Yukon Zinc’s Wolverine mine site photographed in 2009. The Yukon government has applied to have the Wolverine mine put into receivership, alleging that the current owner owes it more than $26 million. (John Thompson/Yukon News file)

Yukon government asks court to put Wolverine mine into receivership

The Yukon government filed a petition against Yukon Zinc Corporation July 17.

The Yukon government has applied to have the Wolverine mine put into receivership, alleging that the current owner owes it more than $26 million in security costs and has repeatedly failed to meet various licence requirements.

The government, represented by the Minister of the Department of Energy, Mines and Resources, filed a petition to the Yukon Supreme Court against Yukon Zinc Corporation on July 17.

The petition argues that it’s necessary to “immediately appoint a receiver” — in this case, PricewaterhouseCoopers Inc. — “to take control and possession of Yukon Zinc’s assets and property.”

Doing so will address four key concerns, according to the petition it will “bring order to a situation where there is increasing uncertainty about Yukon Zinc’s ability to manage the site;” “enable a more open and transparent dialogue between affected parties;” “facilitate, if required, a marketing and sale process for the Mine;” and “provide certainty and clarity to Yukon in terms of its use of equipment and other assets of Yukon Zinc” while the territory takes “remedial action to address dangers to persons, property and the environment.”

As well, appointing a receiver, considering the “declining ability of Yukon Zinc to manage the Mine effectively and reasonably,” will “reduce or prevent further escalation of environmental concerns at the Mine before the security held by Yukon is exhausted and costs (are) potentially incurred by Yukon taxpayers.”

Yukon Zinc has not yet filed a reply.

The Wolverine mine, an underground lead-zinc-copper operation located about halfway between Ross River and Watson Lake, has been defunct since 2015, when unfavourable metal prices triggered a temporary closure.

According to the petition, as well as an accompanying affidavit by the Department of Energy, Mines and Resources’ chief mine engineer, Paul Christman, Yukon Zinc has furnished only $10,588,966 out of the $35,548,000 it’s required to post as security for the mine.

The mine’s security was originally only $1,780,000, but the figure gradually grew as the mine developed and then, from 2016 to 2018, deteriorated — most significantly, in 2017 when the underground mine flooded.

Yukon Zinc has repeatedly asked for extensions to pay the total security, according to the petition and affidavit, but have still not furnished the full amount.

To date, the petition says, the Yukon government has had to seize more then $1.44 million of the security Yukon Zinc has provided to cover the costs of remedial work, including the “installation of a system to collect and treat water coming from the underground mine, repair of impermeable liners in the tailings storage facility and other water containment structures, re-establishment of water conveyance lines, and implementation of a site-wide environmental monitoring program.”

More work is planned for the summer and fall of 2019, according to Christman’s affidavit, including the “installation of a water treatment system at the tailings storage facility designed to lower water levels within the facility through discharge of water,” the “implementation of an aquatics effects monitoring program, geotechnical inspection of water retaining structures and overall logistical support.”

Ross River Dena Council and Liard First Nation, on whose traditional territory the mine sits on, have been kept updated on the Yukon government’s activities at the mine, the affidavit notes.

On top of the issues around furnishing security, the mine has also been found guilty “of a number of breaches” of its quartz mining licence, the petition says, and all inspection reports from 2018 and 2019 “identified serious concerns related to water management and an overall concern about Yukon Zinc’s capacity to undertake the necessary care and maintenance activities at the Mine.”

As well, in late June, Yukon Zinc employees told government officials “about the lack of ongoing support, including payment of salaries, from Yukon Zinc,” the petition says, and, as of July 11, it was unclear if there would be an ongoing presence of employees at the mine following the next shift.

Numerous attempts by Yukon Zinc to sell the mine to another company have, to date, been unsuccessful.

(Yukon Zinc itself was sold to another company, Phoenix Global Investment Inc., in November 2018, but the mine itself has not changed hands.)

In an interview July 18, Yukon Conservation Society mining analyst Lewis Rifkind said that while he’s glad the Yukon government is stepping in while it’s still early, the situation is “good example of how the current Yukon mining system works, and it’s far from adequate, just from an environmental point of view, let alone the socio-economic perspective.”

“It almost seems par for the course that this sort of situation constantly arises,” he said. “You get companies starting up mines, and they often have the best of intentions, but then something goes wrong … and they run into financial difficulties.”

An easy fix, he suggested, would be to require companies interested in opening mines to post security right away so that if something does go wrong, the funds are guaranteed to be there to fix it.

The case is set to be heard in court Aug. 1.

Contact Jackie Hong at jackie.hong@yukon-news.com

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