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Vol. 15, No. 35 Week of August 29, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Explorers trek to mining-friendly Yukon

Territory works to spur resource development as two more mines begin countdown to startup this fall; more juniors kick the rocks

By Rose Ragsdale

For Mining News

THISTLE CREEK, Yukon Territory – The Bell Jet Ranger helicopter just landed, while the A-Star unloaded passengers before powering down its engines on the other side of the creek. A third, smaller copter whined as its rotors buffeted bystanders with gusts of dust and debris during takeoff. Meanwhile, a small plane soared overhead.

Welcome to the Dawson Mining District of central Yukon in early August. Or as one wag joked: “JFK West!”

Visitors prepared to tour Kaminak Gold Corp.’s mining exploration camp here as a three-man cable television crew scurried out of the tree line, running onto to the gravel runway in search of a scoop. All around them, the real story was unfolding on this rough, remote airstrip, used by several companies with mining claims in the area including Kinross Gold Corp., the new owner of the White Gold Project, which lies just 25 kilometers, or 16 miles, to the north.

Yukon’s modern-day mining rush is on, and all signs point to this being just the beginning.

A score of explorers like Kaminak are working hard to follow up on Underworld Resources’ White Gold discovery in 2008 by chasing other, potentially bigger, gold deposits they believe lie beneath their feet in this unglaciated part of the world.

But Yukon’s mining rush is bigger than the White Gold play. A growing crowd of juniors are searching for the yellow metal on claims in the Whitehorse and Mayo mining districts, farther south and east. Still other explorationists are hotly pursuing major deposits of lead and zinc, copper and gold, silver and rare earth elements across the territory.

Yukon policymakers, meanwhile, are busy doing all they can think of to ease the way for these explorers, urging them to chase their theories of where mineral resources continue to hide in this under-explored region, and in the process, pour millions of investment dollars into the territory’s economy.

The strategy appears to be working. Yukon officials say mining investment in the territory is battling back from recession-induced lows to possibly top C$120 million this year, up substantially from about C$90 million in 2009.

“Yukon Territory is an exciting place to be. It’s incredibly busy,” said Mike Burke, head of Mineral Services, Yukon Geological Survey.

Staking rush is on

An important sign of more intensive activity is the number of mining claims staked in Yukon this year. The territory’s total active quartz claims, including 32,692 claims staked during in the first seven months of 2010, jumped to nearly 110,000, up about 38 percent from last year’s record total of just under 80,000 claims.

In Yukon, prospectors and explorers still stake mining claims in the traditional way. They must obtain claim tags from the mining recorder, a unit of the territorial government, and walk off the boundaries of their claims on Crown land, using posts to mark out a rectangle no bigger than 1,500 feet on each side. Each claim costs C$10, and owners have to do at least C$100 of work a year on each claim (or pay C$100) to maintain their rights to the land.

Kaminak President and CEO Robert L. Carpenter said he likes Yukon’s requirement to physically stake mining claims, which is “a rigorous process that is somewhat costly.”

“What I like about working in the Yukon, is it keeps out guys who can’t afford it,” he said. “Every junior mining company in Vancouver with C$120,000 in the bank can’t come up here. The market is not giving money right now to ‘fly-by-nighters.’ The recession is on, and we’re spending 8 million bucks up here this year.

“But nine out of 10 guys in Vancouver are sitting there with their pockets like this, because they can’t get money for their projects,” Carpenter said, turning out his pockets. “And that’s good because it has enabled us to stake 45 kilometers,” he added.

The latest claims rush reflects the most staking activity in the territory since the Wolverine deposit was discovered in the Finlayson Mining District of southeastern Yukon in 1994, according to Burke.

Two more mines set to open

Chinese-owned Yukon Zinc Corp. is one of two companies expected to bring online two mining operations in Yukon this fall. Yukon Zinc aims to start production at a newly built 1,700-metric-ton-per-day underground mine to tap the zinc/silver-rich Wolverine deposit, which contains measured and indicated resources of about 4.46 million metric tons grading 12.14 percent zinc, 354.8 grams per metric ton silver, 1.16 percent copper, 1.69 g/t gold and 1.58 percent lead.

Yukon Zinc had hoped to begin production in the second quarter, but the company said a worker’s death in late April shifted its focus to underground testing and geotechnical modeling, as well as developing enhanced safety protocols and procedures to ensure a safe work environment. A comprehensive plan for a range of ground conditions is currently being completed.

Alexco Keno Hill Mining Corp., a subsidiary of Alexco Resource Corp., intends to start up a mining operation in October at its Bellekeno silver project in the historic Keno Hill silver district in east-central Yukon. Bellekeno, the first of potentially numerous silver deposits that Alexco hopes to mine in the area, will be a 250 t/d operation for years 1 and 2 and increase throughput to 400 t/d in years 3 to 5. The Keno Hill district, once home to at least 35 small mines, produced about 217 million ounces of silver between 1921 and 1988.

In addition to indicated and inferred resources of 400,000 and 111,000 metric tons, respectively, grading 921 g/t and 320 g/t silver, 9.4 percent and 3.1 percent lead, and 6.9 and 6.5 percent zinc, in the Bellekeno deposit, Alexco aims to mine a nearly 2.5 Mt indicated resource in historic tailings nearby grading 119 g/t silver, 0.12 g/t gold, 0.99 percent lead and 0.70 percent zinc with contained precious metal of more than 9.5 million ounces of silver and 9,600 ounces of gold. The company also aims to mine additional high-grade silver and gold deposits on its extensive claims in the district.

Labor force impact is mixed

However, unemployment is up this year among the sparsely populated territory’s 17,800 workers, jumping 1.1 percentage points to 7.8 percent in July. Though jobless claims increased during the height of the mining season, they remained below Canada’s national unemployment rate of 8 percent. The territory’s work force, meanwhile, grew by about 100 individuals during the past 12 months, and several training programs have spawned a score of skilled workers for the burgeoning mining sector.

Northern Freegold Resources Ltd., which has discovered at least eight substantial mineral deposits on its huge district-scale Freegold Mountain Project at the southern end of the Dawson Mining District hired several graduates of the Yukon Mine Training Association’s mine apprenticeship program, which focuses on training First Nations members for jobs in the mining sector.

Bill Harris, Northern Freegold’s chairman and chief operating officer, said the trainees brought hidden benefits to their jobs. In the past, the junior hired university students to fill entry-level positions but soon found that many of the students did not enjoy doing the grunt work needed in a mining exploration camp.

“The Yukoners can drive 5-speed trucks, and many have hunting licenses, which means they know how to use a gun. It’s important to have a gun in camp,” Harris said.

Debbie James, Northern Freegold’s project geologist at Freegold Mountain, said one Yukoner had even worked in the forestry industry and knew how to operate a chain saw. “The students can’t do these things,” she said. “Yukoners are glad to have the jobs and they are happy to do everything.”

Mining incentives help

“We’ve passed regulations and legislation in the past (few) years such at the Quartz Mining Act to make Yukon Territory a friendly environment for responsible people to do business here,” said Patrick Rouble, Yukon’s Minister of Energy, Mines and Resources. “In many ways, we work to support mining, from grassroots exploration to having an option-able property in under five years. That’s pretty impressive.”

Burke said Yukon’s emerging mining boom has been years in the making, dating back to 2003 when Canada’s federal government transferred the authority to make such decisions about natural resource development to the territorial government in a process known as “devolution.”

With a focus on mutually beneficial collaboration, the territory has worked with its 14 First Nations, most of whom have settled their land claims, and with companies to form partnerships for mining ventures.

“All of our First Nations are business-ready, including the three that haven’t settled their land claims,” Burke said.

The territory’s support for grassroots mining exploration is becoming the stuff of legends with the ongoing success of celebrated prospector Shawn Ryan.

Ryan happily credits the territory’s Yukon Mining Incentives Program with giving him critical funds to get started in the form of a C$10,000 annual grant. For more than a decade, Ryan has explored and staked property all over Yukon Territory, including the White Gold claims, and he has optioned claims to at least a half-dozen juniors now seeking Yukon gold. Ryan currently owns 20,000 active mining claims and a rapidly growing prospecting and geophysical services business: He recently expanded and relocated his operation from Dawson to Whitehorse, the territorial capital.

The territorial Legislature, meanwhile, has approved more funding for YMIP in hopes of spurring even more grassroots mining exploration.

Once the mining companies started coming, Yukon officials sought ways to provide additional support. That effort materialized at the Yukon Strategic Industry Development Fund.

“The government was looking for ways to be in the game. Of course we don’t have the resources to get involved to the extent that Quebec does,” said Clint Ireland, manager of large projects for the Yukon Ministry of Economic Development. “We wanted to show the mining industry our support, but we knew we couldn’t afford to be involved as an investor. So far, the fund has invested C$1 million a year in mine projects for the past five years, or a total of C$5 million.”

Ireland said mining companies have used modest grants from the fund to offset costs of transportation and energy studies and to assist with economic aspects of scoping, and feasibility studies.

“The Yukon government gave us a grant to get going, and it’s much appreciated,” Carpenter said. “I’ve worked a lot in other places in Canada. Coming to the Yukon, you’ve got trees, and the weather is not that bad.

Miners applaud regulatory process

In 2003, Yukon lawmakers approved the Yukon Environmental and Socio-economic Assessment Act to establish a process to assess the environmental and socio-economic effects of projects and other activities in the Yukon or that might affect the Yukon and passed regulations in the ensuing years to accompany the Act.

Mining companies say the YESSAA process has proven to be reasonable and speedy.

“In our first year, we managed to get all of our permits, our forestry permit and all of our drilling permits, quite expeditiously,” Carpenter said. “We’re in a jurisdiction that wants us here. It’s an overlooked place by the mining industry. Part of me would like to keep the Yukon all to myself, but the word is out. Because of gold fever, I think the jig is up. Everybody knows. I would have liked to have another year of quiet.”

In addition to streamlining regulations, Yukoners have tweaked their royalty and taxation regime to ensure that it is competitive with other top mining jurisdictions. Yukon’s YESAA process, for example, not only serves as the territory’s environmental review required for all mine projects, it also replaces the Canada Environmental Act review.

Yukon also capped its escalating scale of mine royalties at 12 percent for projects with more than $35 million in annual revenue.

Regulatory road still has potholes

The changes have not guaranteed that mining companies will overcome all regulatory obstacles easily.

Capstone Mining Corp., for example, is headed toward completing its third full year of copper, gold and silver production at the prolific, high-grade Minto Mine in central Yukon. The territory’s only operating mine in recent years, Minto encountered problems with unexpected flooding due to uncommonly heavy rainfall last summer. Since then, mine operators have worked to resolve the flooding within the restrictions of a water discharge permit that does not allow for higher levels of particulates and metals.

Capstone is applying for a permit revision and anticipates being allowed to remove the 160,000 cubic meters of water by year’s end that currently prevents the mining of about 500,000 metric tons of high-grade ore at the bottom of the main open pit at Minto.

Western Copper Corp. is another mine company that has encountered difficulties in Yukon’s permitting process. The company recently was denied the final authority needed to move toward start-up of a 5,000 t/d open pit mine at its Carmacks Copper Project in central Yukon even though it was granted all of its earlier permits, and independent studies indicate that the project poses little risk to the environment. Western Copper has appealed the decision and is currently focusing on its giant 1 billion-metric ton Casino porphyry copper-gold-molybdenum-silver project to the northeast. The junior hopes to apply for permits under the YESAA process next spring.

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