Yukonomist: The latest episode of the Eagle Gold Mine drama gets spicy

This week’s “Yukon Legislature” episode of the Eagle Mine drama got spicy.

There were dramatic new reveals and new characters, as well as old characters that rehashed what happened during the previous Surprise Receivership! series. and “Why isn’t the berm built yet?” episodes.

For those who missed the show over the summer, here is an episode explanation.

Spoiler alert: If you’re the type of person who tunes into Yukon Legislature Radio on 93.5 FM and hasn’t gotten around to listening to last week’s episode, you should stop reading here.

The big revelation this week was that not even Yukon government economists believe the Yukon government will meet its goal of restarting the Eagle mine in the next five years.

When Treasury Secretary Sandy Silver released the latest financial and economic update, we learned that the base case scenario assumes the mine will not reopen for another five years. They called this a “prudent and conservative” assumption and removed Eagle Mine’s production from their five-year economic forecasts.

The forecasters said an earlier reopening of the Eagle Mine was “not ruled out.” An earlier reopening and the associated capital expenditure would be a “positive” scenario that should be considered later if it comes to that.

The forecasters’ assumptions sound reasonable to me given that the government has placed the mine into receivership. It will take time for the governments of the Yukon and Na-Cho Nyäk Dun First Nation to agree to a reopening plan, if they can at all, and then work with the receivers to repair the mine, find new owners and a new management team, etc Hire staff.

The next thing the characters had to respond to was the size of the economic damage: $1.5 billion. That’s a big headline-grabbing number. But those who read the report noted that it spanned five years. Still, about $300 million a year is still a major hit to the $3.5 billion Yukon economy.

At this point, Sandy Silver added some comedic relief to the drama. The Yukon News reported that “Silver credits the government for diversifying the economy from relying solely on mining.”

This is where the editors would insert the laugh track. What Silver could have said: “We have successfully cashed ever-larger transfer payment checks so that 85 percent of Yukon’s government revenue comes from Ottawa.” Or “As our mining growth strategy over the past eight years has resulted in only two hard rock mines in operation by early 2024 mining remains a relatively small part of the Yukon economy.”

Next, the characters discussed the meaning of the word “own.” The opposition said Yukoners are now “owners” of the mine affected by the disaster. Government officials denied this and said the Victoria Gold Corporation still “owns” the mine.

Both sides are right. Legally, Victoria Gold Corporation owns the Eagle Mine. However, as the government has asked the courts to appoint a liquidator, it means Victoria Gold is on some sort of operational life support. The CEO has been fired, the entire board has resigned, and the company’s shares have been banned from public trading.

In addition to the legal formalities, there is the practical concept of “ownership” in the sense of accountability. All eyes are on the Yukon government. After placing Victoria Gold into receivership, they had to advance $50 million to the receiver just for the first 90 days of cleanup.

The receiver’s budget for the 90 days is actually $62 million, and he is paying the additional $12 million from the cash from Victoria Gold and other easy-to-spend assets he now controls. These assets are relatively small. The bankruptcy trustee’s Sept. 20 report said the search of the company’s bank and gold accounts had yielded just $28 million. Once the liquidators have squeezed the remaining juice out of the Victoria Gold Corporation’s shell, it will be the Yukon government that will be responsible for the spending thereafter.

In fact, the Yukon government’s receivership sidelined the existing board and management and halted their attempts to find new private capital to repair and reopen the mine. Now it all falls squarely into the lap of the territorial government.

That raises another confusing storyline to untangle: whether the territorial government’s move to place Victoria Gold into bankruptcy was wise or not.

Several government officials pointed to Victoria Gold’s July statement, which ended in legal language saying “there can be no guarantee” that the company will have the money to repair and restart the mine . Others pointed to the liquidator’s latest report, which said Victoria Gold’s remaining cash would be exhausted by November 25. They therefore argued that it was financially necessary for the government to intervene (in addition to the government’s argument that it had lost confidence). (e.g. previous management’s handling of environmental remediation activities).

However, this misses the real point, which is that Victoria Gold’s board and management at the time were trying to find new investors to pump new money into the operation.

Was it wise for the Yukon government to stop these private sector efforts at this time and use a receiver instead? This move required new managers to take over management of the Eagle Mine site and do things differently, but there were delays in the handover time and the Yukon government had to reserve the money for the receiver’s activities rather than new private funding sector to procure.

Ordinary citizens like you and me cannot know the answer to these questions. They require too much detailed technical and financial knowledge. This is the subject of future public inquiries.

And in the short term it doesn’t matter much. Because we can look forward to the next episode, which will likely feature deputy ministers across all Yukon government departments looking for budget cuts to offset lower tax revenues and fund the Yukon government’s new mine rehabilitation project in Eagle.

Keith Halliday is a Yukon economist and 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.