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Yukon Zinc owes $3M in mine security

Yukon Zinc's Wolverine mine has been out of compliance with its mining licence since October for failing to pay a security earmarked for mine reclamation and closure plans.

Yukon Zinc’s Wolverine mine has been out of compliance with its mining licence since October for failing to pay a security earmarked for mine reclamation and closure plans.

The company, which announced a temporary shutdown of the mine this week, owes the Yukon government close to $3 million.

About every two years, mining companies are required to submit an updated reclamation and closure plan, explained Bob Holmes, a director with Energy, Mines and Resources in an interview this week.

That document must estimate the costs of the plan, and the company must post a security to the government to cover those potential costs.

After Yukon Zinc’s most recent closure plan, the company owed about $3.5 million on top of the $7 million it had already posted as security.

The initial payment schedule would have seen that paid in full by July 2014.

“They were unable to comply with that because of their financial difficulties, and they’ve had financial difficulties off and on for the last couple of years,” said Holmes. “So we worked out a schedule of payment with them.”

But meeting the new schedule, too, proved a challenge for the company. While some payments have been made, a major deadline was missed in the fall.

“Back in October they ran into yet another worsening financial situation, so they were unable to make the payment.”

The company missed a payment of $350,000 on Oct. 31, 2014, and as a result fell out of compliance with its licence. The next scheduled payment, of $450,000, is due tomorrow.

After the missed payment the issue was turned over to the compliance, monitoring and inspections branch.

How the compliance issue it dealt with is up to them, said Holmes.

Rob Thomson, director of the compliance branch, said he will not comment extensively on the case because the investigation is ongoing.

However, the department has informed the company that it is out of compliance with its licence and that failure to make the payment could result in prosecution, he said in a statement.

Yukon Zinc has not responded to several requests for comment.

There are no major compliance issues beside the lack of payment, said Holmes.

“The fact that they are behind on their security is certainly a problem,” he said.

“They are not complying with their licence. But they are responsible for the site, and they’re doing everything they need to do to keep the site in good environmental standing. So we’re not really worried about any of that at this point.

“Our inspectors are out there, looking at things, and I think they’re fairly happy with what’s happening.”

The shutdown announced this week will result in the layoff of 220 employees of Yukon Zinc and its contractors.

The company has cited declining mineral prices and unfavourable market conditions as the reason for the closure.

While zinc prices are doing alright at the moment compared with the five-year average, prices for other minerals that Yukon Zinc depends on to make a buck have fallen dramatically over the past couple years, including silver, copper and gold.

Watson Lake is already feeling the pinch, according to Mayor Richard Durocher.

“We’re noticing it in town. It’s a lot quieter. There’s not as much activity as there was before.”

The company hired 145 Yukoners over the course of 2013, according to its most recent annual report for the Wolverine mine.

It spent $1.24 million on goods and services in Watson Lake, and $264,000 in Ross River, in 2013.

Contact Jacqueline Ronson at