The owner of the mothballed Tulsequah Chief zinc mine in far northwestern British Columbia was pushed into receivership this week by its major lender, according to court documents and a receiver’s report.
The action raises questions about when and how a decades-old problem with acid mine drainage flowing into the Taku River from the mine’s previous operation will eventually be cleaned up.
Chieftain Metals Corp. is the second company to attempt resurrecting the historic and environmentally controversial Tulsequah Chief property, which is 100 kilometres southwest of Atlin and 65 kilometres northeast of Juneau, Alaska, close to the B.C. border along the Alaska Panhandle. It bought the property out of receivership in 2010.
However, after pouring some $26 million into updating its resource estimates, mine plans and obtaining new permits from the B.C. government, Chieftain Metals was unable to secure the financing it needed to develop the project to construction.
And after Chieftain ran short of cash this summer, its major lender and major shareholder, West Face Capital Inc., pulled the plug by issuing a demand notice on Chieftain for the $27 million the investment fund is owed.
“The (Chieftain Metals) companies are facing a liquidity crisis for which (they) have no readily available solution,” West Face partner Peter Fraser wrote in an affidavit to the court, and West Face had “lost confidence in the current management.”
The accounting firm Grant Thornton LLP was appointed receiver for Chieftain Metals on Tuesday, and company president Victor Wyprysky said in a news release that most of the company’s directors had resigned from its board of directors.
Now, conservation groups downstream of the Tulsequah Chief property in Alaska are watching for what comes next after pressing B.C. authorities for years to clean up the site.
“Who’s going to end up owning (the property) and what does this mean for cleanup of the acid mine drainage?” asked Chris Zimmer, Alaska campaign director for the group Rivers Without Borders.
The acid-bearing mine drainage makes its way into the Taku River, which flows across the panhandle to empty into the waters of Alaska’s Inside Passage.
Chieftain built a treatment plant to deal with the acidic drainage early in its tenure that operated in 2012. But an inspection report from the B.C. Mines Ministry noted that it operated at below its designed efficiency and at higher-than-expected cost, it was shut down.
The mining firm Cominco, one of the predecessors to today’s Teck Resources Ltd., operated the Tulsequah Chief property as a small underground mine between 1951 and 1957.
The property was taken over by Redfern Resources Ltd. in the 1990s, but that company entered bankruptcy protection in 2008, the process from which Chieftain acquired it 2010.
And with the Tulsequah Chief owner now in receivership, Zimmer said the mine’s immediate prospects to generate revenue that could be devoted to cleaning up the environment don’t look any brighter.
“If the mine is never developed, how is it going to get cleaned up if you’re relying on the companies,” Zimmer said. “At some point, the government, B.C., needs to take responsibility for this.”
Zimmer said the situation also doesn’t improve the confidence of Alaskan conservation groups in B.C.’s ability to develop bigger mines on the B.C. side of the border with the potential to affect rivers downstream on the Alaska side, such as Seabridge Gold’s Kerr-Sulphurets-Mitchell proposal.