Yukon Zinc’s creditors seek security for “devastating” debt

Two trucking companies from Yukon and B.C. are arguing they're entitled to be repaid the full amount Yukon Zinc owes them.

Two trucking companies from Yukon and B.C. are arguing they’re entitled to be repaid the full amount Yukon Zinc owes them.

Lawyers for Sidhu Trucking Ltd. and Hy’s North Transportation appeared in B.C. Supreme Court on Thursday to argue liens the two companies filed against Yukon Zinc should be reviewed in the Yukon, not in B.C. They said because the liens were filed under Yukon’s Miners Lien Act, they should be evaluated in the Yukon.

But a B.C. Supreme Court judge decided to give Yukon Zinc more time to choose whether it plans to dispute the liens before ruling on which jurisdiction will hear the case.

Currently, Sidhu Trucking and Hy’s North Transportation claim that Yukon Zinc owes them about $866,000 and $551,000, respectively. Yukon Zinc argues its debt to Sidhu Trucking is just $688,000.

Between March and April 2015, both companies filed claims of lien against Yukon Zinc. If valid, those liens would be secured debt and give the companies rights to the Wolverine Mine and minerals until the debt is repaid in full.

That would put them in a very different position from Yukon Zinc’s many unsecured creditors, who will likely receive a small percentage, if any, of the money they’re owed.

And it would put them on equal footing with JinDui Cheng Canada Resources Corporation Limited, Yukon Zinc’s parent company. JDC Canada is owed the vast majority – $600 million – of the $646 million of debt for which Yukon Zinc received creditor protection in March. And JDC Canada has the right to be repaid before any unsecured creditors.

Yukon Zinc will announce to the court whether it plans to file a restructuring plan by August 14. If it does, that plan will likely include “very small” dividends to its unsecured creditors, according to David Gruber, a lawyer for Hy’s North Transportation.

If it doesn’t, the mine’s assets will be sold off. But the value of the mine, said Gruber, is probably less than the amount owed to JDC Canada.

“If the mine was sold, the unsecured creditors would likely get nothing,” he explained.

Gruber said Hy’s North Transportation and Sidhu Trucking were trying to have their liens evaluated before Yukon Zinc submits its plan. That way, the companies would “know where [they] stand,” he said.

But now that won’t happen. Gruber said the liens won’t be dealt with at least until the end of August. He suspects that decision was made to give the companies a chance to settle with Yukon Zinc in the interim. If Yukon Zinc offers a dividend to unsecured creditors in mid-August, Sidhu Trucking and Hy’s North Transportation would have the option of negotiating that amount rather than pursuing the lien claims.

In court documents, Yukon Zinc has cast doubt on whether the claims are valid under Yukon’s Miners Lien Act, stating that “amounts owing for hauling services are not lienable under that act.” Kibben Jackson, the lawyer for Yukon Zinc, said the act isn’t clear about what services are eligible for a lien. That could make all the difference for the claim filed by the two trucking companies.

“If it’s not valid, then those guys get lumped in with unsecured creditors,” he said.

Don Halliday, president of Hy’s North Transportation, said he doesn’t know what will happen to his company if Yukon Zinc’s debt isn’t repaid.

“Financially, it’s been pretty much devastating,” he said. “If we don’t get the money, I don’t know what we’ll do. For anyone to take a $500,000 hit is huge.”

Halliday said he currently has about 25 employees in B.C. and Yukon. He’s had to lay off five or six since Yukon Zinc stopped paying their bills in January. He’s also shut down operations in Watson Lake.

He added that he currently owes about $400,000 to suppliers and other creditors in the Yukon. He’s been counting on money from Yukon Zinc to pay off his own debts.

While Halliday and other creditors wait for Yukon Zinc’s next move, there is now some news about what might happen to the Wolverine Mine if Yukon Zinc does choose to sell it.

Australian company MinQuest announced late last week that it has put in a bid for the mine.

MinQuest’s Fyre Lake copper project is 28 kilometres southwest of the Wolverine Mine, and the company is interested in using the mill and tailings facilities at Wolverine to produce a copper-cobalt-gold concentrate.

Jeremy Read, managing director for MinQuest, said the company estimates it would cost just $50 to $60 million to put the Fyre Lake project into production using existing facilities at Wolverine, whereas it would cost $250 to $300 million to build facilities at Fyre Lake from scratch.

If MinQuest’s bid is successful, Read said Fyre Lake could go into production in early 2018.

Read said MinQuest doesn’t have plans to do anything with the mine itself, which is currently filling with water. The water is estimated to reach the mine entrance within 30 months, which Read said would give MinQuest enough time to figure out how to deal with it.

Even with the flooding, Read explained, the cost of reclaiming the mine isn’t a major consideration for his company.

“That’s not the biggest cost by a long way.” Read said decommissioning the above ground facilities and reclaiming the land around a mine are much more onerous responsibilities than dealing with the mine itself.

MinQuest plans to provide a further update on its bid on or before August 10.

Contact Maura Forrest at

maura.forrest@yukon-news.com

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