Keith Haliday's Article Yukonomist: A cyanide landslide of bad news for the Yukon economy
The cascading effects of a sliding heap leach pad
Keith Halliday
Jul 14, 2024 5:30 AM
Wyatt’s cartoon in the Yukon News summed up the situation perfectly: two Yukoners are out for a walk and one says “I hear a major mining company is having trouble.”
The reply: “Huh, what are the odds?”
In the background is the Yukon Mining Graveyard with tombstones for Faro, Minto and Wolverine.
Unless you have been deep inside a lead-lined adit with no cell coverage since June 24, you’ll know Wyatt was talking about the cyanide heap leach landslide at Victoria Gold’s Eagle Gold Mine operation near Mayo.
Longtime readers will know that I strongly support a responsible mining industry. I believe mining creates good local jobs. It fosters meaningful opportunities for economic reconciliation with First Nations and their devcorps. And it is one of the few private-sector opportunities big enough to move the Yukon a step closer to economic sustainability.
So it is with consternation that we observe the troubles at Victoria Gold. This is not supposed to be Faro. It is a modern mine, recently permitted under strict processes, profitable in 2023, and with what appeared to be a positive relationship with the Na-Cho Nyk Dun First Nation.
Victoria Gold claims to be the Yukon’s largest private sector employer with 350-400 workers, with a priority on hiring “Yukoners, women and First Nations.” Its 2023 financials set aside $18 million for current and deferred corporate income tax. The company’s First Nations Benefits Agreement goes back to 2011. It has spent over $300 million on contracts with Yukon companies. Since 2022, it has raised $1.85 million for its Every Student Every Day school programs.
There is still much we don’t know about the disaster. It is too early to jump to conclusions, but the news we have so far is cause for worry.
The company says it “received Notices of Default” from its lenders. The News learned at government briefings that the workforce is down to around 60 essential workers. Two million tonnes of cyanide-laden material escaped the containment zone. The slope is unstable, making it dangerous to send in repair crews. John Streicker, the minister responsible, said that “elevated levels of cyanide at 0.04 milligrams per litre” were found downstream (this is worrying, but for reference, it is below the federal maximum acceptable concentration in drinking water of 0.20 milligrams per litre).
If the mine remains out of production for months, or even a year as some speculate, the consequences will be serious. Even more so if the mine is forced to close permanently.
First, there are the Yukoners working for the mine and its suppliers. Every reader of this column probably has friends and family now laid off from the mine. I know a spectrum from young Yukoners working their first adult job to those doing one more gig to top up the retirement fund.
There is never a good time to get laid off, but a time of sky-high mortgage rates and inflated food prices is particularly bad.
Second, there is the environment. Cyanide is toxic and we don’t know how much escaped or how quickly it will seep downstream. Intensive water testing must continue.
Na-Cho Nyk Dun Chief Dawna Hope underlined the concern: “Downstream of Haggart Creek, it drains into the South McQuesten, where we have our spring fishery. The issues we are talking about are invisible. You cannot see them, and that is why it's taking so long waiting for the results to come back. My people can no longer dip their cup in that water while they're camping there, fishing, nor can we be confident that we can even fish there anymore. That is what is of utmost concern to us. We do drink that water, and we have rights to drink that water within those final agreements.”
Third are the economic aftershocks. Shut down mines and laid off workers don’t pay much tax to the Yukon government to fund other programs. Hundreds of workers will be ramping down discretionary spending to make Employment Insurance go as far as it can. Some may be forced to sell houses, trucks or other assets. Yukoners who owned shares in the company have seen their investment go down 90 per cent from the morning of the incident to when this column was written.
These multiplier effects will ripple through our economy.
Taking a step back, the longer term economic effects could be even more serious for rural Yukoners and First Nations.
Coming on the heels of Wolverine and Minto, the Victoria Gold incident has seriously undermined public support for mining. Chief Hope put it this way: “The catastrophe must serve as a wake-up call to all Yukoners and all of Canada. We can no longer prioritize short-term economic interest over the health and well-being of our people and the environment. Mining in its current form is neither safe nor sustainable, making it very irresponsible and enough is enough.”
As the News reported, Chief Hope called for a halt to mining and mineral staking until a land-use plan is completed. That could take many years.
Victoria Gold has posted the largest security deposit among Yukon mines, totalling $104 million. If the mine fails, and the clean up costs more than that, the Yukon government will be on the hook. Meanwhile, we don’t know how much royalties the mine paid. According to the Yukon government website, the royalty returns for 2021-2023 are still under review. The Wolverine mine did not last long enough to pay any royalties. Minto paid $35 million over its life.
One can see future Yukon governments being much more skeptical about the benefits of a mine compared to the financial and environmental risks it brings.
Whitehorse is big enough and has so much transfer payment spending that it can weather a major downturn in Yukon mining. But, without mining, what is the economic Plan B for Mayo and Na-Cho Nyk Dun’s economic aspirations? Ditto for other Yukon communities.
The Yukon decided not to develop its natural gas resources. The Alaska highway pipeline never happened. Unlike Alaska, we don’t have a commercial fishery or big military bases. Manufacturing is minimal. We have trouble keeping our internet connected, let alone hosting massive data centres like northern Sweden. Tourism is highly competitive, seasonal and many of its jobs are relatively low-wage. Many Yukoners oppose the development of big resorts and lodges that create a lot of jobs in other jurisdictions.
After Minto, Wolverine and Victoria Gold, Yukoners are asking if the industry just got unlucky and rolled snake eyes three times in a row. Or if there is something systematically wrong with how we run mining in the Yukon.
Much depends on how much cyanide escapes from Victoria Gold and how quickly the mine can be repaired and back in production. In any case, the bar for approval of the Yukon’s next mine just got higher. As did the need for an economic Plan B in rural Yukon.
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.