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

Just Posted

Whether the dust jacket of this historical novel is the Canadian version (left) or the American (right), the readable content within is the same. (Michael Gates)
History Hunter: New novel a gripping account of the gold rush

Stampede: Gold Fever and Disaster in the Klondike is an ‘enjoyable and readable’ account of history

Yukonomist Keith Halliday
Yukonomist: Your furnace and your truck need to go

Perhaps the biggest commitment in the NDP deal with the Liberals was boosting the Yukon’s climate target

Air North president Joe Sparling said the relaxing of self-isolation rules will be good for the business, but he still expects a slow summer. (Mike Thomas/Yukon News)
Air North president expects a slow summer

Air North president Joe Sparling suspects it will be a long time before things return to pre-pandemic times

XX
WYATT’S WORLD

Wyatt’s World for May 14, 2021.… Continue reading

Copies of the revised 2021-22 budget documents tabled in the legislature on May 14. (Haley Ritchie/Yukon News)
Liberals introduce new budget with universal dental and safe supply funding

The new items were added to secure the support of the NDP.

Chief Medical Officer of Health Dr. Brendan Hanley. (Crystal Schick/Yukon News)
Family pleased youth will be able to get Pfizer vaccine

Angela Drainville, mother of two, is anxious for a rollout plan to come forward

Safe at home office in Whitehorse on May 10, 2021. (John Tonin/Yukon News)
Federal government provides $1.6 million for Yukon anti-homelessness work

Projects including five mobile homes for small communities received funding.

Drilling at Northern Tiger’s 3Ace gold project in 2011. Randi Newton argues that mining in the territory can be reshaped. (Yukon government/file)
Editorial: There’s momentum for mining reform

CPAWS’ Randi Newton argues that the territory’s mining legislations need a substantial overhaul

At its May 10 meeting, Whitehorse city council approved the subdivision for the Kwanlin Dün First Nation’s business park planned in Marwell. (Submitted)
KDFN business park subdivision approved

Will mean more commercial industrial land available in Whitehorse

Main Street in Whitehorse on May 4. Whitehorse city council has passed the first two readings of a bylaw to allow pop-up patios in city parking spaces. Third reading will come forward later in May. (Stephanie Waddell/Yukon News)
Whitehorse council pursuing restaurant patio possibilities

Council passes first two readings for new patio bylaw

Neil Hartling, the Tourism Industry Association of the Yukon president, left, said the new self-isolation guidelines for the Yukon are a ‘ray of hope’ for tourism operators. (Ian Stewart/Yukon News file)
Yukon tourism operators prepared for ‘very poor summer’ even with relaxed border rules

Toursim industry responds to new guidelines allowing fully vaccinated individuals to skip mandatory self-isolation.

A lawsuit has been filed detailing the resignation of a former Yukon government mine engineer. (Joel Krahn/Yukon News file)
A year after resigning, former chief mine engineer sues Yukon government

Paul Christman alleges a hostile work environment and circumvention of his authority led him to quit

Most Read