Colorado Goldfields, the Denver-based company that attempted to revive mining in Silverton, has filed for Chapter 11 bankruptcy.

Colorado Goldfields was forced into an involuntary chapter 7 bankruptcy by its creditors in late 2017. Among the company’s creditors is Todd Hennis, owner of the Gold King Mine.

On Tuesday, however, the company’s creditors asked the U.S. Bankruptcy Court for the District of Colorado to convert to a Chapter 11 bankruptcy, which allows some leeway in reorganizing assets rather than selling them off.

“This conversion ... would hopefully allow us to put the past history of Colorado Goldfields in the rearview mirror and facilitate our efforts to restart the facility and add jobs in Silverton,” Hennis told The Durango Herald on Thursday.

In 2008, Colorado Goldfields purchased the Pride of the West mill, a few miles northeast of Silverton near Howardsville on County Road 2, with the promise of bringing back mining to the historic town.

At the time, Hennis was the president of Colorado Goldfields, but he resigned in fall 2008 and immediately filed litigation against the company. Littleton resident Stephen Guyer subsequently took over as director.

But in 2013, Hennis brought actions against Colorado Goldfields that forced the company to put Pride of the West into foreclosure.

He then purchased the mill – assessed at $4.2 million – for $300,000 in July 2015 at the foreclosure auction.

The situation, mired in litigation and moving parts, presented a precarious predicament: Hennis owned the land and the Pride of the West mill, but Colorado Goldfields owned the permit with the state to operate site.

In summer 2017, the state’s Division of Mining, Reclamation and Safety discovered a tailings pond that holds millings waste was overflowing, spilling sludge and sediment into the upper Animas River.

The state ordered Colorado Goldfields to repair the tailings pond by that fall or face revocation of its permit and seizure of its $515,000 bond.

But Hennis, owner of the land, did not allow Colorado Goldfields access to the property to make the necessary repairs.

Hennis has said he denied access to the mill because Colorado Goldfields failed to provide its workers with insurance, making him liable if injuries occurred on site.

Guyer, on the other hand, believes the act was intentional to put the company out of business.

Regardless, as a result, the state revoked Colorado Goldfield’s permit and bond money.

The state has since used about $200,000 of the bond money to fix the tailings pond, said Russ Means, an environmentalist specialist for the division.

The conversion to Chapter 11 bankruptcy is not a done deal, Hennis said. But if completed, it will allow whatever assets the company still has to be divided among its creditors.

It will then allow Hennis to try to reinstate the permit for the Pride of the West mill and recover the remaining posted bond, which is about $315,000.

And ultimately, Hennis hopes it will bring back mining to a town where the last mine closed in 1991. Hennis, who lives in Golden, holds a number of mining locations in Silverton he intends to sell as a package to a company to begin mining.

“That site is absolutely crucial for national defense purposes for mineral production, especially strategic minerals,” he said. “The Silverton mining district has a lot of strategic metals.”

Guyer, speaking to the Herald on Thursday, said Hennis has manipulated the court system to take over Colorado Goldfields in an attempt to gain full control of the company and its permit for the Pride of the West mill.

“It’s pretty incredible,” Guyer said. “He has successfully stolen the company.”

Hennis, however, contends that Colorado Goldfields should have been out of business years ago. He said the company operated at a loss for years and never conducted mining operations.

“They did a lot of damage to a lot of people,” he said.

Means said the state can use the remaining bond money if an immediate environmental threat is posed at the site. Otherwise, the division is waiting to see how the web of litigation plays out.

“There’s a lot of moving parts,” he said. “And a lot of it is outside our jurisdiction.”

jromeo@durangoherald.com