody would lend him a dime.

At the same time, mining giant Dome Petroleum was trolling Bay Street, looking for someone to take an abandoned $350-million lead-zinc mine in the Yukon off its hands. The Faro mine was costing $1 million a year just in maintenance costs. Lead-zinc prices were in the basement.

For $1, Mr. Frame bought an option to buy Faro. Five months later, he had his political ducks — and public subsidies — lined up. As a Price Waterhouse profile of Mr. Frame later reported: "Mr. Frame required a number of vital government subsidies and concessions achieved through delicate negotiations with the Government of Canada and the Government of the Yukon Territory.

These included: The Price Waterhouse report added, "The reopening also required a public relations campaign to offset the resistance from competitors in the mining community. These competitors organized a vigorous lobby to prevent financing and reopening."

The "delicate negotiations" were due to the fact that Mr. Frame was alternately dancing with Brian Mulroney's Conservative government in Ottawa (where Yukon MP Erik Neilsen was deputy prime minister), and the NDP cabinet of Yukon premier Tony Penikett.

It took a mere five months to put the Faro subsidy package together. The kicker came when Mr. Frame levered a cut-rate electric power contract with the federal power agency in the Yukon, and the Alaska city of Skagway knocked down its port taxes.

The timing was perfect. By Christmas, 1985, lead-zinc prices were spiking upward. In 1987, Mr. Frame's company reported net earnings of $27 million. In 1988, the figure was $60 million. In 1989, it was $62 million.

On almost every front, there was peace in the valley. Nearly 600 mine workers had jobs. The Faro mine accounted for more than one-third of the Yukon economic output. That made the Yukon government, and the federal government, happy. Even a chagrined Dome Pete was getting paid.

The Northern Miner declared Mr. Frame its "Mining Man of the Year" for a second time, in 1987. Suddenly, the loser of Quintette was a miracle worker at Faro. Everybody wanted to do a deal with him, including the silver-speculating Hunt brothers of Texas, junk-bond trader Michael Milken, and his newfound Australian friend, John Byrne.

But, despite a flurry of takeover bids, a major new mine property eluded Mr. Frame. His dream of a diversified mining empire stalled.

So did lead-zinc prices and mine production. The Steelworkers Union struck at Faro, demanding a bigger piece of the mine's profits and more focus on safety. In March 1989, a man was electrocuted when his screwdriver contacted an unmarked live wire hidden under snow. The safety code required live wires to be marked and elevated on tripods.

In April, the Steelworkers reported 39 accidents and a dozen dust fires. During that year, the frequency of lost-time accidents at Faro was 11.3, compared to the British Columbia average of 3.6.

That prompted the Yukon government to hire an independent safety expert. His May 1990 report on Faro mine safety, leaked to the Whitehorse Star, warned of: The next year, 1991, a Faro mine mechanic was crushed to death when the suspension on an 85-tonne dump truck he was inspecting failed. In December 1992, Curragh Resources (now a publicly traded company with Mr. Frame as CEO and major shareholder) was convicted and fined $15,000 for failing to ensure a front-end loader had a parking brake, and $5,000 for failing to ensure that oxygen was available on first-aid vehicles serving two mine pits 13 kilometres apart.

The convictions at the Faro mine came six months after 26 miners perished at the Westray coal mine in Nova Scotia.

Kenton Teasdale has had five years to weigh both the personal and political impacts of Westray. Perhaps no one has had a clearer window into the tragedy.

His daughter Isabel lost her husband, Myles Gillis. His grandchildren lost their father. And he lost a young son-in-law, who died underground. Rescue crews reported finding Myles Gillis clutching his crucifix.

Mr. Teasdale, a retired school principal, is also the designated spokesman for the families of the miners who died on May 9, 1992. He didn't miss a single day of the 76-day Westray Inquiry hearings. He heard all 71 witnesses, and virtually every word of the 16,650 pages of testimony. He has dealt with the lawyers, the media, and the insurance claims.

The deep creases in his face, his slumping shoulders, and especially his eyes, show it. Talking at the kitchen table in the unassuming rural bungalow he and his wife, Kay, share near Antigonish, east of the now infamous mine, he looks quickly away when tears threaten. His voice catches, and his fingers fold, refold and spread out the corners of a newspaper.

Then he continues, his face a mask of suffused pain and a silent, imploding fury.

"It was not an accident in the true sense of the word," he says. "It was predictable and predicted well in advance by knowledgeable people. The requisites for even attempting a safe operation at the Foord [coal] seam, where Westray was operating, were well known to Mr. Frame and his associates. They didn't even come close to following a minimal degree of safety."

For two hours, Mr. Teasdale makes that case, quietly, precisely, methodically — as a coroner might at an inquest. The notoriously gassy and dangerous Foord seam, which had killed 246 Pictou miners over a century. Mining in unapproved zones. Ankle-deep, ignitable coal dust. Uncertified underground equipment.

Disabled methane detectors. Constant cave-ins. Open sparks, even acetylene torches, underground. Untrained miners. Bad ventilation.

The details are not new. They were reported by miners under oath during Nova Scotia's Westray Inquiry, supported by subpoenaed inspection reports and expert witnesses, and documented in Halifax journalist Dean Jobb's 1994 investigative book, Calculated Risk.

Mr. Teasdale is convinced he knows how and where the fatal explosion happened on May 9, 1992. What consumes him is why it happened. And whether those responsible will be brought to account.

The source of the tragedy, he believes, lay in "a very close, cosy, almost incestuous relationship between the political regime in Nova Scotia at that time, and Curragh and Westray. The financial aspects. The regulatory control, or lack of it. The ready approval for almost any application Curragh was to make."

For another two hours, Mr. Teasdale recounts how Nova Scotia and federal politicians arranged $100 million in subsidies to build Mr. Frame's mine. As a bonus, the provincial power utility signed a 15-year, take-or-pay contract for Westray coal, under which any production surplus would be purchased by the Nova Scotia government.

That, says Mr. Teasdale, created a fatal conflict-of-interest. The Nova Scotia government was both Westray's single customer — and the safety regulator of the mine.

"It's a direct conflict of interest. This arm is saying: 'Obey the law.' And this arm is saying: 'If [Westray] obeys the law then I might wind up having to buy a lot of extra coal because the Crown corp. won't take it if it doesn't get it on time.' "

In fact, a written November 1991 order by the province's mine inspection branch, to stop Westray from mining in unapproved areas, was quickly reversed by senior Nova Scotia bureaucrats. The fatal explosion almost certainly occurred in the unapproved mine zone.

Mr. Teasdale holds out little hope that the Westray Inquiry will bring those responsible to justice. But he has reluctant praise for the politicians who appeared.

"At least when called upon to testify before the Inquiry — we may not believe everything they said, or have grave doubts about their integrity, or their competence — but at least they had the decency to show up. I think they just recognized it was so obvious. They had a responsibility."

And Mr. Frame?

"I think there's a very definite moral and legal obligation for Mr. Frame to testify before the Inquiry. They conducted an operation which resulted in the deaths of 26 people. That company [Curragh] is faced with charges of manslaughter and criminal negligence causing death. It is not a simple little accident. It is of such seriousness that the people of Nova Scotia — the people of all Canada — have a right to have many questions answered."

Five years after the disaster, can any good come of the Inquiry, even if Mr. Frame is legally compelled to appear before a final report is published?

"I remember a young local fellow was killed in an accident with a chainsaw," Mr. Teasdale replies, after a long pause. "He had bought a used chainsaw, and it didn't have a safety brake. It flew up and cut his throat. His uncle knew what was happening. He sent the kid's younger brother out to get help. Then he sat down with him on the woodpile, talked to him, realized he was dying, bleeding to death very quickly.
The Wayback Machine has archived copies of this Ottawa Citizen item:

To Westray and Beyond
The Story of Clifford Frame,
Who Wants to Put Westray Behind Him
and Get Back in Business

by Paul McKay
The Ottawa Citizen, Monday, September 8, 1997
http://www.ottawacitizen.com/business/970908/1139242.html


Archived: 1999 February 18
http://www.ottawacitizen.com/business/970908/1139242.html
Archived: 1999 September 22
http://www.ottawacitizen.com/business/970908/1139242.html
Archived: 2000 March 8
http://www.ottawacitizen.com/business/970908/1139242.html
Archived: 2000 October 1
http://www.ottawacitizen.com/business/970908/1139242.html
Archived: 2001 January 16
http://www.ottawacitizen.com/business/970908/1139242.html
Archived: 2001 June 11
http://www.ottawacitizen.com/business/970908/1139242.html




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