Yukon Zinc scrambles to preserve Wolverine property

Yukon Zinc has another two months to sort out whether it will be able to save the company and its assets.  

Yukon Zinc has another two months to sort out whether it will be able to save the company and its assets.

A B.C. Supreme Court order has extended the company’s creditor protection to June 12.

In the meantime, the company will be soliciting offers to buy the Wolverine mine property outright, or its liquidated assets.

At the same time, it will continue to attempt to restructure its organization towards the goal of convincing parent company Jinduicheng Molybdenum Group Ltd. to continue financing Yukon

Zinc’s maintenance of the property, according to documents filed with the court.

The company has been under creditor protection since March 13 on $646 million in debt.

Meanwhile, the underground portions of the mine continue to slowly flood with water, at a rate that is still unknown.

Yukon Zinc is required to continuously pump water out of the mine shaft under its temporary closure plan. It ceased to do so around February 8, because it could no longer afford to operate the equipment.

In co-operation with the Yukon government the company plans to send inspectors into the mine before the end of this month to assess the damage.

Based on what is found, the company has promised to submit a new temporary closure plan to the Yukon government by July 17. The flooding is expected to continue until that date at the earliest.

Yukon Zinc has previously stated its intention to negotiate a temporary closure plan that does not include dewatering and ventilation of the mine, so as to reduce costs.

This, however, would jeopardize the permanent closure plans for the mine, since those currently involve storing tailings permanently within the mine shaft.

The company also owes the Yukon government $3 million towards its mine security, and as a result is out of compliance with its mine licence.

Government officials have said that they do not believe this debt will take precedence over any other in the event that assets are liquidated.

Procon Mining & Tunnelling Ltd., the mine’s primary contractor, has urged the court to force the company to liquidate quickly, arguing that continued maintenance of the property will diminish eventual returns to creditors.

That company asserts it is owed $7 million by the company, although Yukon Zinc says the real figure is about half that.

Yukon Zinc sued Procon in October over a $18 million lien that it says was “intentionally and egregiously inflated.” Yukon Zinc alleged defamation, conspiracy and possible racism.

That matter is ongoing.

Procon is also at odds with Transamine Trading LLC, a customer of Yukon Zinc’s concentrates that paid $7.7 million towards future deliveries that have yet to materialize.

Yukon Zinc agreed Transamine could collect concentrates being stored both at the Wolverine mine and at a shipping terminal in Stewart, B.C. However, Procon has challenged that arrangement, arguing that its lien covers the property in question.

The Wolverine mine has not turned a profit since production began in March 2012. Over the subsequent three-year period, losses have totalled $196 million.

Commodity prices for Yukon Zinc’s product are low, and expected to remain low in the short term, according to the most recent court monitor’s report.

If the mine ever does return to operation, the company will soon after be required to install a water treatment facility at an estimated cost of $10 million.

It remains to be seen whether Yukon Zinc’s parent company believes these costs merit the benefits of holding onto the property.

Yukon Zinc’s CEO met with representatives of the JDC Group in China late last month.

“JDC Group continues to be supportive of a restructuring, but at this time, is not prepared to extend any further financial commitments until it better understands the restructuring options,” according to the monitor’s report.

Contact Jacqueline Ronson at jronson@yukon-news.com

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