An economic cold snap is coming and — unless you have a fully insulated job inside the Yukon’s government greenhouse economy — it’s time to find your financial parka.
With the Yukon government having succeeded in pushing Victoria Gold into receivership, the chances of the Eagle Gold Mine returning to production next spring have gone from debatable to fantastical.
For a Spring restart to happen now, you would have to believe all of the following things. That either new private sector investors — undeterred by the intense political scrutiny — or the Yukon government itself could quickly set up a new company and hire fresh managers to quickly develop a restart plan. That the new managers could get the First Nation of Na-Cho Nyäk Dun on-side to restart heap leaching with cyanide in their traditional territory. That the new investors or the Yukon government would front the big bucks required; probably well north of $100 million. And that all of this could happen in time to get substantial work done on site before freeze up.
If you believe all that, I have a used cyanide delivery truck to sell you.
So a slow down is coming, even if the full effects may not be felt until next year’s exploration season. In such situations, you should have a plan and move quickly to manage your cash-burn rate and shore up your balance sheet.
But before we panic, you should also think through how severe a Yukon recession might be and your personal exposure to it.
The good news, such as it is, is that the Yukon government has been mostly unsuccessful in diversifying the economy. It still gets around 85 per cent of its revenue from Ottawa. This stabilizes the Yukon economy, with 45 per cent of the workforce employed in the public sector plus thousands more supported by relatively secure government contracts.
The Yukon never brought in an out-of-territory worker tax like the N.W.T.’s to encourage local mining employment, so 411 of Victoria Gold’s 605 employees don’t even live here. Some of the 194 Yukon employees will get jobs with the receiver or the contractors working on the clean up.
So, while the Eagle Gold Mine disaster may not spark a full economic crisis, its effects will still be sizable. Especially since the disaster affects the entire mining industry — 11 per cent of our economy — not just Victoria Gold. With the Yukon government’s bold move to push Victoria Gold into receivership, the calls by First Nations governments for mining limits, and the shift in public sentiment, I would not want to be pitching investors on a Yukon project this winter.
Let’s look at three different types of Yukoner and how the economic cold snap could affect them.
The first group is those most severely affected: the 194 Yukoners already laid off plus the unknown number at suppliers. The pain is multiplied by today’s high mortgage rates and inflated prices. These workers will have already taken their first moves, such as cutting discretionary spending and looking for other work.
What they have not yet done, as far as I can tell, is to organize to pressure the Yukon government to give them priority on clean-up jobs at Eagle. Or to suggest that now would be a good time to ramp down the Yukon’s temporary foreign worker and working student programs, whose effect is to bring in competing workers and suppress wages.
It will be vexing if laid off Yukoners have to compete with temporary foreign workers for entry-level jobs in Whitehorse while fly-in-fly-out workers laid off by Victoria Gold got the well-paid jobs with contractors fixing the landslide.
The next group is those least affected. If you have a greenhouse job in a core government program, say as a teacher, doctor or grader operator, your job is safe.
The businesses in the middle and their staff face some tricky questions. The first is figuring out how much risk you face. How much of your business’s revenue comes from the mining industry? Will the clean-up contractors bring in enough Outside labour to keep your hotel or restaurant busy? Will exploration budgets be zeroed out next summer, or will investors be confident enough in the Yukon to pivot to geologies that don’t require heap leach? Will people keep starting new housing projects for your contracting company even if the economy is wobbling?
Unfortunately, many of these questions are unanswerable today. You need to do some personal scenario planning.
For example, you might get out a piece of paper and make two columns: “A Few Days of Minus Thirty” for a mild impact on you, and “Three Weeks of Old-School Forty Below” for more severe economic weather.
Then list what would happen to your business and personal finances in each situation. How much does your income go down? Do you have a rainy day fund and, if so, how long does it last? Does the Forty-Below scenario have you missing mortgage payments or going out of business?
Then list the things you can do to improve your situation in each scenario. Some will be what consultants call “no regrets” moves; things that pay off in both scenarios, such as discretionary cost cutting, refinancing loan payments at lower rates or postponing major purchases.
Some moves will have trade-offs, and you might not want to make them until you are sure you are in a Forty-Below scenario.
The timing element is critical. If your cash-burn rate is too high today, the time to make a budget and cut costs is now rather than waiting to be forced to do so. Making some big, unpleasant decisions today can help prevent you from ending up having to make decisions like switching to No Name brand oatmeal tomorrow.
Timing is also critical for asset sales. If you suspect you may need to sell some business assets or personal items, you may wish to do it now while used prices are still good. Once everyone else tries to sell their fully loaded F-150 Tremor or Skidoo Summit Adrenaline, prices will plummet.
And then there is your house. Can you afford your mortgage in a Forty-Below scenario? Will Whitehorse house prices go down, or will our reliably rising transfer payments and greenhouse jobs keep prices stable?
The old saying is that there is no such thing as bad weather, just bad clothing choices. Now is the time to review your current outfit, and see if you are actually in reassuringly good shape. Or if you are the person headed into Forty Below wearing shorts and flip flops.
Keith Halliday is a Yukon economist and the winner of the 2022 Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.
