Western Copper permit denial casts shadow on Yukon permitting process

Vancouver – The Carmacks copper project in the Yukon looked primed for development, with owner Western Copper (WRN-T) awaiting just one permit. But now that permit has been denied, after the Water Board decided the company failed to prove the proposed leaching, detoxification, and discharge processes would work, and the news left Western Copper’s share price bleeding for a week, falling 67¢ or 35% over five days to $1.24.

But there’s a bigger story behind that headline. Carmacks is the first project to move through the Yukon mine permitting process in its entirety and this failure at the final step has left Western Copper and other potential Yukon mine developers leery that overlapping or poorly-defined responsibilities amongst the various agencies involved have created a significant barrier to success.

Power over mineral resources transferred from the federal government to the Yukon government in 2004, in a process known as devolution. The Yukon government established its own resource extraction permitting regimes; for mining projects the process includes the Yukon Environmental and Socio-economic Assessment Board (YESAB), the Quartz Mining Act, and the Waters Act. A proposed project must receive a licence from each office before it can proceed.

Western Copper submitted an environmental impact assessment to YESAB in 2007 and, in 2008, the board gave the project a green light, concluding the company had identified, assessed, and planned appropriate mitigative actions for all of the project’s potential environmental and social effects. The board did include several terms and conditions with its approval but none were onerous.

A few months later the Yukon government accepted YESAB’s recommendations and lent its approval to the project. Then in April 2009 the Minister of Energy, Mines, and Resources issued the project a Quartz Mining license. Quartz mining licences in the Yukon address mine development and production, including construction plans, reclamation and closure plans, financial security requirements, and environmental protections plans.

The only remaining hurdle was the Waters Act licence. A water-use licence addresses water use and protection of water quality through effluent discharge standards, water quality objectives, and monitoring plans. Western Copper submitted its nine-volume application in mid-2009 and the Water Board held public hearings on the application earlier this year. Western Copper said it had “worked closely with… the Water Board” in developing the application and, until recently, was fairly confident it had achieved its goal.

“The public hearing took longer than we expected but we felt relatively good coming out of it because though there were issued that had come up we thought they were not issues that were within the mandate of the Water Board,” said Paul West-Sells, president and COO of Western Copper.

West-Sells is referring to the fact that the issues that had been raised were concerns already considered in the YESAB and Quartz Mining processes. Since those boards had already approved the Carmacks plan, and thereby had approved project aspects like the use of sulphuric acid heap leaching to recover copper and the use of soda ash and water to rinse and detoxify the leach piles prior to reclamation, Western Copper thought those aspects of the project were already set in stone.

But the Water Board denied the Carmacks Water licence because it was not convinced Western Copper had proven the success of acid heap leaching to recover copper from oxide ore or shown convincingly that soda ash and rinsing would neutralize the old leach piles, among other, smaller issues. The contradiction between the various permitting agencies has left Western Copper and West-Sells frustrated.

“It’s our feeling that the water board’s mandate has not been restricted or changed as required to fit within the new permitting regime,” said West-Sells. “For example, in terms of how we leach the ore or how we close the project, those passed through YESAB and they passed through the Quartz Mining Act so we aren’t in a position to change those.

“We can’t say, OK, to appease the Water Board we’ll pick up the heap and pile it somewhere else, or something, because then we would be contravening issues around YESAB and the Quartz licence. So our hands are kind of tied.”

The company also had trouble accepting the Water Board’s classification of sulphuric acid heap leaching as an unproven technology, as there are copper mines around the world, and in particular in Chile’s Atacama Desert, based on acid heap leaching.

“Unproven technology – how do you battle that?” asked West-Sells.

The 39-page Water Board decision document found issue with many aspects of the Carmacks plan. The Board was not convinced plans for leaching and neutralizing the pile were supported by sufficient evidence, as mentioned; the Board also took issue with Western Copper’s plans for discharge management, effluent standards, and the heap leach facility itself.

On most points the Board concluded there was insufficient evidence to prove the success of each proposed procedure. For example, the Board did not believe Western Copper had submitted enough evidence in support of its detoxification process.

“In summary, while the Board accepts that encouraging results have been developed at a very small scale, the likelihood of successfully detoxifying the heap is not support in the evidence,” reads the decision document. “It is the Board’s finding that evidence of successful detoxification at field scale is necessary prior to providing a water use licence that would permit full production. Moreover, the Board believes that the testing must include the detoxification of multiple lifts at the field scale.”

The field scale mentioned is 70 metres, the final height the leach piles would reach. West-Sells struggles to respond to this criticism.

“Sure – how can you be sure about what happens at 70 metres unless you do a test at 70 metres?” he said. “Well, it’s been done before based on this kind of testwork… We did a significant number of tests, following a very standard procedure – they were the tests that heap leaches have been built off of for years and years and years. But they’re talking about a 70-metre high column…you can’t do a test like that.

According to West-Sells, much of the data that the Water Board discounted as insufficient had already been assessed and found sufficient during the YESAB and Quartz Mining processes. In considering the detoxification proposal, YESAB hired two independent environmental consulting companies to assess the evidence, in part because Western Copper is suggesting a slightly unconventional procedure. To close a copper oxide heap leach, most companies cap the pile to reduce the percolation of water and then install a passive treatment system to treat the water the does pass through the pile. At Carmacks, as mentioned, Western Copper wants to neutralize the pile first using soda ash, and then cap it.

“Two reputable environmental groups in Vancouver reviewed the data and decided it was ok, and then it gets to the Water Board and they read all of the reports and then say, ‘We don’t believe it,'” says West-Sells. “So you just sort of put your hands in the air.”

Western Copper sees three possible avenues forward, two of which it is already pursuing. The company is lobbying the Yukon government to step in and better define the Water Board’s mandate, arguing the government has to clarify which agency actually is responsible for assessing which aspects of a proposed project. And West-Sells says his company is also looking at potential legal avenues of recourse.

The third option is to reapply, but given the procedural issues encountered to date that is not currently under consideration.

But the Water Board’s decision, as the ultimate step in the first all-Yukon permitting process, has other companies concerned.

“I know that it’s been a shock outside of just Wes
tern Copper – there’s a lot of concern,” says West-Sells. “Up after us at the Water Board is Alexco for its Bellenkeno permit and then Capstone with an amendment for their water use licence for Minto – they’re concerned. And I was fielding calls, and I understand the Yukon government was as well, from a number of junior exploration companies with a property in the Yukon and another property, in say Nevada, and they’ve got to decide where to spend money next year. This needs to be clarified.”

Alexco Resources (AXR-T) is exploring the historic Keno Hill district, which produced more than 200 million oz. silver in the 1900s, and is trying to bring parts of the past-producer back into operation. Capstone Mining (CS-T) operates the Minto copper mine.

Carmacks is roughly 200 km north of Whitehorse, in the south-central Yukon. Western Copper has proposed an open pit mine to extract the project’s 10.6 million proven and probable reserve tonnes, which carry an average grade of 1.04% copper, 0.483 gram gold per tonne, and 4.62 grams silver per tonne. During its six years of operation the mine would produce 32 million lbs. copper cathode annually, by leaching the oxidized rock and treating the pregnant leach solution via solvent extraction and electrowinning.

Carmacks is Western Copper’s most advanced project but is not its largest. The company is advancing the Casino project, which is also in the Yukon, towards the feasibility stage; according to a 2008 prefeasibility study Casino is home to 914 million proven and probable tonnes grading 0.212% copper, 0.237 gram gold, and 0.0236% molybdenum. The company is also joint-ventured on a copper-gold project on Vancouver Island and owns a copper-silver project in the Northwest Territories.

After losing ground for five days following the Carmacks news to hit a low of $1.24, on the sixth day Western Copper’s share price gained back 20¢ to reach $1.44. The company has a 52-week trading range of 48¢ to $2.25 and has 80 million shares outstanding.