MinQuest wants to put Yukon Zinc’s Wolverine mine back into production

Australian mining company MinQuest says it will try to put the Wolverine mine back into production within six months if it's given the chance to buy the mine from Yukon Zinc.

Australian mining company MinQuest says it will try to put the Wolverine mine back into production within six months if it’s given the chance to buy the mine from Yukon Zinc. That means Yukon Zinc’s creditors now have to choose between getting a fraction of the money they’re owed right away, and the possibility of being employed by Wolverine again in the near future.

MinQuest went public with its bid to buy Wolverine last month, at the time saying it didn’t have plans for the underground mine itself. Instead, it planned to use the mill and tailings facilities at Wolverine to fast-track the development of its Fyre Lake copper project, located 28 kilometres southwest of the Wolverine mine.

But now, managing director Jeremy Read says the company is interested in operating the Wolverine mine for two or three more years – the time it would take to get Fyre Lake into production.

“We have a vision and a plan that will hopefully extend over a 10-year period,” he said.

MinQuest is in a bit of a tight spot at the moment. It still has to secure financing before it can finalize a purchase agreement with Yukon Zinc – about $20 million upfront and another $6 or $8 million to put the mine back into production, Read said.

And it has to do that even though Yukon Zinc sees its bid as a back-up option in case creditors vote down a restructuring plan it proposed last week.

Read said he didn’t realize until Yukon Zinc’s court appearance last Friday that MinQuest’s offer was only a back-up.

“We were approaching it from the perspective that ours would be presented alongside the Yukon Zinc plan,” he said. “It makes it a little bit more difficult for us to conclude financing.”

But he said MinQuest is in “quite advanced discussions” with a number of potential investors.

This means Yukon Zinc’s creditors now have an interesting choice to make. Yukon Zinc’s restructuring plan would pay off the full debt to any creditor owed less than $5,000, and either $5,000 or up to 11.5 cents on the dollar to any creditor owed more. If the creditors refuse the plan, Yukon Zinc would likely be forced to sell to MinQuest, and the unsecured creditors would probably get nothing from the sale.

So creditors now have to choose – take the deal as it stands and see the mine remain closed at least until metal prices rebound, as Yukon Zinc is proposing, or refuse the deal and take a chance on a junior mining company that says it will try to get the mine running again right away.

And whatever they decide, they have to do it quickly. Creditors voting for the plan need to respond to Yukon Zinc’s offer by Aug. 31 if they want to get the best deal available. The final vote on the plan will take place on Sept. 2.

David Green, owner of MacPherson Rentals in Whitehorse, said he’s already decided to take Yukon Zinc’s deal. Yukon Zinc owes his company about $63,000 for equipment rentals, so he plans to take 11.5 cents on the dollar, which would get him about $7,200.

Green said he’s had clients go bankrupt before, and this is the first time a client in financial difficulty has been able to pay anything back at all.

“The plan’s not unreasonable for what we would expect,” he said.

He also said he’s not convinced MinQuest will be able to deliver on its promises.

“I think that any development of the MinQuest project would be a number of years away… because of the current commodity cycle. They need to raise a lot of money,” he said. “I think that the probability of getting any money out of the MinQuest proposal in the foreseeable future is way lower than what the plan of arrangement is.”

But according to one lawyer involved in the case, Yukon Zinc’s plan is not really what creditor protection is supposed to achieve.

Jonathan Williams represents the three prospectors who discovered the Wolverine deposit, and whose royalty payments were recently threatened by Yukon Zinc. The court has now ordered that those payments be maintained if the mine goes back into production. But Williams’ clients are still among the unsecured creditors, for outstanding royalty payments.

Williams said an ideal creditor protection scenario is one where a company needs to reduce its debt to keep operating. In that situation, a financier would step in to refinance the operation. Creditors would get a fraction of the amount they’re owed, but that would allow the company to keep them employed.

But in this case, he said, all Yukon Zinc is doing is “reducing debt and putting this thing into mothballs.”

“[Creditor protection] is legislation that is intended to provide a social benefit to creditors and the community by allowing a company to restructure,” he said. “What bothers me about this so-called restructuring is that it’s not really a restructuring. There’s very little community benefit to what is going on here. That’s what I find somewhat distasteful.”

Currently, to file for creditor protection, companies have to have at least $5 million of debt, and they have to show that their liabilities outweigh their assets. But Williams said they should also have to show what benefit creditor protection will provide to the community.

For his part, Green believes some money back is better than none. But he’s also surprised Yukon Zinc had to file for creditor protection in the first place. He said he’d always believed JDC Canada, Yukon Zinc’s parent company, would support the mining company through financial difficulties. That was part of the reason he kept dealing with Yukon Zinc.

“I had made a calculated assumption that they would stand behind the company,” he said. “I’m still surprised that they walked away from that.”

JDC Canada didn’t exactly walk away, however. Yukon Zinc owed its parent company over $600 million when it went into creditor protection in March. Now, JDC Canada has agreed to finance Yukon Zinc’s restructuring plan – a plan that will see it pay out roughly $24.5 million less than the total amount owed to unsecured creditors.

Williams said that in creditor protection proceedings involving a wealthy parent company, it’s always difficult to know how far that parent is willing to go. In this case, he said, it’s hard to know whether JDC Canada would have let Yukon Zinc go bankrupt if creditor protection had not been an option.

And now, he said, it’s hard to know if this deal is the best the creditors can get from JDC Canada.

“I wonder… whether JDC would be willing to put up more money to avoid a bankruptcy,” he said. “But unless the creditors got together and formed a committee and entered into negotiations with these guys, we won’t know that.”

Contact Maura Forrest at

maura.forrest@yukon-news.com

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Children’s performer Claire Ness poses for a photo for the upcoming annual Pivot Festival. “Claire Ness Morning” will be a kid-friendly performance streamed on the morning of Jan. 30. (Photo courtesy Erik Pinkerton Photography)
Pivot Festival provides ‘delight and light’ to a pandemic January

The festival runs Jan. 20 to 30 with virtual and physically distant events

The Boulevard of Hope was launched by the Yukon T1D Support Network and will be lit up throughout January. It is aimed at raising awareness about Yukoners living with Type 1 diabetes. (Stephanie Waddell/Yukon News)
Boulevard of Hope sheds light on Type 1 diabetes

Organizers hope to make it an annual event

City of Whitehorse city council meeting in Whitehorse on Oct. 5, 2020. An updated council procedures bylaw was proposed at Whitehorse city council’s Jan. 18 meeting that would see a few changes to council meetings and how council handles certain matters like civil emergencies. (Crystal Schick/Yukon News file)
Whitehorse procedures bylaw comes forward

New measures proposed for how council could deal with emergencies

A Yukon survey querying transportation between communities has already seen hundreds of participants and is the latest review highlighting the territory’s gap in accessibility. (Crystal Schick/Yukon News file)
Multiple reports, survey decry lack of transportation between Yukon communities

A Community Travel survey is the latest in a slew of initiatives pointing to poor accessibility

Mobile vaccine team Team Balto practises vaccine clinic set-up and teardown at Vanier Catholic Secondary School. Mobile vaccine teams are heading out this week to the communities in order to begin Moderna vaccinations. (Haley Ritchie/Yukon News)
Mobile vaccine teams begin community vaccinations

“It’s an all-of-government approach”

A file photo of grizzly bear along the highway outside Dawson City. Yukon conservation officers euthanized a grizzly bear Jan. 15 that was originally sighted near Braeburn. (Alistair Maitland/Yukon News file)
Male grizzly euthanized near Braeburn

Yukon conservation officers have euthanized a grizzly bear that was originally sighted… Continue reading

Mayor Dan Curtis listens to a councillor on the phone during a city council meeting in Whitehorse on April 14, 2020. Curtis announced Jan. 14 that he intends to seek nomination to be the Yukon Liberal candidate for Whitehorse Centre in the 2021 territorial election. (Crystal Schick/Yukon News)
Whitehorse mayor seeking nomination for territorial election

Whitehorse mayor Dan Curtis is preparing for a run in the upcoming… Continue reading

Gerard Redinger was charged under the <em>Civil Emergency Measures Act</em> with failing to self-isolate and failing to transit through the Yukon in under 24 hours. (Joel Krahn/Yukon News file)
Man ticketed $1,150 at Wolf Creek campground for failing to self-isolate

Gerard Redinger signed a 24-hour transit declaration, ticketed 13 days later

Yukon Energy, Solvest Inc. and Chu Níikwän Development Corporation are calling on the city for a meeting to look at possibilities for separate tax rates or incentives for renewable energy projects. (Crystal Schick/Yukon News file)
Tax changes sought for Whitehorse energy projects

Delegates call for separate property tax category for renewable energy projects

Yukon University has added seven members to its board of governors in recent months. (Crystal Schick/Yukon News file)
New members named to Yukon U’s board of governors

Required number of board members now up to 17

Yukonomist Keith Halliday
Yukonomist: Your Northern regulatory adventure awaits!

“Your Northern adventure awaits!” blared the headline on a recent YESAB assessment… Continue reading

Yukoner Shirley Chua-Tan is taking on the role of vice-chair of the social inclusion working group with the Canadian Academy of Health Sciences’ oversight panel and working groups for the autism assessment. (Submitted)
Canadian Academy of Health Sciences names Yukoner to panel

Shirley Chua-Tan is well-known for a number of roles she plays in… Continue reading

Most Read