The future of Yukon mining

The Yukon Chamber of Mines told the media they were “pleased with the election of a Yukon Liberal government and looking forward to working with them on issues that are important.”

Everyone is being publicly polite in the aftermath of the territorial election. The Yukon Chamber of Mines told the media they were “pleased with the election of a Yukon Liberal government and looking forward to working with them on issues that are important.”

Talk to miners in private, however, and they often sound more nervous. Of new Liberal MLAs likely to be in cabinet, one is a former Green candidate and few of the others have been prominent promoters of the industry in their previous lives. Former placer miner Tamara Goeppel was one of the Liberal candidates not elected.

Liberal Leader Sandy Silver says he supports the mining industry, and has talked about the need to restore relations with First Nations to enable the industry to grow. He also promised to cut business income taxes. However, he also campaigned for several things that will be painful to miners. These include the carbon tax, which will hit the energy-intensive mining industry harder than the average Yukon business, and what is effectively a ban on mining companies selling surplus electricity to our grid if they generate it with natural gas.

The latter can sometimes be an important part of a mine’s business case since it allows the mine to generate some extra revenue and spread the cost of its power plant over a longer time period.

The future of our mining industry will occupy a solid part of the future cabinet agenda. Silver won’t want to be the Klondike MLA who presides over the final phase of the de-mining of the Yukon economy. On the other hand, moving beyond nice words to actions that make a noticeable improvement in our mining output will be challenging.

Of the mines that opened after the industry’s near-death experience at the turn of the century, only Minto is still operating. It announced more layoffs last month, closed its open pit, and its last quarterly report said it expected a temporary closure of underground mining in 2017. Neither Wolverine nor Alexco are operating, although the latter continues exploration and development of potential new ore bodies.

There are several factors hurting the industry, some within the control of the Yukon government and some not. Global mineral prices have not been helpful. The RBC non-precious minerals index, for example, has fallen from over 350 in 2008 to around 160 now.

The Yukon government does have influence over several other big factors, however. A productive relationship with Yukon First Nations is part of this. Mining jobs for First Nations citizens and business opportunities for their development corporations are important opportunities. The Chamber of Mines suggests finalizing an improved royalty resource sharing agreement between the Yukon government and First Nations, so that the latter benefit more from mining activities no matter what category of land the mine happens to sit on.

This seems like a good suggestion that should be near the top of the new government’s to-do list.

A second factor is the permitting process. Something called the Mine Licensing Improvement Initiative is wending its way through the bowels of government. The new cabinet should accelerate this, set some deadlines, and make sure the mining industry thinks the changes will actually improve the situation (while continuing to protect the environment of course).

Such process improvements are notoriously complex and technical. The involvement of YESAB, federal and First Nations agencies adds to the complexity. The non-miners around the cabinet table will need to quickly get up to speed to make sure real progress is actually happening.

The Yukon government will also have to figure out what to do about the carbon tax. The election of Donald Trump means that miners in Alaska and Montana won’t be paying one. We won’t be helping the environment if we have a carbon tax that simply encourages mining to take place near Fairbanks instead of Carmacks. When Australia brought in its now repealed carbon tax, it offered “trade-exposed” industries varying amounts of “Free Carbon Units,” essentially free passes to burn certain amounts of fossil fuels without being carbon taxed. On the other hand, if the mining industry gets a special carbon-tax deal then plenty of other Yukoners may wonder why they are paying the tax.

The government has also already been working on infrastructure and mine training programs at Yukon College. These are worthy initiatives, but are not likely to do much good if the industry’s more fundamental problems around First Nations support, permitting and energy costs aren’t dealt with decisively.

There is some good news on the horizon. Minto’s 2017 closure is only supposed to be temporary. In addition to development work by Alexco, there are several other mining projects on the horizon. Goldcorp’s Coffee site looks almost like the perfect mining project: good ore grades, sound economics, close to infrastructure and not requiring complex or unproven extraction techniques. The real question will be if less perfectly endowed mining projects can make it to production.

In the end, we know what success looks like for our new government. By the time of the next election, a win would be to have five operating mines, and the industry representing over 20 per cent of a larger future economy (it was 18 per cent in 2014). A failure would be to have just one or two mines, and less than 15 per cent of our economy.

If, by the time of the next election, there is only Goldcorp and the government is blaming global mineral prices, we’ll know they failed.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won last year’s Ma Murray award for best columnist.