Yukon Zinc has announced a temporary shut-down of the Wolverine mine.
“The metal prices in the past months have significantly affected our revenues and the Wolverine mine does not realize cash positive to sustain its operations,” wrote CEO Jingyou Lu in a letter to suppliers on Jan. 23.
The plan is to shut down for two or three months, and then re-evaluate the company’s position.
The news comes just as Yukon’s politicians, mining execs and First Nation leaders are in Vancouver trying to drum up interest in the territory in a gloomy investment climate at the annual Mineral Exploration Roundup conference.
Exploration spending in the territory has fallen from a high of $332 million in 2011 to $88 million in 2014, according to recent numbers from Natural Resources Canada.
With Wolverine shuttered, Capstone Mining Corp’s Minto mine is the last active producer in the territory.
Yukon Zinc has had difficulty securing funding from shareholders to pay down its debts to suppliers, according to the letter.
“As a result, we’re still unable to provide a payment plan to pay down the balance owed as previously agreed.”
However, the company is still in a position to pay its debts, and financing discussions are ongoing, according to the letter, which promises an update by Feb. 16.
The Town of Watson Lake is already feeling the pinch, said Mayor Richard Durocher in an interview this week.
“We’re noticing it in town. It’s a lot quieter. There’s not as much activity as there was before.”
Forty or 50 Watson Lakers are expected to lose their jobs directly or indirectly as a result of the shutdown, he said.
“That’s a substantial amount of loss in employment for a community this size.”
The town is just hoping that the mine gets back into production soon, said Durocher.
“They’ve announced a 90-day shut-down, but we’ve seen these trends before, and 90 days come and go and there’s never a reactivation of the facility. That’s the big worry of people in the community right now. After 90 days, are we guaranteed a reopening or is there going to be an extension?”
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Meanwhile, at Yukon’s last producing mine, the picture is not much rosier.
Capstone announced two rounds of layoffs last year, as the mine continues to wait for the permits that would allow it to begin work on the next pit.
“Right now we’re stuck in that quandary of waiting for a hearing, waiting for a licence,” said Ron Light, the mine’s general manager.
The mine is currently using up stockpiled ore, supplemented by underground operations, while it waits for the Yukon Water Board to issue an amended water licence for the project.
A hearing will likely take place in March, and it could be another six weeks after that before a permit is issued, said Light.
Those sources of ore could run out in the next 12-18 months, he said.
And falling copper prices add a further layer of uncertainty.
We’re looking at all of our mine plans and wondering what we can do to survive that,” said Light.
“We’re looking at, do we want to run just stockpile? Do we want to invest money to pre-strip Minto North, when we do get a licence? It’s a hard decision, based on the economics of the industry right now and commodity prices.
“We’re doing due diligence every day to see whether we can survive the market.”
The government has announced two incentives this week to encourage exploration spending in the territory.
This year exploration companies will have to spend only half as much on their claims to keep them in good standing, announced Mines Minister Scott Kent from Vancouver this week.
In addition, the government plans to subsidize exploration with a $1.4 million funding injection again this year through the Yukon Mineral Exploration Program.
The base-level funding for that grant program is $770,000, and it was topped up to $1.17 million in 2013 and $1.4 million in 2014.
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First Nations are in Vancouver this week, too, asserting their wish to lead the conversation when it comes to mining development in the Yukon.
Last night Yukon’s 11 self-governing First Nations hosted a meet-and-greet event to discuss issues and common goals with the mining industry.
“It was excellent. It was very well received,” said Council of Yukon First Nations Grand Chief Ruth Massie in an interview this morning.
“We let everybody know that we want a positive working relationship with them.”
One of the main topics of discussion was First Nation opposition to a federal bill that will amend Yukon’s environmental assessment legislation.
First Nations say some of the proposed changes will undermine their participation in assessments, and are contrary to the final agreements they signed with Yukon and Canada.
“All the Yukon First Nations are speaking with a common voice,” said Eric Fairclough, chief of the Little Salmon/Carmacks First Nation, in an interview this morning.
The mining industry responded very positively to their message, he said.
“They feel that this is really throwing a wrench in things.”
The unsigned Kaska nations, too, are asserting their right to guide development on their traditional lands.
The Council of Kaska Chiefs announced yesterday its intention to write legislation that will govern development on large swaths of Yukon, B.C., and the Northwest Territories.
The announcement is about giving mining companies certainty, in terms of laying out precisely what they must do in order to achieve First Nation consent for their projects, said Brian Ladue, chief of the Ross River Dena Council, in an interview yesterday.
“We’re asserting ourselves as a government and saying that these are laws that should be recognized just as the Yukon government laws are recognized,” he said.
“With the recent court decisions and such, it’s been established that for any project to go forward in our traditional territory, that requires our consent.”
So far, mining companies working in the area have been very supportive of the idea, said Ladue.
“They thought it was a brilliant idea. We heard from them that that is what’s needed in the Yukon.”
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The mining industry news this week is not all doom and gloom.
BMC (UK) Ltd. announced this week the purchase of the Kudz Ze Kayah project from Teck Resources Ltd.
“We spent just about 18 months looking around the world at different projects that had the right blend of geology, location, political risk, community support, that kind of thing,” said BMC CEO Scott Donaldson in an interview yesterday.
The opportunity to buy Kudz Ze Kayah came up and they took it, he said.
“It was the precise type of project that we were looking for.”
Kudz Ze Kayah is a base metals project, with deposits of zinc, copper, lead, silver and gold. It is located between Ross River and Watson Lake, and neighbours the Wolverine mine.
The company is backed by Barclays Natural Resource Investments, which has committed $150 million in equity funding for the project.
That will cover the purchase of property plus things like feasibility studies, engineering and environmental assessments, said Donaldson.
The company plans to spend about $15 million developing the property this year, he said.
Things might not look great for the industry today, but that won’t always be the case, said Donaldson.
“Mining industry people are generally optimists, and the mining industry is cyclical. So the last year or so hasn’t been great for the mining industry but we’re confident in the long term future and we’re in a fortunate position to be able to take a longer view.”
The company has done a great job communicating with the Ross River Dena Council so far, said Chief Brian Ladue.
“This is a perfect example of the industry going with the new way that business should be done in our traditional territory. They came to us right at the beginning and sat down at the table and had open discussion on what the project is about.”
Contact Jacqueline Ronson at
jronson@yukon-news.com