Justice Suzanne Duncan of the Supreme Court of Yukon reserved her decision on several issues argued last week regarding the bankrupt Wolverine Mine.

The Yukon government is asking the court to find the government does have a case to claim $35.5 million through bankruptcy proceedings to cover the government’s cost if has to ultimately reclaim and close down the mine site.

It’s asking the court to rule that its claim ranks above all other claims in the bankruptcy proceedings.

Court documents indicate it’s unlikely the Wolverine Mine and associated assets would sell for more than $15 million even if a buyer could be found. But a marketing and sales plan has been prepared.

Among the issues Duncan was asked to consider during the three days of hearings was the proposal to sell the mine southeast of Ross River and other assets of the Yukon Zinc Corp.

PricewaterhouseCoopers was appointed last fall as the receiver and trustee to oversee the sale of assets owned by Yukon Zinc, a private Chinese company whose sole shareholder is Jinduicheng Canada Resources Corp.

Yukon Zinc is opposing the government’s application on a couple of key points. For one, it argues the government can’t claim the $35.5 million as a debt owed because it hasn’t spent any of its own money at the site so far. The law, the company argues, does not support the Yukon’s claim.

Secondly, the government can’t claim rights to Yukon Zinc’s 2,495 mineral claims because they’re not real property or an asset associated with the mine.

The marketing and sales plan was filed with the court by PricewaterhouseCoopers before the proceedings began last week.

Court documents prepared by the Yukon government indicate what’s left of Yukon Zinc’s reclamation security deposit could all be spent by June looking after the mine site, leaving Yukoners to bear the cost of caring for the site from then on.

John Fox, the assistant deputy minister of Energy, Mines and Resources, said in interview Wednesday having the money run out by June is the worst case scenario.

The government is planning to stretch it out to the end of October if it has to so that it can continue looking after the site and treating contaminated water in the tailings pond for release to the environment, he said.

He said they need to ensure there is room in the pond to handle any unforeseen weather events to avoid having contaminated water spill over the top.

Fox said the overriding intent of the marketing plan is to have the Wolverine Mine sold before June.

“We have worked with the receiver on the development of the plan,” he said. “We would like to see it sold as soon as possible.”

Fox noted when Yukon Zinc was still in control of the mine, the company had a couple of potential buyers interested, potential buyers that the government did meet with.

“We believe that in discussions with the receiver that there are interested parties out there,” he said. “We believe with the mine in the hands of the receiver rather than the company, it will actually be easier to sell.”

The Wolverine Mine, an underground lead-zinc mine, began production in 2012. It suspended operations in January 2015, after three straight years of losing more than $100 million a year.

Yukon Zinc applied for and received court protection from creditors in March 2015.

In the subsequent months, many companies inside and outside the Yukon received 11 cents for every dollar they were owed. The company held onto the property but it also had to bring its reclamation security up to date by posting the full $10.6 million required in late 2015.

From 2016 through 2018, the Yukon government reassessed the amount of reclamation security that needed to be posted, and came up with $35.5 million, including the $10.6 million already secured, according to the court documents.

The documents suggested the liability grew substantially because of inaction by Yukon Zinc in carrying out obligations set out in its plan for temporary closure.

It did not, for instance, treat water coming out of the mine portal for release into the environment but rather redirected the water to the tailings pond, the documents say. They say the company failed to address issues with the pond’s liner.

Since taking over the property in October 2018, the Yukon government has drawn the security down by $5.8 million to repair the liner, bring in a new water treatment plant and so forth.

“It is anticipated that the balance of the security held by Yukon will cover the cost of environmental protection and care and maintenance activities only until June 2020, at which time Yukon will incur costs to address the significant adverse environmental effects left by YZC,” reads a Yukon government submission filed with the court prior to last week’s hearing.

Court documents say as a condition of the sale, the purchaser would also have to post any outstanding security – $25 million.

But the documents also note it’s unlikely the value of the mine and associated Yukon Zinc assets is greater than $15 million.

Under the marketing and sales plan prepared for the court’s review, the sale process was to begin Jan. 30 with the approval of the court.

It would ultimately end up with PricewaterhouseCoopers reporting on the results of the marketing and sales effort no later than May 29, unless the date was extended by the court.

The document notes that any delay in getting the process underway as outlined would simply shift the deadlines identified in the plan.

A Jan. 16 report to the court by PricewaterhouseCoopers notes conditions at the mine have fallen into a state of disrepair since 2015.

Of the vehicles on site, all but one have been locked down by the Yukon’s Workers’ Compensation Health and Safety Board for safety reasons.

When PricewaterhouseCoopers took over control in the fall, only two of the 10 diesel generators on site were operable, and one of them was deemed a fire hazard after inspection, reads the Jan. 16 report.

A failure in the heat trace system allowed pipes in the camp to freeze.

“Under the supervision of the receiver, a short-term solution was achieved, which avoided the entire camp from being shut down,” says the report.

The Yukon government’s policy to require a reclamation security deposit was implemented in 2003 when it took over responsibility for licensing new mines as part of the transfer of federal authority to the Yukon government.

The policy is intended to ensure the amount of security kept pace with growing liability associated with continued operations of the mine, such as an open pit getting larger and larger as the years go by.

The policy was intended to ensure there was always enough money in the bank to reclaim a mine site if a company went bankrupt, thus avoiding a situation like the Faro mine hangover.

To date, for instance, the Minto Mine has $49.2 million in security posted under the Quartz Mining Act and another $23 million posted under the Waters Act, for a total of $72.2 million.