Victoria Gold's Eagle gold mine site north of Mayo, Yukon, on July 3.HO/The Canadian Press
Stakeholders are hoping for a restart of the contaminated Eagle gold mine, but experts say finding a buyer isn’t guaranteed, and creditors are likely to take a major haircut regardless of the outcome.
Toronto-based Victoria Gold Corp. VGCX-T was placed in receivership last week, its management ejected and its shareholders wiped out after an Ontario judge ruled it wasn’t moving with enough urgency and lacked sufficient funding to remediate a major cyanide spill in central Yukon.
Four million tonnes of cyanide-laced rocks collapsed at the company’s outdoor gold-processing facility in late June. About two million tonnes broke through the company’s containment zone and spilled into the local environment.
The First Nation of Na-Cho Nyäk Dun fears the spill could devastate fisheries, hunting grounds and groundwater. Dozens of dead fish were found in a creek near the mine and groundwater will likely have to be monitored for contamination for years. Stabilization of the site is expected to take into next year and cost up to $150-million.
The Yukon government, which is funding the cleanup, said on Friday that its costs should be partially covered by $103.7-million in security bonds already paid by Victoria Gold. But depending on the total cost, it may be on the hook for tens of millions over and above that.
For Yukon and other creditors of Victoria Gold, the preferred financial outcome is an eventual sale of the mine to a new operator with that entity paying creditors back the highest amount possible.
Kerry Smith, mining analyst with Haywood Securities Inc., said that Agnico Eagle Mines Ltd. AEM-T is a possible acquirer of Eagle, and given that it is a large, diversified miner with expertise in running big sites in northern Canada, it’s a buyer that would likely be welcomed by the Yukon government.
“The Yukon government, they don’t want some other little, small mining company coming in to take on the project, “said Mr. Smith. “They’re going to want somebody that’s got a little bit more substance.”
Agnico also has a history of pouncing in tricky mergers and acquisitions situations and getting assets at distressed valuations. In 2021, it swooped in to buy TMAC Resources Inc. for the lowly price of $289-million after the federal government rejected Chinese state-controlled Shandong Gold Mining Co. Ltd.’s attempts to buy the struggling Arctic miner. Mr. Smith said that if Agnico is indeed interested in buying Eagle, it will likely drive a hard bargain.
“Agnico’s not going to be the Red Cross to the banks. They’re going to say, ‘Look, if you want us to come in, we’ll pay, you know, 30 cents on the dollar. We’ll take this on, and we’ll figure out if there’s a way to get it back into production. But we’re not going to pay much for it, because we don’t know if we can get approvals from the government.”
What is unknown is whether the mine is sizable enough to move the needle at Agnico. Eagle, which went into production just less than four years ago, had a projected mine life of 12 years, and was producing about 200,000 ounces of gold a year. Last year, Agnico produced 3.4 million ounces.
Natalie Frackleton, director, external communications with Agnico, in an e-mail to The Globe and Mail said the company does not comment on market speculation.
Mr. Smith said that Eagle may be more attractive to mid-tier producers, such as New Gold Inc. NGD-T and Iamgold Corp. IMG-T, both of which have far fewer mines than Agnico and significantly lower production.
New Gold and Iamgold did not respond to requests for comment.
A major uncertainty is the outcome of an inquiry into the rockslide and whether heap leaching will be allowed again at the site because that will affect the economics. Heap leaching involves stacking mined ore into outdoor piles and then sprinkling it with water laced with cyanide. Gold leaches from the ore into a lined pond and it is then pumped to an enclosed facility, where it is collected.
Heap leaching is used for processing low grade ore and is a cheaper alternative to building a mill. The Yukon government has suspended the issuance of heap leach licences pending the outcome of an independent review into the Eagle spill.
Tracy-Anne McPhee, Yukon’s Minister of Justice, last Friday said she was hopeful that mining can restart at Eagle. The site was an important contributor to Yukon’s economy. Before the disaster occurred, Victoria Gold employed about 500 people.
Any eventual buyer will have to have the blessing of Na-Cho Nyäk Dun. While the First Nation has called for a moratorium on mining on its traditional territory, it has indicated that it is open to the eventual restart of the Eagle mine. When the company went into receivership, it had missed $750,000 in royalty payments to the First Nation.
“We’re not against mining,” said Chief Dawna Hope at a news conference last week. “We want it done sustainably in a responsible way, so that would have to be discussed within our citizenry again, in light of the disaster.”
But even if the First Nation gives its blessing to a restart of Eagle, there’s also no certainty that receiver PricewaterhouseCoopers Inc. will be able to find a buyer. The same receiver was unable to find a buyer for the Minto mine in Yukon, after its owner abandoned the site in 2023.
As of the end of March, the last time it filed its financial statements, Victoria Gold had $27.7-million in cash versus $230-million in debt. Among its biggest creditors is a syndicate of banks including Canadian Imperial Bank of Commerce, Bank of Montreal, Desjardins and National Bank, which were owed US$136.6-million. Montreal-based Osisko Gold Royalties Ltd. OR-T in 2018 provided Victoria Gold with $98-million in return for a royalty on metals produced from the site. Osisko has already taken a $67.8-million writedown related to the financing.
Victoria Gold CEO John McConnell was terminated by PWC last weekend. In a recent interview with The Globe, he said he regretted staying largely silent through the crisis. In an e-mail sent on Sunday, he said the past 15 years “have been a blast,” he was “very proud” of what his team had accomplished, and he told recipients to “stay tuned for my next adventure.”