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Yukon government, B.C. company want Supreme Court of Canada appeal of Wolverine Mine case

Government concerned with recouping cleanup costs, creditor wants review of receiver’s actions.
Clouds pass by the Supreme Court of Canada in Ottawa, Friday, June 12, 2020. THE CANADIAN PRESS/Adrian Wyld

Both the Yukon government and a British Columbia biotech company are seeking to press their interests in the receivership of a bankrupt mining firm in the country’s highest court.

The government and Welichem Research General Partnership are each seeking an appeal before the Supreme Court of Canada in response to a March 5 Yukon Court of Appeal decision.

Both appealing parties allege that they’re owed money by the Yukon Zinc Corporation (YZC), which operated the Wolverine Mine located between Ross River and Watson Lake.

The mine opened in 2012 and ceased production in early 2015, eventually being placed in care and maintenance with almost its entire staff laid off.

YZC entered bankruptcy in 2019 and was placed in receivership with PricewaterhouseCoopers Inc. (PWC) appointed as receiver by the courts.

In 2020, the Yukon Supreme Court ruled that the Yukon government would get priority over other groups that were owed money by the bankrupt mining firm.

Justice Suzanne Duncan called the entire mining venture “irresponsible” in her decision, which also spoke of failures to maintain environmental standards and an increasingly perilous financial situation leading up to the company’s bankruptcy.

The Yukon government’s claim against the company totaled $35.5 million. The government has been funding its work to stop flooding and water contamination at the disused mine using a $10.6 million security furnished by YZC. The Yukon Supreme Court did not allow the government’s claim against Yukon Zinc, citing uncertainty in the total cleanup costs at the site.

The case proceeded to the Yukon Court of Appeal in March 2021. The higher court also rejected the Yukon Government’s $35.5 million claim but found that government expenditures to cover clean-up costs can be secured using YZC property.

Mineral claims

A core issue the Yukon government lawyers want to be heard by the Supreme Court of Canada is whether the mineral claims owned by YZC at the time of its bankruptcy amount to “real property.” The court of appeal decision held that they are not property but an interest in property.

The company owns a total of 2,945 mineral claims covering approximately 700 square kilometers.

The Yukon government’s submission to the Supreme Court of Canada notes that YZC’s primary assets are the mineral claims, which it had been exploring and mining from.

“However, as is the case with many mining rights regimes across this country, YZC does not own the land. YZC has the right to use the surface of the land for its mining activity, but the land remains under the administration and control of Yukon,” the government’s Supreme Court submission reads.

“It is the mineral claims that YZC owns which gain value as Yukon spends to remediate the land and water.”

Also at issue is the guarantee in the Bankruptcy and Insolvency Act (BIA) placing claims made by Canada or a province against property in bankruptcy proceedings ahead of all other claims if they are for costs of remedying environmental damage. The Yukon Court of Appeal found that this legislation did not apply to the mineral claims.

According to the documents the Yukon government filed with the Supreme Court, they will argue that the Yukon Court of Appeal’s interpretation of the mineral rights issue is not harmonious with the intention of Parliament or the objective of the BIA. They say the main flaw in the court of appeal’s decision originates from its belief that the terms “real property” and “land” are synonymous.

The Yukon’s submissions call any financial security granted by the courts over the zinc company’s assets outside the mineral claims “entirely illusory.” They say under the court of appeal decision, none of the government money spent on cleanup will be recouped and taxpayers will bear the brunt of costs while YZC’s other creditors will benefit.

Rentals to the receiver

Among those creditors is Welichem Research General Partnership is a biotech company based in B.C.

According to bankruptcy documents made public online by PWC, the zinc corporation pledged all their present and future assets as collateral to secure an $8.55 million loan from Welichem in 2018. Shortly thereafter, YZC sold all of its assets related to the mine, including buildings and equipment, to Welichem which in turn leased it back to them.

According to the decision from the court of appeal, Welichem is YZC’s primary secured creditor.

Welichem’s submission to the Supreme Court of Canada details how the receiver and Welichem discussed the continued use of leased items over several months. The receiver had identified several leased items necessary for remediation work at the mine. These included heavy equipment, motor vehicles, power generators, fuel storage, staff accommodation and pipes and pumps required for water treatment.

Welichem states the receiver wanted to use these items but did not want to remain responsible for the full payment of the lease which totaled $110,688 per month. They sent a letter to Welichem in which they backed out of all provisions of the lease agreement but sought to maintain the right to use 79 pieces of leased equipment in exchange for a monthly rental payment of $13,500, and with no other obligations.

“Rather, the Receiver was seeking to chart the prohibited “middle course”, one that both purported to disclaim its obligations under the Master Lease, while simultaneously appropriating the Essential Lease Items for its continued use on terms unilaterally imposed by the Receiver,” Welichem’s arguments to the Supreme Court read.

They submit that the acceptance of this middle way between ending and continuing with the lease by the Yukon Court of Appeal puts creditors at the mercy of court-appointed receivers in cases like this.

The Supreme Court of Canada will now decide whether it will hear either of the appeals. According to information provided by the court, decisions on whether to hear an appeal take an average of four months from their filing.

Contact Jim Elliot at

Jim Elliot

About the Author: Jim Elliot

I’m a B.C. transplant here in Whitehorse at The News telling stories about the Yukon's people, environment, and culture.
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