Ever wanted to own your own mine? To be the star of this fall’s Yukon Geoscience extravaganza? To create jobs and economic opportunity in your community? To hang with bankers and commodity traders? To help feed the world’s insatiable appetite for gold?
Well, have I got a deal for you.
It is, as realtors sometimes say, a “unique purchasing opportunity.” It’s a used mine, only one previous owner, offered on an “as is, where is” basis. Oh, and it’s got the kind of backstory that your realtor would prefer not to talk about: a well-publicized environmental disaster.
I’m talking about the Eagle Gold Mine, which will be put up for sale by Victoria Gold’s receiver.
Recent court documents lay out the process. First, you and your partners need to submit a non-binding letter of intent by August 6. The court listed 17 things your bid should include, such as your suggested price, financing details, summary of your experience in mining and Indigenous relations, a questionnaire from the First Nation of Na-Cho Nyäk Dun (FNNND) and your plan to restart the mine. This should also cover how you plan to deal with local employees, contractors and other stakeholders.
If you are selected to continue to Phase 2, you’ll have access to more confidential information and the ability to conduct due diligence on the property. Then your bid will be due by October 15. The court hopes to have the sale closed by the end of the year, an ambitious timeline compared to the recent sales processes for the Minto mine or Northwestel.
The court documents say FNNND and the Yukon government have committed not to bid against you. Both governments will be kept informed throughout the process and will have access to confidential bid information from the receiver. The Yukon government retains the right to make a bid if the sales process is terminated by the receiver, which it may be if they don’t receive any bids they deem suitable.
After a company goes bust, it is normal for the receivers to attempt to recover value by selling the company or its assets. This is how creditors of the company can recover at least some of their money.
In Eagle’s case, the Yukon government hopes to recover the cash it has advanced for the repair of the mine after its disastrous heap-leach landslide. The receiver has been authorized to borrow large sums from the Yukon government, up to $220 million.
The eventual sale proceeds, if any, will first go to the fees of the receiver and the bank advising on the sale. After that the Yukon government and eventually other banks, non-Yukon and local creditors are in line.
A realtor describing a house as a “unique purchasing opportunity” or a “fixer-upper” usually alerts potential buyers to do their due diligence.
It is the same with Eagle. The News reported that “the emergency works in response to the June 24, 2024, slide and contaminated water creeping towards bodies of water and seeping into the environment are expected to be done by Sept. 30, 2025.” But the receiver is not committing to moving the estimated two million tonnes of landslide that escaped the heap-leach facility back to where it was before the disaster.
The new owners will need to invest new money to get the mine fully fixed up and back in operation.
Bidders will be asking themselves a bunch of questions as they decide whether to bid.
The first big unknown is whether the gold trapped in the heap leach facility and the future profits of the mine are enough to pay back new investors for the capital they will need to invest.
This requires estimating the up-front capital, how much gold you can produce and how much each ounce will cost. The good news here is that gold prices are currently at near-record levels.
Then you have the risk factors new investors will face. What if gold prices go down? What if your cost estimates go up?
You also have to think about the intense public scrutiny you and your government regulators will be under, both now and after future elections possibly change the politicians you are dealing with.
The recently released Independent Review Board report focusing on the geotechnical and hydrogeological causes of the 2024 disaster will give bidders lots of useful information. But they will want to keep in mind that a future Yukon government might even order a full public inquiry into the incident and the government decisions that preceded it. FNNND officials have called for this.
The News reported last week that, according to a FNNND lawyer, “FNNND and its citizens haven't decided if they support the mine reopening.” This will depend on the successful bidder’s operational and remediation plans.
Strictly speaking the bankruptcy court judge has extensive powers to select a winning bidder. But it is hard in reality to imagine a deal getting very far without the support of the Yukon and FNNND governments.
Investors will be considering how much extra it will cost per ounce to comply with the higher social and environmental expectations they may face from regulators and governments.
On the other hand, the Yukon government’s hopes of diversifying the economy away from government jobs took a heavy blow when Eagle laid off hundreds of workers. Someone could very well bid $1, and then ask for substantial government subsidies to bring those jobs back.
It will be interesting to watch who bids on August 6, and whether any of the bidding consortia include Yukon partners. Besides you of course, this might mean First Nations development corporations, Yukon investors and non-First Nations businesses.
Such local partners may be critical to a new bidder convincing the Yukon and FNNND governments that they are viable long-term owners of the mine.
But unless you’ve already been working on a bid with your favourite bankers and international mining executives, you need to get cracking. That first bid deadline is only 33 days away.
Keith Halliday is a Yukon economist and the winner of the Canadian Community Newspaper Award for Outstanding Columnist. The audiobook version of his most recent book Moonshadows, a Yukon-noir thriller, has just been released.
