Reviving a costly dream

MARY JANIGAN November 4 1985

Reviving a costly dream

MARY JANIGAN November 4 1985

Reviving a costly dream

At the height of its prosperity in the late 1970s, 2,500 people lived in the Yukon town of Faro—and their standard of living was one of the highest in Canada. That good fortune changed in mid-1982 when Cyprus Anvil Mining Corp., the town’s main employer, closed a lead-zinc-silver mine originally opened in 1970, because costs were skyrocketing and metal prices were plummeting. Then, last week mining executive Clifford Frame said that his new company, Curragh Resources Corp., will resume production next year.

The development took place at a critical time for the less than 100 remaining inhabitants. Unemployment insurance payments will expire on Jan. 1, and most of the residents are still shocked by the neardeath of theirtown.

“People are feeling a little better but they are not getting excited yet,” said Gary Peters, a former shovel operator at the mine who is now employed by the town.

“They will not believe it until they actually see the boilers fire up the mine and the people moving in.”

Frame will likely unveil a package of federal and territorial government support this week that will enable him to start production. That package will include lower federal power rates, loans from the Yukon’s New Democratic Party government and federal guarantees for those loans. The reopening will also likely revive the beleaguered Yukon: the mine once represented 740 jobs and 40 per cent of the territory’s gross domestic product. But the plan has angered officials from five other Canadian lead-zinc mines, who claim that mining even more zinc in an already oversupplied market will mean lower prices and more layoffs for the industry.

That strong lobby against federal support for the mine has seriously embarrassed the federal Conservatives. They are torn between their ideological aversion to government rescues of industry and their desire to foster a healthy economy in the Yukon riding of powerful Deputy Prime Minister Erik Nielsen. A spokesman from his office told Maclean’s last week that Nielsen was unavailable and that the mine deal was not something on which he would wish to comment.

Frame launched his campaign to resurrect the mine last June when he signed a letter of intent to purchase the assets of Cyprus Anvil Mining Corp. from Dome Petroleum Ltd. of Calgary. Under the terms of the agreement Dome would give the mothballed mine—and an undisclosed share of the mine’s $120-million debt—to Curragh Resources. Dome kept the remaining portion of the debt in return for a share in future profits.

With that, Frame sought concessions from governments. In the past, Cyprus Anvil sent its ore by truck to Whitehorse and then transferred it to the historic White Pass and Yukon Railway for the final 200 km to the Alaskan port of Skagway. Now the ore will go by truck to the port — at an estimated annual saving of $6 million to $8 million —because the Alaska, Yukon and federal governments have agreed to keep the South Klondike Highway open throughout the winter.

Frame also asked the Yukon Territorial Water Board to waive provisions that would have forced him to construct a $50-million dam to submerge the tailings and keep them from contact with air. The board has agreed to do so. The 52-year-old executive also plans to sidestep the United Steelworkers of America, the union that represented Cyprus Anvil miners, by hiring a subcontractor to provide laborers for the mine during the first year of operation. Federal government insiders told Maclean’s last week that Ottawa wanted to avoid direct grants or loans but would probably agree to cut the rates for power supplied to the mine by the Crown corporation, Northern Canada Power Commission. Ottawa would also guarantee any loans to the mine by the Yukon NDP government. Frame said only, “We got what we required.”

For his part, Liberal Yukon Senator Paul Lucier accused the federal Tories of duplicity. He declared: “I am fully in favor of the mine opening, but Nielsen should not try to hide behind the Yukon NDP’s skirts. The money will have to come from the feds because the Territory has no money.” Although the rescue is popular in the Yukon it has aroused the heated opposition of mine executives in other parts of Canada. Last summer five Canadian lead-zinc mines scattered throughout the Northwest Territories, Ontario, New Brunswick and British Columbia submitted a brief opposing Cyprus Anvil concessions to Finance Minister Michael Wilson. In it, the firms argued that they had already cut back jobs and zinc production because of a world surplus.

That argument was supported by mining analysts who said that the rescue would simply rearrange mining employment and endanger additional jobs in the smelting industry. Raymond Goldie, a mining stocks analyst with Richardson Greenshields of Canada, said that Ottawa was wrong to support Cyprus Anvil because prices were at historic lows—and would remain there for the foreseeable future. And he pointed out that concentrate from most western Canadian mines is processed in Canada, while Cyprus Anvil intended to 3 export concentrate to the Pacific Rim and Italy for smelting.

Frame said that the much as 550,000 tons of lead and zinc concentrates and three million ounces of silver by 1988 and employ 450 people. He also forecast an upswing in the current zinc price of less than 50 cents per pound to 60 or 70 cents within two years. Frame added that his opponents constituted “a cartel.”

Frame declared that the Faro mine will not cause layoffs in other areas because he is seeking new markets for Canadian zinc in Pacific Rim countries such as Korea, in Italy and in Eastern bloc nations. Meanwhile, in Faro, where seven pupils and one teacher remain in the local school, many residents say that they are anxious to the see the mine actually operating again. “It has been a never-ending story,” said Mel Smith, the manager of the Faro Hotel. “I think everybody here will believe it when they see it.”

-MARY JANIGAN with FLORA EVANS in Whitehorse, MARC CLARK in Toronto and HILARY MACKENZIE in Ottawa