Financial and Other Considerations Mt. Nansen Mine Case Study. Hugh Copland, DIAND Mining Land Use and Reclamation

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1 Financial and Other Considerations Mt. Nansen Mine Case Study Hugh Copland, DIAND Mining Land Use and Reclamation Orphan Mines Workshop Winnipeg, MB June 26/27, 2001

2 Outline -Yukon Abandoned Mines -Challenges -Mt. Nansen Example -History -Operational Trouble -Abandonment -Financial -Post-abandonment -Next Steps -Lessons Learned

3 YUKON ABANDONED MINES CLINTON CREEK UNITED KENO HILL MT. NANSEN FARO KETZA RIVER

4 Administrative Maintaining environmental integrity Inadequate financial security Funding Legal Maintain or reclaim Lack of policy and reclamation standards Challenges

5 Mt. Nansen Mine - History Original Discovery 1943 First production: Sept.68 to Apr.69, 16,360 t Second production: , 5 months 5800 tonnes Latest production: Nov. 96 to Nov. 97, March 98 to Feb. 99: 269,000 tonnes

6 Mt. Nansen - Operations Complex metallurgy Increased sulphides with depth High clay content Dam seepage and stability Ineffective water diversions Old equipment

7 Mt. Nansen - Recoveries Recoveries (%) GOLD SILVER Nov. 96 Time Feb. 99

8 Mt. Nansen - Troubles Frequent non-compliance with water licence Environmental studies not completed Incredible staff turnover Water treatment no good Charges laid under Yukon Waters Act Security payment missed, Dec. 98

9 DIAND Challenges - Operations Allow to continue to operate in face of frequent water licence violations. How to maintain balance between socio-economic issues and environmental concerns. Increasing environmental liabilities beyond financial security held. Early February 1999, company directed to pay by Feb.18 outstanding security and reduce cyanide levels in tailings pond water to licence limits.

10 Mt. Nansen - Abandonment February 17, 1999 operations ceased March 23, 1999: Company appointed a receiver / manager May 1999: Company convicted under YWA charges, fines total $300,000 July 28, 1999: Receiver informs DIAND it is abandoning the property

11 DIAND Challenges-Abandonment Continuation of water treatment Retaining experienced mine personnel Access to security deposit of $445,000 Water treatment equipment, generators, pumps, vehicles, worn out Who takes the lead? Permitting Disposal of hazardous chemicals

12 DIAND Financial Considerations $445,000 security used by November 1999 Estimated $4-8 million closure costs depending on options Amount of money spent by DIAND: 1999: $1,200,000 (includes $445,000 security) 2000: $2,431, : $1,800,000 TOTAL ESTIMATED TO END 2001: $5,431,000

13 Why not reclaim immediately? First instance of abandonment like this Legal No reclamation plan Engineering studies required Environmental assessment required (CEAA) Permitting time Funds

14 YEAR 2000 Cost Breakdown LABOUR including camp costs and administration: $898,000 CONSTRUCTION $604,000 tailings and seepage collection dam $569, 400 water treatment plant upgrades $34,600 FUEL (diesel, propane, lubricants) $416,900 CONSULTANTS $241,900 dam (geotechnical review, design) $192,500 water treatment plant $49,400 EQUIPMENT RENTALS (genset, earthmoving equip) $76,800 PARTS AND REPAIRS (pumps, electrical, treatment) $65,300 WATER TREATMENT (chemicals) $63,600 SAMPLE ANALYSIS $31,400 MISCELLANEOUS $33,100 LEGAL??????? TOTAL: $2,431,000

15 Post Abandonment - Challenges Economic viability of mine Locating and retaining mine site records Legal obligations concerning ownership Creditor s claims, Miners liens Environmental / Engineering studies Lack of closure plan or abandonment policy

16 Other Considerations Third party access to property or portions Good samaritan clean-up First Nation involvement Devolution to Yukon Government Federal accounting system changes DIAND as operator and regulator

17 Mt. Nansen Next Steps Continue water treatment Examine reclamation options Gain clear title to property Deal with creditors Obtain funding Treasury Board submission EA and permitting Reclaim site

18 Lessons Closer scrutiny of financial ability of company prior to permitting Abandonment predictable? Frequent reviews of security Security required for emergency operating period Criteria for shutting down operation possible? Develop decision framework for handling future abandoned sites.