Yukon News

The wealth we give away

Wednesday May 20, 2015


by Lewis Rifkind

The current premier of the Yukon is fond of saying that the Yukon has beauty both above ground and beneath it.

The below-ground beauty is, one assumes, all the mineral deposits the Yukon has been blessed with.

There are precious metals such as gold and silver. There are base metals such as zinc, copper and lead.

All of these minerals belong to all Yukoners, unless they are located on First Nation Class A land, in which case they belong to that particular First Nation.

As the reader might be aware, large-scale industrial mining has been around in the territory for well over a century, and getting minerals out of the ground has become part of the Yukon mystique. One just has to look at a vehicle licence plate, with the image of the old-style prospector, to see this reflected.

As romantic as this image of yesteryear is, the individuals and companies who do this activity can’t just pocket the shiny rocks; they face an important reality.

The minerals do not belong to the company or individual who extracts them from the ground until a royalty is paid to the owner of the mineral, be it the Yukon government or a First Nation’s government.

The concept is that since the mineral is a non-renewable resource and will not grow back, ever, the owners of the mineral deserve some financial compensation for a resource that is permanently removed from the land.

One would think that with over a century of large-scale mineral extraction and associated royalty payments the Yukon would be wealthy beyond belief.

Since 1898, it is estimated that roughly 20 million ounces of placer gold have been recovered from the Klondike placer mining district alone. In today’s prices that’s about $24 billion.

The Keno region is estimated to have produced from 1913 to 1990 214 million ounces of silver, 322,698 tonnes of lead and 198,141 tonnes of zinc. The silver alone at today’s prices is worth $3.4 billion.

The Faro mine produced over 2.3 million tonnes of zinc, 1 million tonnes of lead and 63.5 million ounces of silver. At today’s prices the zinc would be worth about $5 billion.

Imagine if a decent royalty had been obtained from this wealth over the years and put aside for the wellbeing of future Yukoners.

Instead, this huge amount of wealth has been extracted, forever, and by any standard the Yukon is dirt poor.

The most recent territorial budget was $1.3 billion, of which $1 billion came from Ottawa in the form of the annual transfer payments, federal transfers and recoveries.

Why do we receive huge amounts of southern taxpayer dollars? The answer is because the mineral royalties the Yukon gets are a joke.

The royalty on gold is computed at the rate of 2.5 per cent, but gold is always assumed to be worth $15 per ounce. That’s right. The value of gold for the purposes of calculating the Yukon royalty is stuck at an absurd value from over a hundred years ago.

This means that placer gold royalties are 37.5 cents an ounce on gold that is worth around $1,200 an ounce.

In 2013 about $69.4 million worth of placer gold was extracted and the Yukon received just under $18,000 in royalties.

Hardrock mining is even worse. The only operating hard rock mine in the Yukon, the Minto mine, is on Selkirk First Nation Class A land. They get all the royalties from this mine. In 2013 it was $215,773.

But at least the Minto mine operators paid a royalty.

The Wolverine mine, currently under creditor protection, has debts of $647 million, was operating for three years, and didn’t pay a cent in royalties to the Yukon government.

They didn’t have to pay a cent under the current Yukon hardrock royalty regulations because there are provisions to write off start-up costs in the initial years of mine operations. If the mine goes into creditor protection in year three, the owners of the minerals being extracted get zero royalties.

Mining can create wealth and economic opportunity. It also provides minerals that our modern industrialized society needs and uses.

And if managed correctly, it can be used to generate wealth for the owners of the minerals under the ground.

There is beauty in those mineral deposits, as well as wealth. It’s time to recognize that Yukoners deserve some of that wealth and we must stop giving it away.

Lewis Rifkind is the mining analyst for the Yukon Conservation Society.


ProScience Greenie wrote:
8:10am Thursday May 28, 2015

By that same logic we should have high royalties/fees for the tourism and eco-tourism industries for profiting, with the help of many government subsidies, from our beautiful wilderness. That would not go over well with those industries and their powerful lobbyists.

Speaking of lobbying, your letter Lewis falls under political lobbying rather than true charitable activity.

Increasing mining royalties might be a good thing but perhaps that should be tied to commodity prices, amount of local hire and for sure, the size of operation. Go too far and the mom and pop operations will shut down leaving only the big corporations which sometimes I think is one the goal of our friends at YCS, CPAWS etc.

The reason we get the big fat billion dollar cheque from Ottawa each year is more about Canadian Sovereignty than our royalty payment schedule.

Don’t forget Kenn, many Yukoners are shareholders of mining stocks of companies doing work in the Yukon. Anyone can buy shares.  As well, with our small population we do not have the required highly skilled workforce to fill all mine positions. To be realistic no amount of training can make that happen so we’ll be stuck with a certain level of fly in / fly out workforce.

Kenn wrote:
3:05pm Tuesday May 26, 2015

Lewis… Wow I am impressed… , can’t believe I am going to say this,...Good article and I believe most Yukoners agree with you on this one .... Specially after devolution , this should of been changed… Is it New Zealand, Denmark and Sweden that take the majority of wealth for their common folk for social programs, from natural resource extraction… Most of the wealth from the yukon go to shareholders of mining companies , we don’t owe them nothing…  Resource development companies should be based and owned by Yukoners, and all subcontracting should be for yukoners…. Introduce a yukoner dividend , have resource development fund social programs…. The alyeska pipeline pays yearly dividends….

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