The Yukon Water Board has increased the reclamation bond required for the largest operating mine in Yukon by $3.5 million — and, according to the board chair, future increases could be tied to potential impacts of climate change. 

“There are design changes that are directly resulting from climate change,” said Piers McDonald, adding these design changes could include increasing the size of settling ponds — basins that make wastewater less turbid — or what’s required through care and maintenance, after the mine closes.

According to a recent order by the water board, financial security required for Victoria Gold’s Eagle Gold mine, located north of Mayo, is now roughly $31 million. That figure has increased from the $27.5 million previously set by the Yukon government.

The company’s president, John McConnell, wasn’t immediately available for comment.

There are two operating mines in Yukon currently — Minto and Eagle. Coffee Gold and Casino are both under review. Map: Carol Linnitt / The Narwhal

Under the Quartz Mining Act, both the Yukon government and the water board have the authority to set financial security, said Sue Thomas, a spokesperson with the Department of Energy, Mines and Resources. She said the water board can set factors to determine financial security for a water licence that doesn’t require approval from the territorial government.

“These days, climate change can be more of a factor requiring water management on site and precipitation management,” Thomas said. 

McDonald said the board found certain discrepancies in information supplied by Victoria Gold, such as costs for waste disposal and water management, which has affected the amount of security required. 

This follows an incident at the Eagle Gold mine in April, in which Victoria Gold dumped 43 million litres of untreated wastewater — equivalent to roughly 17 Olympic-sized swimming pools — into a gravel-lined sump that filters into groundwater, in order to manage the spring freshet following the highest recorded snowfall in the area since 2007. The incident, first reported by The Narwhal, contravened limits set in Victoria Gold’s water licence, but the alternative was allowing a treatment pond to overflow from the deluge. 

The event highlighted the mine’s lack of capacity to brace for the changing weather, something Victoria Gold’s president acknowledged to The Narwhal at the time. While a system for pumping excess wastewater from the treatment pond into another pond on site was underway before the incident, McConnell said, it wasn’t completed in time to manage the heavy freshet. 

“The guys were already working on setting up the pump, but we got caught with our pants down because the weather warmed up faster than we expected,” McConnell said.

McDonald, the chair of the Yukon Water Board, said the incident is on the board’s radar, adding that it’s working with inspectors to further investigate what happened. He said it isn’t reflected in the adjusted security levels, but that it could be in the future, adding that when the company submits its next reclamation and closure plan, the water board “will think that problem through.”

McDonald also couldn’t say whether, or to what extent, the increase in security is associated with the effects of climate change, such as heavier precipitation and spring freshets. However, he said those impacts are top-of-mind to those who sit on the board, which could affect decisions regarding security.

“They do want to send clear signals that the regulators are taking (climate change) seriously,” McDonald said. “On a small government like the Yukon’s, it could be quite a serious drain on resources if we don’t plan for it now.” 

“Climate change is making a difference.” 

‘There never seems to be enough money to clean the sites up’

Before mines can go into operation, companies are required to pay a reclamation bond to the Yukon government, which keeps that money in a bank, returning it as reclamation work occurs. But the amount of security that is paid by mines is somewhat of a moving target, reviewed every two years, when major mines are required to submit updated reclamation and closure plans. The idea is that as mines expand over the years, so, too, does the required financial security. But there are problems with that, said Lewis Rifkind, mining analyst with the Yukon Conservation Society.

“Two years is a very short time in mining projects,” he said. “When things go wrong, they go wrong in a big way.”  

Rifkind said reviewing securities every two years makes it difficult to ensure they’re keeping up with mines as they grow. 

And, if a mine goes bankrupt, he said, costs balloon, typically falling on the Yukon government — a result of having to cover care and maintenance costs while legal affairs are settled and reassess original closure plans, which often don’t account for adequate security levels.

“If you just look two years ahead, I worry we’re going to get into the Wolverine situation,” Rifkind said.

The beleaguered Wolverine Mine, which is estimated by the Yukon government to cost more than $35 million to clean up, saw its bankrupt owners walk away, allowing liabilities to increase in their wake, according to a study completed by PricewaterhouseCoopers Inc., which was named receiver for the mine last year. 

The cleanup of the Wolverine Mine is estimated to cost more than $35 million, after its bankrupt owners walked away. Photo: Yukon government

A recent Yukon Supreme Court decision confirmed the Yukon government will be the first recipient of dollars flowing from bankruptcy proceedings for Yukon Zinc, the company that built the mine in southeast Yukon, in order to cover clean-up and maintenance costs that now fall on the territory. 

Rifkind said this example illustrates that if a company can’t put forward full security for the mine’s life, it raises questions about whether a project should go ahead at all.

“If we’re really concerned about the environment, we should be asking for too much up front,” he said. “Our experience in the Yukon is there never seems to be enough money to clean the sites up. By the Yukon government holding the money, there’s an incentive for the company to do the closure and reclamation because they get the money back, whereas if you pay too little, what’s the incentive? You just declare bankruptcy and walk away.”

Yukon government and water board considering future climate change impacts on mines

The Yukon Water Board, to its credit, Rifkind said, is asking tough questions during public hearings for mines that pertain to long-term effects related to climate change.

“They tend to ask a lot of questions about precipitation and how we’re designing for storms and things like that, but, also, we’re seeing it in the security calculations,” he said. “Of course, in the North, water is one of the things that climate change is going to create a lot of, whether it’s rain, extra snowmelt, [thawing] permafrost — it’s very H2O oriented.”

“The mining companies tend to think 10 or 20 years ahead. The water board is often thinking 100 years ahead.”

The Department of Energy, Mines and Resources is also currently leading a project, in partnership with First Nations and the water board, to mitigate future impacts of climate change on mine sites, such as the overflow Victoria Gold experienced in April.

“The project will develop a document to guide how mines can prepare for climate change and how they continually assess whether the climate is affecting critical infrastructure on the mine site,” Thomas said. 

The document should be completed by March 2021, according to Thomas.

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The Yukon government is seeking $25 million from Yukon Zinc in bankruptcy proceedings to cover the costs of the company’s shuttered and contaminated Wolverine mine site in southeast Yukon.

Yukon Zinc operated the mine until 2015, when it was temporarily shuttered due to unfavourable market conditions. But the mine never reopened and in 2018 the Yukon government stepped in to handle environmental care and maintenance of the flooded site, which contains waste water contaminated with cadmium, selenium, copper and lead.

Over the course of a three-day hearing in late January, government asked the Yukon Supreme Court to recognize the debt, arguing it has “a provable claim” to $35,548,650 for remediation of the environmental damage at the site and that this claim “ranks above” any other creditor claims against the Wolverine property.

According to court documents, during the course of the mine’s operation Yukon Zinc only paid around one third — $10.6 million — of the $35.5 million security required of it, leaving it owing owing around $25 million earmarked to clean up the mess left behind.

In July 2019, the Yukon government petitioned to have Yukon Zinc sent into receivership so its assets could be liquidated and sold. That request was granted by the Supreme Court of Yukon on Sept.13, with PricewaterhouseCoopers Inc. taking control of proceedings and the mine.

Yukon Zinc — which is owned by Jinduicheng Canada Resources Corp., a private Chinese company — argues that the government can’t claim the $35.5 million security as a debt, because the government hasn’t actually spent any of its own money at the site, only part of the $10.6 million in security Yukon Zinc managed to pay. 

Wolverine mine ‘has left an environmental scar on the territory’

Prior to 2003, remediation of abandoned mine sites was a federal, not territorial, responsibility. 

“This is the first litigation that [the Yukon Government] has initiated … that relates to defaults on the part of a mineral claim/licence holder for a mine,” since the territory took on this responsibility, Laurie Henderson, legal representative for the Yukon government, said in an emailed statement. 

During the final day of the recent hearings, Yukon’s lawyer, John Porter, told the court the Wolverine mine “has left an environmental scar on the territory.”

At the request of his client, Porter declined to comment on the hearing outside of the courtroom.

A request for comment sent to Yukon Zinc via email went unreturned. All phone numbers listed for the company on its website have been disconnected.

Location of the Wolverine mine in Yukon. Map: Carol Linnitt / The Narwhal

The missing millions

The Wolverine mine site — primarily rich in zinc but with traces of silver, copper, lead and gold — is located in Yukon, approximately halfway between the communities of Watson Lake and Ross River on Kaska First Nation traditional territory.

In the Yukon, mine security increases as sites develop so risk can be assessed over time. In 2006, when Yukon Zinc first opened Wolverine, the company paid an initial deposit of just $1.78 million. 

Operations at Wolverine, which is an underground mine, included construction of a work camp, mill, air strip, tailings storage facility, landfill and a 25-kilometre access road connecting the mine to the Robert Campbell Highway. Commercial production began in 2012 and by 2013 the necessary security increased to $10.6 million, required in scheduled instalments — which Yukon Zinc was consistently late in making.

The company filed for and was granted creditor protection when the mine closed in 2015. Yukon Zinc made its way out of protection in October of that year and brought its total contribution up to the $10.6 million mark, but the mine remained closed.

The Wolverine mine. The underground mine is flooded and its tailings facility has risked overflowing in the years since the mine’s closure in 2015. Photo: Yukon government

In a Yukon Supreme Court document filed July 17, 2019, the Yukon government stated that between 2016 and 2018, inspections found conditions at the site to be rapidly deteriorating. 

The underground mine was flooded, and so contaminated water had to be diverted to the mine’s tailings storage facility, designed to hold waste from mining operations. With no water treatment in place at this time, the water in the tailings pond swelled, and risked overflowing.  

In the same document, the government noted inspection reports issued in 2018 and 2019 identified “serious concerns related to water management and an overall concern about Yukon Zinc’s capacity to undertake the necessary care and maintenance activities at the mine.” 

As a result of “deteriorating environmental conditions at the mine site,” the Yukon government bumped up the required security to $35.5 million in May 2018. By fall the government was forced to step in, beginning environmental maintenance of the site, including the establishment of water treatment.

Selenium a problem in Wolverine tailings

A 2017 government report on the site found that water in the underground mine, even during the period in which there were no mining operations, “exceeds discharge limits for most metal parameters, with exceedances of cadmium, copper, lead, selenium, and zinc.” 

Water samples from the tailings pond registered three different classes of problem contaminants which “require removal to ultra-low levels for discharge,” including cyanide, selenium and metals. 

Moreover, a “significant portion of the total selenium present in the water is selenocyanate and ‘unknown’ organo-selenium species that are not normally present in mine-impacted waters,” the report notes.

Although selenium is an essential nutrient to human health in tiny doses, it can be poisonous at higher levels. Even at low levels, selenium is dangerous to fish, capable of causing crippling deformities.

For decades B.C. failed to address selenium pollution in the Elk Valley. Now no one knows how to stop it.

Both the water in the flooded underground mine and the water in the tailings pond — itself a source of contamination, as it contains the left-overs from the mining process — are contaminated, says Lewis Rifkind, mining analyst for the Yukon Conservation Society. Water from the tailings is presently being treated by a system which allows cleaned water to be pumped out, which was put in place by the Yukon government to prevent it from spilling over and contaminating other water sources.

“The stuff coming out of the site is pretty nasty,” Rifkind told The Narwhal, noting selenium is a large concern at the site. 

Buyer wanted

What the government really wants is a new buyer to return the site to production, John Fox, Yukon government’s assistant deputy minister for oil, gas and mineral resources, told The Narwhal.

With input from government, PricewaterhouseCoopers submitted a sales and marketing plan to the court in January that anticipates the sale of the mine by the end of June. 

The plan relies on an “aggressive timeline,” Fox admitted. 

“With that [sales] plan, we would also expect the successful proponent to provide us with security that … would ultimately link to the new company’s reclamation and closure plan,” Fox said, adding new reclamation and closure plans would be subject to a new environmental assessment.

“We entered into this receivership with our eyes open and we feel there is a very high likelihood that the mine will sell.”

In an affidavit filed Aug. 1, 2019, Fox stated the estimated cost to continue managing contaminated water at the site to the end of the 2020 fiscal year at $6 million. Fox said the $10.6 million in Yukon Zinc security held by government can cover costs until the end of November 2020.

The Yukon government has already directed $5.8 million of the $10.6 million from Yukon Zinc in its possession to pay for the cost of work it has already done at the site to treat and discharge 15,000 cubic metres of water from the facility, Pendergast said, adding more treatment will take place this spring. 

“Future costs will depend on the timing of a potential sale of the property, as well as the need to  address emerging issues as they arise on site,” Natalie Pendergast, communications representative for the Yukon department of Energy, Mines and Resources said.

Yukon Supreme Court Justice Suzanne Duncan, who presided over the January hearing, has reserved her decision on the issues at hand for the time being, although she has stated she recognizes the urgency of the matter, Pendergast said via email. 

Fox said whatever the outcome of the courts, “it’s fair to say that Yukon — unlike [Yukon Zinc] — can’t walk away from those obligations. So we will be spending the money we need to ensure those risks are addressed.”

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Wet tailings and ‘bad rock’

Rifkind said he heard “rumblings” of the possibility of a sale, but thinks it’s “dreaming in technicolour,” as the cost and time to pump out the site, clean it up and make a workable mine again would be undesirable to a buyer. Moreover, the primary product of the mine — zinc, which is primarily used to protect iron and steel from rust — is not a high-roller commodity, he noted.

“Just getting to the site is going to be expensive. It’s got to be remediated and closed up and you need lots of money for that,” Rifkind said. 

Full remediation is expected to cost another $25 million, although Rifkind said he has to wonder if that will be enough, given the kind of barebones upkeep a site like that requires. 

“Keeping the roads open and that sort of stuff, basic maintenance, none of it is cheap — that’s why you burn through money like crazy.”

Rifkind said the fact that the site is water-rich — the underground mine remains flooded and the tailings impoundment is threatening to overflow — is another disincentive for a buyer. 

Wolverine was also built with a wet tailings impoundment, a waste storage technology that fell out of favour after the 2014 Mount Polley mine disaster, which saw the collapse of a tailings dam that released 25 million cubic metres of mine slurry and waste water into the local environment and Quesnel Lake in Likely, B.C. An expert panel report on the disaster recommended best available practices and technology — including dry stack tailings — be used for tailings storage when possible.

“Could you imagine if you bought the mine, put it back into operation, dewatered it and did all the right things, and then tried to get a wet tailings dam through the (environmental assessment process)?” Rifkind said.  

“I mean, the entire Yukon would scream — we just don’t accept wet tailings dams anymore,” Rifkind said. 

“Plus,” he added, “it’s a mine that, when it was operating, was infamous for instability, rock, falls, that sort of thing — it’s something called ‘bad rock,” said Rifkind. “So you need a lot of money just to stabilize the site.”

A rendering of the tailings pond facility at the Wolverine mine. Image: Yukon Zinc

New rules in place

As to why Yukon Zinc was allowed to operate for so long without providing the full required security deposit, Pendergast said via email that for the government to take enforcement action the mine operator had to be in non-compliance of the terms and conditions of its licence, but during most of the temporary closure, Yukon Zinc was in compliance.

“In the end, Yukon Zinc Corporation’s failure to comply with the terms and conditions of its licence increased the closure costs of the mine,” Pendergast added, noting that the government is looking at the options in its toolbox when it comes to reconsidering the terms and conditions of licences to be more proactive in addressing the risk of mines. 

Some of those tools have already been put in place.

Shortly after the security for Wolverine was set at $10.6 million in 2013, the government changed its rules to require security for any critical infrastructure that has to be constructed for the mine during its entire lifecycle, according to Fox.

“Yukon Zinc required a water treatment plant on site. Our old rules basically said, ‘if they don’t need the water treatment system right now, they don’t need to secure it. We will get that (money) when they will build it later and everything will be fine,’ ” Fox said. “Of course they didn’t build it and everything wasn’t fine.” 

This policy in and of itself is a “change” and the government believes it will go a long way to preventing a recurrence of a situation like Wolverine again, he said. 

“The Wolverine is the first mine in the Yukon since devolution where a company has failed to pay the required security,” Fox noted. 

In November of last year, the Yukon government announced it was considering the creation of a reclamation fund, but hasn’t said yet who will be responsible for paying into it.

After the Mining Rush: A Visit to Faro Mine, One of Canada’s Costliest, Most Contaminated Sites

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

A new proposal to send power from B.C.’s Site C dam to remote Yukon mines is baffling on both environmental and financial grounds, according to Yukon mining analyst Lewis Rifkind.

Rifkind, a civil engineer who works for the Yukon Conservation Society in Whitehorse, said beyond environmental concerns associated with the mines, the “lunatic” cost of building more than a thousand kilometres of transmission lines for short-term projects makes the prospect nonsensical.

The idea was floated this week by Yukon energy and mines minister Ranj Pillai, who said that proposed new Yukon mines will require additional power sources and that the Site C dam could provide that energy with a $1.5 billion to $2 billion investment in transmission lines.

The catch, explained Rifkind, is that taxpayers would end up footing the bulk of the bill for transmission lines to far-flung mines that might only operate for a few years.

“We’re privatizing the profits and socializing the risk. Mines go bankrupt and the owners skedaddle. And then we have to tidy up the mess.”

Rifkind pointed to the Wolverine mine as an example of the short lifespan of territory mines. That mine — a zinc operation in the Yukon’s southeast — was supposed to be in operation for 10 years after it opened in 2012 but shut down after just three.

And it will cost taxpayers more than $500 million to clean up leaching waste rock and tailings at the Yukon’s abandoned lead-zinc Faro mine, whose toxic waste covers the equivalent of more than 26,000 football fields and lies one metre deep, according to the federal government.

“Since when do we invest massive amounts of public money without having an idea of what it’s going to be for and who will actually be able to use it, and how?”https://t.co/IsRZntA6Jz

— DeSmog Canada (@DeSmogCanada) January 26, 2018

Northern mining boom in the works  

The Yukon is poised for a mining boom, with a half dozen new copper, gold, and silver mines in various stages of permitting, environmental assessments and early construction. The territory currently has only one operational hard rock mine.

The new mines intend to burn fossil fuels like natural gas for power, which Rifkind said is “not necessarily a bad thing” given other considerations such as the “awful” lifespan of Yukon mines, the profound environmental damage caused by Site C, and the greenhouse gas emissions emitted during dam construction and from dam reservoirs.

“Even if they were to build a small local hydro dam we’d be flooding a river and a lot of the rivers are salmon habitat…and usually those dams are built at taxpayers’ expense. Why should we destroy our environment, why should we use our taxpayers dollars to subsidize something that’s probably only going to last for three years?”

Even if the mines operate for 10 years, Rifkind said it is “a crazy idea” to spend billions of dollars to connect them to Site C’s power. “That doesn’t even address the cost of building Site C and the huge environmental harm it’s doing.”

“The [mines] are hundreds of kilometers from the existing hydro grid in the Yukon, never mind the hook-up to B.C. It’s not just a matter of running lines from Site C to the Yukon border. You’ve then got to do another 400 kilometres to get to the Yukon grid. And then some of those mines are another 150 kilometres or 200 kilometers off the grid.”

What’s the story with all those new Yukon mines?

Planned Yukon mines that could use Site C’s energy under Pillai’s scheme include:

• The Casino copper and silver mine proposed by Vancouver-based Western Copper and Gold Corp. on a stream called Canadian Creek that drains into the Yukon River. The earthen dam for Casino’s tailings pond would stretch 285 metres in height and hold eight times the volume of the Mount Polley tailings pond, whose failed dam was 40 metres high. Road access to Casino would be through the range of the Klaza caribou herd.
• The Coffee gold mine planned by Vancouver-based Goldcorp Inc., one of the world’s largest gold producers. Coffee would be an open pit and heap leach mine on the Yukon River, 130 kilometres south of Dawson, operational for 10 years. Last July, the Yukon Environmental and Socio-economic Assessment Board halted its review of the project, saying that Goldcorp did not adequately consult with the Tr’ondek Hwëch’in, Selkirk, and Na-Cho Nyak Dun First Nations, which would be affected by the mine.
• The Selwyn lead-zinc mine in eastern Yukon, proposed by the Chinese-owned mining company Selwyn Chihong. The mine would be accessed through the Northwest Territories, along a road that runs through parts of the Nááts’ihch’oh and Nahanni national park reserves. Trucks carrying lead and zinc concentrates would travel to port facilities in Stewart, B.C.

Rifkind said only one of the planned mines — Victoria Gold Corp’s proposed open pit Eagle Gold Mine in the Dublin Gulch watershed, 350 kilometres north of Whitehorse — is anywhere near the grid.

Victoria Gold Corp. has already said it will pay for a 35-kilometre transmission line to connect to the existing Yukon grid, which gets more than 90 per cent of its power from a single Whitehorse dam.

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Ugo Lapointe, national program coordinator for MiningWatch Canada, said he finds it “sad and disconcerting” that B.C. went through such a harsh debate over the $10.7 billion Site C dam and decided to sacrifice a valley potentially to send power to new Yukon mines.

He said the mines will “come and go” and that he is troubled by the idea that Site C’s electricity could go to Alberta’s oilsands operations or to speculative mines in the Yukon.

“Since when do we invest massive amounts of public money without having an idea of what it’s going to be for and who will actually be able to use it, and how?”

Can wind and solar help reduce carbon emissions for mines?

Both Lapointe and Rifkind said there are far more environmentally sound ways to help meet power needs for new northern mines while reducing their greenhouse gas emissions.

Lapointe pointed to the Raglan Mine, a large nickel complex in Quebec’s Nunavik region that installed wind turbines and a small energy storage facility in 2014. In the first two years of operation, the mining company saved 4.5 million litres of diesel and avoided 12,600 tons of greenhouse gas (GHG) emissions.

Rifkind said new Yukon mines can install solar arrays and small wind turbines to meet some of their energy needs, reducing fossil fuel reliance. Once the mines close, he said the renewable energy infrastructure could be moved to a Yukon community as a legacy from the mining project.

How much would it cost to ship Site C’s power to Yukon mines?

A 2016 report found that constructing a 763-kilometre transmission line from Iskut, B.C. to Whitehorse — either to import or export energy — was not economical. The cost of the line was pegged at $1.7 billion at the time.

In an emailed statement to DeSmog Canada, B.C.’s Ministry of Energy and Mines said no formal discussions have taken place between the B.C. and Yukon governments and “it’s too early to comment on any possible transmission intertie between the two jurisdictions.”

BC Hydro is interested in serving new customers provided that it is economic to do so, but studies would have to be done before deciding on possible transmission line routes and the price of energy “would be subject to negotiations,” the energy ministry said in the statement.

Industry Canada confirmed to DeSmog Canada that a transmission line from B.C. to the Yukon would qualify for funding from Canada’s new Infrastructure Bank.

New funding agreements are currently being negotiated with the provinces, and a transmission line to the Yukon or Alberta would also be eligible for green infrastructure funding.

Rifkind said it would be “insane” to use taxpayers’ dollars to pay for transmission lines to send Site C’s power to the Yukon, in part because of significant power losses when electricity travels long distances.

About five per cent of power is lost through long-distance transmission in B.C., and another five per cent through local transmission, meaning that at least 10 per cent of the power that would be shipped from Site C to the Yukon would be lost.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.