Wolverine mine crumbles alongside Yukon Zinc’s finances

The underground workings of Yukon Zinc's Wolverine mine are slowly filling with water because the company can no longer afford to operate the pumps and ventilation equipment.

The underground workings of Yukon Zinc’s Wolverine mine are slowly filling with water because the company can no longer afford to operate the pumps and ventilation equipment.

Yukon Zinc officially suspended operations at the mine on Jan. 21, citing falling mineral prices.

On March 13 the company received creditor protection on $646 million in debt. That court order protects Yukon Zinc from legal action by its creditors temporarily, while it attempts to restructure its affairs.

Yukon Zinc must abide by a temporary closure plan that is set out in its Quartz Mining Licence in the event of a shut-down.

That plan includes ongoing dewatering and ventilation of the mine shaft.

But on Feb. 8, the company told the Yukon Workers’ Compensation Health and Safety Board of its intention to suspend those activities, too.

“The mine informed us that they had decided to shut down the pumps because they had run out of propane and could no longer run the ventilation system,” said Richard Mostyn, spokesperson for the safety board.

The consequences of the resulting underground flooding have yet to be determined.

The Yukon government has hired a contractor to help understand the environmental implications, as well as how the flooding could affect the mine’s closure plan.

“I think we’re satisfied that it isn’t a crisis at this moment in time,” said Rob Thomson, director of compliance monitoring and inspections for Energy, Mines and Resources.

“The water infiltration isn’t rapid. Our chief concern from an enforcement point of view is not foreclosing options that are described in the decommissioning and closure plan.”

The company’s current closure plan involves permanently storing waste rock underground. That may not be possible if the mine is allowed to flood.

On February 13 an EMR inspector issued an enforceable direction to the company to continue the dewatering.

“The only next step we could take would be to carry out that action ourselves, and we don’t know that that’s necessary yet,” said Thomson.

If the government decides to take action to dewater the mine on its own, it could use money from the company’s mine security to pay for it.

We’ll have a better sense within a couple of weeks how significant the flooding is, and what the consequences are for the mine, he said.

Meanwhile, the company’s finances are being monitored by PwC Canada under court order as it attempts to restructure its affairs.

The most significant portion of the company’s debt is $595 million owed to Jinduicheng Canada Resource Corporation Ltd., Yukon Zinc’s parent company.

That company funded approximately $477 million in capital expenses for the mine, as well covering revenue shortfalls during the mine’s operation. Yukon Zinc has not turned a profit since it began operations in 2012.

Jinduicheng began to restrict Yukon Zinc’s borrowing in November 2014, according an affidavit filed in the Supreme Court of British Columbia.

The parent company has since advised Yukon Zinc that it will not continue to provide funding until a formal restructuring process has been completed.

Since entering the creditor protection process, Yukon Zinc has received a $8 million line of credit for continued operations through Maynards Financial Partnership Ltd., a firm that specializes in high-risk lending to companies in financial trouble, as it continues its efforts at restructuring.

According to court filings, the company expects it will need $7.1 million to cover expenses through the end of July, and $1 million per month after that.

Based on current project mineral prices, it expects mine operations to remain suspended through the end of this year and the beginning of 2016.

Those cost estimates, however, do not include some potentially expensive items that may be required by the government.

The company is counting on being able to negotiate a new temporary closure plan that would not require dewatering and ventilation of the underground workings.

“The company is in discussions with the Yukon government and expects to submit a revised temporary closure plan which would remove the underground dewatering requirement temporarily,” according to an affidavit signed by Yukon Zinc CEO Jing You Lu.

But EMR hasn’t seen any proposal for an alternative plan, said Sue Thomas, spokesperson for the department.

Regulatory requirements for a temporary closure plan will not change, she said.

Yukon Zinc also owes the Yukon government about $3 million towards its mine security. It has missed two scheduled payments since October, and as a result is out of compliance with its mine licence.

The Yukon government charged the company for its failure to pay last week in Yukon Supreme Court. A first appearance is scheduled for March 31.

The maximum fine a judge could assign for failure to make payments on time is $100,000.

The company also may have to deal with a section of the underground tunnel that has become unsafe.

In late January workers brought up concerns with a section of the ramp during a WCB inspection, said Mostyn.

He said he wasn’t sure exactly what the problem was, but onsite geotechnical engineers “agreed with the workers’ concerns and told us the ramp needed to be fixed immediately.”

WCB issued a stop-work order prohibiting entry to that section of the ramp on Feb. 5.

“The ground condition in that site is a very coarse, granular type of material. I don’t know if that played into it at this time – there have always been problems there, because of the type of material they’re mining in.”

That order did not prevent ongoing access to the underground water pumps and ventilation equipment, since there was a safe secondary access, said Mostyn.

The cost of making the necessary repairs to that section of the tunnel are still unknown.

In the court-appointed monitor’s first report, the company appears to pass the buck to both WCB and the Yukon government for its failure to deal with safety issues and to continue the dewatering of the underground.

“The company has not been able to access the underground mine areas since mid-January due to safety concerns,” according to the report.

“As a result, the underground areas have not been dewatered nor ventilated. The company anticipates there will be costs required to make access to the underground mine areas safe, however, it is unable to estimate the potential cost of this activity until it assesses the current situation in the underground mine areas in consultation with YG.”

Contact Jacqueline Ronson at jronson@yukon-news.com

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

Just Posted

The City of Whitehorse will be spending $655,000 to upgrade the waste heat recovery system at the Canada Games Centre. (Crystal Schick/Yukon News file)
New waste heat recovery system coming to the CGC

Council approves $655,000 project

Yukon First Nation Education Directorate education advocates and volunteers help to sort and distribute Christmas hamper grocery boxes outside Elijah Smith Elementary School on Feb. 23. (Rebecca Bradford Andrew/Submitted)
First Nation Education Directorate begins Christmas hamper program

Pick-ups for hampers are scheduled at local schools

Cyrine Candido, cashier, right, wipes down the new plexi-glass dividers at Superstore on March 28, before it was commonplace for them to wear masks. The Yukon government is relaunching the Yukon Essential Workers Income Support Program as the second wave of COVID-19 begins to take place in the territory. (Crystal Schick/Yukon News file)
Yukon Essential Workers Income Support Program extended to 32 weeks

More than 100 businesses in the territory applied for the first phase of the program

City of Whitehorse staff will report back to city council members in three months, detailing where efforts are with the city’s wildfire risk reduction strategy and action plan for 2021 to 2024. (Crystal Schick/Yukon News file)
Council adopts wildfire risk reduction plan

Staff will report on progress in three months


Wyatt’s World for Nov. 25, 2020

Cody Pederson of the CA Storm walks around LJ’s Sabres player Clay Plume during the ‘A’ division final of the 2019 Yukon Native Hockey Tournament. The 2021 Yukon Native Hockey Tournament, scheduled for March 25 to 28 in Whitehorse next year, was officially cancelled on Nov. 24 in a press release from organizers. (John Hopkins-Hill/Yukon News file)
2021 Yukon Native Hockey Tournament cancelled

The 2021 Yukon Native Hockey Tournament, scheduled for March 25 to 28… Continue reading

Lev Dolgachov/123rf
The Yukon’s Information and Privacy Commissioner stressed the need to safeguard personal information while shopping this holiday season in a press release on Nov. 24.
Information and Privacy Commissioner issues reminder about shopping

The Yukon’s Information and Privacy Commissioner Diane McLeod-McKay stressed the need to… Continue reading

Keith Lay speaks at a city council meeting on Dec. 4, 2017. Lay provided the lone submission to council on the city’s proposed $33 million capital spending plan for 2021 on Nov. 23, taking issue with a number of projects outlined. (Crystal Schick/Yukon News file)
Resident raises issues with city’s capital budget

Council to vote on budget in December

Beatrice Lorne was always remembered by gold rush veterans as the ‘Klondike Nightingale’. (Yukon Archives/Maggies Museum Collection)
History Hunter: Beatrice Lorne — The ‘Klondike Nightingale’

In June of 1929, 11 years after the end of the First… Continue reading

Samson Hartland is the executive director of the Yukon Chamber of Mines. The Yukon Chamber of Mines elected a new board of directors during its annual general meeting held virtually on Nov. 17. (Joel Krahn/Yukon News file)
Yukon Chamber of Mines elects new board

The Yukon Chamber of Mines elected a new board of directors during… Continue reading

The Yukon Hospital Corporation has released its annual report for 2019-20, and — unsurprisingly — hospital visitations were down. (Crystal Schick/Yukon News file)
Annual report says COVID-19 had a large impact visitation numbers at Whitehorse General

The Yukon Hospital Corporation has released its annual report for 2019-20, and… Continue reading

Whitehorse City Hall. (Joel Krahn/Yukon News file)
City hall, briefly

A look at decisions made by Whitehorse city council this week

Most Read