Capstone Mining Corp. is shutting down operations at its Minto mine after a deal to sell the property to a U.K.-based company fell through, a decision that will result in the loss of about 200 jobs.
Capstone made the announcement in a press release Oct. 11.
Earlier this year, Capstone had struck a deal with Pembridge Resources to to buy Minto, located about 240 kilometres north of Whitehorse and the Yukon’s only active hard rock mine, for US$37.5 million and 9.9 per cent of Pembridge’s shares.
However, according to Capstone’s press release, the sale was cancelled after Pembridge was “unsuccessful in completing the financing required to complete the transaction” due to “unfavourable equity market conditions” — namely, the price of copper, Minto’s primary product.
The price of a pound of the metal fell from more than US$3 a pound in June to less than US$2.60 a few months later. It’s currently sitting around US$2.80.
The mine is now transitioning into care and maintenance mode, the release says, with mining operations to cease “imminently” and milling operations to end in the “next few weeks” once the mine’s current ore stockpile is processed. Blasting and development were halted immediately.
Up until Oct. 10, Minto employed 216 people, Capstone’s vice president of investor relations and communications Cindy Burnett said in an interview Oct. 11 — 119 Minto employees and 97 contractors.
As part of the care and maintenance phase, a core team of about 12 Minto employees will be kept on site to take care of things like environmental monitoring, water treatment, machinery maintenance and ensuring underground portions of the mine don’t flood.
Twenty-four Minto employees were immediately laid off on Oct. 11. The rest will be laid off gradually as operations wind down.
Capstone estimates that it will cost about US$5 million for the rest of 2018 and again 2019 to put Minto into its care and maintenance phase, and under US$4 million for every year after that.
“The decision to put Minto on care and maintenance while we seek alternatives is to preserve and maximize its value,” Capstone president and chief executive officer Darren Pylot said in the press release. “The team will ensure Minto can be restarted efficiently and safely once the copper and equity markets improve. Minto has been an important part of Capstone’s history and we thank the team at Minto for their commitment and dedication.”
In its own press release, Pembridge also acknowledged the unfavourable market conditions, explaining that it “has determined that a renegotiation of the acquisition terms with (Capstone) is necessary to ensure the best possible outcome for Pembridge and its shareholders.”
The care and maintenance phase will “ensure it remains in a safe and stable condition while Pembridge prepares a revised offer for Minto,” the release adds, quoting Pembridge chief executive officer David Linsley as saying that it’s anticipated an “amended agreement” will be reached “in the near future.”
“Commitments for the significant majority of the financing are still in place, and we are in ongoing discussions with a number of parties to complete the final elements of a revised offer for Minto,” Linsley said in his company’s press release. “Capstone and our off-take partners have been very supportive of the decision to restructure the terms of the Minto Acquisition.”
While it’s continuing to discuss the sale with Pembridge, Capstone’s press release says that it’s also looking at “other potentially interested parties.”
Burnett added that Minto, when copper prices improve, would be a good asset for any buyer.
“Minto still has (and) produces a really well-sought-after, clean and high-grade concentrate and it’s well sought-after in world markets,” she said. “There’s still considerable reserves and resources … Structurally, it is remote and it is higher-cost because of that, but in the right copper price environment, which we’re very optimistic about in the kind of medium and long-term, it will be a good asset.”
The Minto mine first began production in 2007, primarily chunning out copper but also gold and silver as secondary products. Capstone had previously planned to pursue underground mining projects at the site until the end of 2021. It had also operated an open-pit mine at Minto but closed that, and also scrapped plans for another open-pit mine, earlier this year, a decision also tied into copper prices.
In an interview following Capstone’s announcement Oct. 11, Yukon Chamber of Mines executive director Samson Hartland said that while it’s “never good news when a mine closes,” the “silver lining” is that there are a number of other mining initiatives underway in the territory that may be able to absorb some of the laid-off Minto workers.
“For example, Victoria Gold is full-tilt in trying to get online by next year and they have a number, upwards of 350 employees on-site,” he said.
“…You always want to ensure that folks are able to be re-engaged in employment soon after such a change and I hope that some of the opportunities that exist out there with those mines that are in the pipelines and those that are being built… that there will be opportunity to pick up most if not all of those employees.”
Contact Jackie Hong at jackie.hong@yukon-news.com