Will Yukon Zinc’s Wolverine mine ever reopen?

When Yukon Zinc shut down its Wolverine mine in January 2015, it was supposed to be temporary. At a meeting in Whitehorse last August, Yukon Zinc CEO Jing You Lu said he’d like to see the mine reopen when metal prices recover.

ANALYSIS

When Yukon Zinc shut down its Wolverine mine in January 2015, it was supposed to be temporary.

At a meeting in Whitehorse last August, Yukon Zinc CEO Jing You Lu said he’d like to see the mine reopen when metal prices recover.

“Why not?” he said at the time. “If the markets resume and we can make money, why not?”

But as time passes, that outcome is looking increasingly unlikely.

In December, the Yukon government approved an updated closure plan that allows the mine to fill completely with water. The government has also required that Yukon Zinc install two cement plugs in the mine before September, to prevent any of that water from leaking out.

Once that happens, putting the mine back into production would require those plugs be removed and the water be pumped out, at a cost that is likely rising with the water levels.

Bob Holmes, director of mineral resources with the Yukon government, said Yukon Zinc was always going to plug the mine at the end of production. But the plugs are now needed as part of the temporary closure, he said, because Yukon Zinc stopped pumping out the Wolverine mine last year, and the mine will be completely flooded by the fall of 2017.

Yukon Zinc’s updated closure plan, submitted to the government in July 2015, largely assumes that the mine will not reopen.

“Final closure, as defined in this plan, is presumed to occur following an extended temporary closure period,” it reads.

However, it does include an overview of what would be required if the mine were to reopen.

Before the mine could be pumped out, rehabilitation work would be required in more than 20 locations on the main ramp and associated infrastructure, according to the plan.

The cost of that work alone is estimated at $3.26 million.

Still, neither the government nor Yukon Zinc has confirmed that the mine is closed for good.

“I don’t think anybody knows,” said Holmes. “The business plans for the company are something they have to figure out.”

Alex Wu, a spokesperson for Yukon Zinc, said only that “There’s no plan to reopen the operations anytime soon.”

But Holmes did confirm that the cost of reopening the mine is likely rising. And even if the mine did reopen, it probably has only two or three more years of production left, according to the closure plan.

That the Wolverine mine may never go back into production is perhaps unsurprising. And even if it doesn’t, the Wolverine deposit extends beyond the existing mine. Holmes said it’s possible that part of the mine ramp could be pumped out to access the rest of that resource.

“If the ground is valuable enough, there’s all kinds of different ways to get at it,” he said.

Still, the issue raises some questions about the creditor protection process that allowed Yukon Zinc to keep the mine while getting rid of some of the debt it owed to contractors. In September, Yukon Zinc’s creditors voted to accept a plan that saw those owed less than $5,000 paid out in full, while those owed more received either $5,000 or up to 11.5 cents on the dollar. Yukon Zinc emerged from the creditor protection process on Oct. 13.

Jonathan Williams, a lawyer involved in the case last year, said the creditor protection process was designed to prevent struggling companies from being torn apart by those to whom they owe money. The community as a whole will suffer if that’s allowed to happen, he explained. It’s better to allow a company some relief from its creditors so that it can restructure, keep operating and keep people employed over the long term.

“The idea is to keep things going as a going concern for the benefit of the community,” he said.

But in this case, he said, it’s not clear what the creditors gained. “How did the community benefit from this process?”

Certainly, the creditors did get some money. If the company had gone bankrupt, that most likely wouldn’t have happened. But Williams wondered whether the community might not have benefited more if Yukon Zinc had declared bankruptcy and sold the mine to the highest bidder, instead of putting it into mothballs.

There was at least one interested buyer. MinQuest, an Australian junior mining company, promised last year to try and put the mine back into production if it were allowed to purchase it from Yukon Zinc.

Of course, that may have been an empty promise. The mine was already flooding back then, and MinQuest never secured the financing it would have needed to buy Wolverine.

But Jeremy Read, MinQuest’s managing director, still says he’s interested in using the processing plant at Wolverine to process copper ore from his company’s nearby Fyre Lake project, though he’s now given up on the mine itself. For months, he’s been trying to strike a deal with Yukon Zinc, without success.

“To date we have not yet been able to agree (to) a deal with Yukon Zinc for accessing the processing plant at Wolverine, but we have been trying very hard to do so,” he wrote in an email.

And so the property sits, idling, as the mine fills with water.

To be fair, metal prices remain low. Wolverine isn’t the only Yukon mine to have closed in recent years – Alexco Resources also closed its Bellekeno silver mine in 2013, and also said it would be temporary. As Williams acknowledged, “Maybe nobody could run (Wolverine) economically right now.”

But if creditor protection is supposed to allow a company to restructure so that it can keep operating and keep employing local people – well, so far, that hasn’t happened here.

Contact Maura Forrest at maura.forrest@yukon-news.com

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