By Rose Ragsdale
For Mining News 

Regulatory thorns threaten mining bubble

Failure of project review process in 2010 fades rosy outlook in northern jurisdiction despite recent influx of mineral explorers

 

Last updated 6/26/2011 at Noon



With a mining boom in full swing in Yukon Territory, government officials can be proud of having created an attractive business climate, one that is bringing hordes of excited miners and investors to the territory, with seemingly no end in sight.

But a group of industry leaders recently submitted a report to the Government of Yukon, warning that storm clouds are gathering that could extinguish mining's bright forecast in the territory.

In order for the industry to continue to make significant contributions to the economic well-being of Yukon and its citizens and to make increased contributions in the future, it will need a competitive, appropriate and balanced regulatory and fiscal regime, the Yukon Minerals Advisory Board told the government in a report submitted this spring.

"Over the last several years, Yukon has made significant progress toward providing a balanced but pro-mining, pro-business investment climate, through such initiatives as the changes to the Miners' Lien Act and the Quartz Mining Act, as well as funding of the Yukon Mine Training Association," the board wrote in its 2010 annual report. "However, significant challenges remain."

The 10-member advisory board was created by an order-in-council in 1999, pursuant to Yukon's Economic Development Act, to advise the Minister of Energy, Mines and Resources on mineral development matters. It was chaired until recently by senior executive of Capstone Mining Corp., which owns the Minto copper-gold-silver mine - the territory's longest producing mine currently in operation. Among the other nine board members are top executives of other Yukon mining and service companies, including silver-lead-zinc producer Alexco Resource Corp.

Regulatory alarms in 2010

The advisory board cited five issues as the most pressing concerns facing the mining industry in Yukon, saying they require the most urgent attention.

"They will be familiar to the Yukon government, as they have been highlighted in YMAB reports from 2008 and 2009," the board wrote. "However, developments in 2010 have created even greater urgency, especially for (three of the issues). Without immediate attention, these critical concerns threaten to constrain the sustainability and growth of the Yukon mining industry, erode Yukon's investment attractiveness and diminish the territory's overall economic well-being," the board wrote.

"After many years of low rankings, Yukon has finally begun to make progress in respect of regulatory attractiveness. However, several key issues threaten to undermine these positive developments and represent a significant step backwards in respect of regulatory certainty and timelines. This has the potential to result in investment dollars simply going elsewhere, to the detriment of Yukon, its economy and its citizens," the board wrote.

The most significant issue facing the industry, according to the advisory board, is the ongoing concern of regulatory uncertainty, especially following the Yukon Water Board's decision in 2010 regarding Western Copper Corp.'s application for a water use license for the Carmacks Copper Project.

"These concerns require urgent action by the Yukon government and Minister of EMR, in order to avoid serious damage to Yukon's investment attractiveness and kill off the nascent resurgence of mining activity in Yukon," the board wrote.

Pointing out that it did not discuss the merits of the Carmacks Copper project, the board said its concerns center on "the new element of regulatory uncertainty" created by the Water Board's rejection of a project that was recommended by the Yukon Environmental and Socio-economic Assessment Board and supported in the government's decision document.

The (Water Board) decision rejects a number of matters which were reviewed and accepted by YESAB and then adopted by (the government) in its decision document, according to the advisory board. In addition, a number of items in the Water Board decision are in conflict with the YESAB assessment and (the government's) decision document, it added.

"This situation demonstrates that the (Water Board) and YESAB processes are not harmonized or coordinated, and in fact appear to be at odds with one another," the advisory board observed.

For example, if (the Water Board) issues recommendations that conflict with those of YESAB and the government decision document, then the project is, in effect, stymied. The proponent may have to begin again by resubmitting an amended project proposal to YESAB and the government, which may result in a different outcome than that anticipated by the Water Board, as YESAB could disagree with the Water Board's conclusions.

The advisory board said its concern is that a company could end up in an ongoing loop of making changes to its project proposal and submitting these amended proposals to YESAB and the Water Board again and again.

"This issue is particularly concerning given that the Carmacks Copper project was the first mine project to go through the YESAA Executive Committee process, and the process did not appear to work as anticipated," the board wrote. "These developments create additional significant uncertainty for the mining industry in regard to how the regulatory system in Yukon will work. This uncertainty also has the potential to affect the climate for investment in other sectors of the Yukon economy, which also are subject to both YESAB and (the Water Board) processes.

"Perception is key - mining investors and shareholders are watching closely as this situation plays out and have already begun to express concerns about their investments in Yukon," the board noted.

Better coordination needed

The industry leaders also wrote that while Western Copper's request for a judicial review will perhaps clarify some of the concerns raised by the various parties, it should not be left to the courts to decide such matters.

"The (Yukon government) needs to work with (the Water Board), YESAB and its own departments to coordinate and harmonize the assessment and regulatory processes to provide greater clarity and certainty," the board added.

Among its specific recommendations, the board advised the Yukon government to clarify the role and jurisdiction of Water Board and YESAB, work with the two organizations to harmonize their processes, and investigate the concept of a process charter. In addition, YESAB and the Water Board should work to meet increasing demand from industry by adding staff, improving staff experience and stability, and YESAB should implement standard mitigative measures and best mining practices to simplify reviews. Further, defined time frames should be established for adequacy review processes by regulators and assessors," the board wrote.

It also predicted that the outcome of the judicial review and the government's efforts to coordinate and harmonize the regulatory process will have an important effect on whether mining companies continue to invest in Yukon.

"Continued uncertainty has the potential to damage Yukon's investment attractiveness and industry's ability to raise funds and thereby create economic activity and employment in Yukon," the advisory board observed. "The heightened regulatory uncertainty threatens to undo the good work done by (the Yukon government) to develop an effective regulatory system and promote its benefits across Canada and internationally. It also has the potential to undermine the government's credibility and Yukon's positive rankings in surveys such as the one issued annually by the Fraser Institute.

"In YMAB's view, it is essential that the Yukon government demonstrate that it is aware of these concerns and that it is working to address them quickly to provide certainty and clarity in the assessment and regulatory processes," the board concluded.

Four other urgent issues

Among other concerns for the mining industry:

Access to land, especially in relation to land-use planning and the Recommended Peel Watershed Regional Land Use Plan, is the Advisory Board's second-most serious concern.

The board recommended that (the government) reject or significantly vary the (Peel Watershed recommendations) to deal with the numerous significant concerns with the plan.

In addition, (the government) should re-examine and confirm the mandate, direction and limitations for land-use planning commissions generally in Yukon.

Finally, (the government) should suspend assessment work and fee requirements for existing claim holders within the Peel Watershed until the mineral staking moratorium is lifted.

"YMAB strongly believes that it is essential to improve the attractiveness of mining to local First Nations and communities by achieving an improved resource revenue-sharing arrangement in Yukon.

YMAB encourages (the Yukon government) to negotiate with the federal government to achieve a more equitable resource revenue-sharing arrangement for Yukon First Nations and the territorial government, and to ensure that direct net benefits remain in the local and regional community.

In addition, (the Yukon government) should seek industry input and advice," the board added.

Unless Yukon's limited access to energy is significantly improved, it will become an increasing impediment to resource development. YMAB recommends that (the Yukon government) seek a long-term solution by pursuing the interconnection of the Yukon power grid to Alaska and B.C., as well as taking steps to develop the Eagle Plains Gas Field and construct gas-fired power plants in one or more Yukon locations. In addition, YMAB recommends that policies for independent power production and net metering be implemented expeditiously to allow for growth and flexibility in Yukon's energy capacity.

Further, (the Yukon government) needs to ensure that it appropriately supports infrastructure necessary for resource development, including resource access roads and access to ports.

The lack of a local skilled work force is, and will increasingly become, a significant constraint on mining development in Yukon. "YMAB recommends that measures be taken to attract skilled workers to Yukon and to build skills and capacity in those already residing here. These measures include working with the City of Whitehorse to encourage the provision of more lots and homes in Whitehorse at reasonable prices and working with local educational and training organizations to share information, coordinate activities and increase opportunities for mining-related education and training," the board wrote.

The advisory board noted that other ongoing concerns, which have been highlighted in reports for the past two years, were not repeated in the 2010 report but still need to be resolved.

When asked about the Advisory Board's 2010 report and recommendations, a Government of Yukon spokesman told Mining News that an official response to the report is still being finalized.

"At this point, we can say that we were pleased with the YMAB report, as always, and plan to address the recommendations within," said spokesman Jesse DeVost.

 

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