The Decibel - A massive cyanide leak and the cost of gold

Episode Date: September 27, 2024

Back in June, there was a massive accident at the Eagle gold mine in central Yukon, on traditional Na-Cho Nyak Dun territory — 4 million tonnes of cyanide-laced rock collapsed. Surrounding surface and groundwater soon had elevated cyanide levels, and dozens of fish died. Cleanup efforts are underway, but now, the storage ponds are nearly full of cyanide solution and are at risk of another cyanide spill. Niall McGee is the Globe’s mining reporter. He’s on the show to explain what we know about this accident, what happened with the mine’s owner, and why it’s so crucial that they figure out how to treat the cyanide soon.

This past June, there was an accident at a Yukon gold mine, where four million tons of rocks laced with cyanide collapsed. Cleanup efforts are underway at the Eagle Mine, but it hasn't exactly been straightforward. And now, four months later, there's the risk of yet another spill. Niall McGee is the Globe's mining reporter. He's on the show to explain what we know about this accident, what happened with the company that owned the mine, and why it's so important that they figure out how to clean up all that cyanide fast. I'm Maina Karaman-Wilms and this is The Decibel from The Globe and Mail.

Niall, thank you so much for being here. Great to be here. So you've been covering what's been going on at the Eagle Mine in Yukon Territory since June. Where exactly is Eagle Mine? Eagle Mine is in central Yukon. It's not actually in a particularly remote spot. It's 80 kilometers or so north of the village of Mayo, and it's 400 kilometers north of the capital Whitehorse. It's on the electricity grid in Yukon, and you can actually drive there, which is, you know, not all mines in Canada, you can actually drive to somewhere fly in, fly out. And it's also located on the traditional territory of the First Nation of the Nacho Naiton. Okay. And just to give us a sense, how important is mining in Yukon today?

It's really important. It's the biggest private sector industry. The biggest industry overall is the government. It's the biggest employer. Mining's been an important part of the history of the Yukon. There was a Yukon gold rush about 100 years ago or so. This particular mine was very important. It was the biggest gold mine that's ever existed in the Yukon. It employed about 500 people before this catastrophe occurred. There is another pretty big silver mine in operation in Yukon as well. There's plenty of gold exploration companies looking for deposits and employing prospectors and geologists. And there's lots of prospecting going on.

So it's kind of individuals out looking for precious metals. Do we know how long the mine has been in operation for? It went into production around 2019, 2020. This is a relatively new mine. They're only about a third or less than half of the way through the life of the mine. So there was a lot of production that they were still going to do. Okay. And you mentioned the catastrophe, essentially, that happened in June.

So take us through that now. What happened there? So essentially, there was a giant rock collapse at the company's outdoor gold processing facility, which is called a heap leach pad. And that's basically the rocks at the mine that is crushed down. And then they're putting cyanide solution on this giant pile of rocks. This is a process called heap leaching, as you said then. Yeah, exactly. The leaching comes from the gold leaches from the rocks into a lined pond underneath because you want everything to be protected and not get into the environment. And yeah, it was a pretty massive facility.

It's somewhat common in the gold mining industry. But basically, there was a massive instability is what has been described in the rock pile and it collapsed and it was really catastrophic because it was 4 million tons of rock, which had a lot of cyanide in it. And just to give you an idea of how heavy that is, you ever been on the highway and there's like two semi trucks either side of you? So imagine 100,000 of those fully loaded semi trucks, like that weight of material came crashing down. Wow. That's how much rock was involved then. Yeah. So it was a scary amount of rock, lots of cyanide, but half of the material was contained within the mine site and kind of wrecked a lot of infrastructure and obviously caused a lot of contamination at the mine site. And about half of the material spilled into the environment. So surface water, groundwater, and yeah, massive catastrophe. Is this a common method for extracting gold,

this process of heap leaching? I guess I'm just wondering if there are better ways to do this. Yeah, I mean, it's pretty common, I'd say, and lots of companies around the world use heap leaching. It's used generally where the grade of the metal that they're extracting is really low. And so if you had to build a mill and grind the ore that way, it would be just kind of too expensive and not worth it economically. So it's been around since around the 70s, and it's really for those low-grade deposits, but you can still extract the gold ultimately and make a profit. So this sounds like a pretty intensive process then that takes a long time.

Yeah, it actually does take a long time. It takes months for the technology to work and for the cyanide to kind of percolate through the ore, get in the pond, and then it's pumped into a facility where they extract the gold. It takes months for it to happen, whereas in a mill, it's a much quicker process. And essentially, the cyanide is kind of percolating through the rock, and that kind of forces the gold out of the rock. Is that essentially what's going on there? Yeah, that's essentially it. It's a very powerful chemical, and they discovered that if you put cyanide on a giant pile of rock that has gold in it, the gold will eventually leach out of the rock and they can access the gold.

So now cyanide is, of course, a poison, right? This is pretty intense. How has this spill affected the environment around Eagle Mine? Well, immediately after the catastrophe, cyanide levels were through the roof, obviously at the mine site where a lot of the contaminants are, levels were through the roof, obviously at the mine site where a lot of the contaminants are, but also in the vicinity of the mine, they were monitoring cyanide levels in the water bodies and the cyanide levels were extremely high, way higher than they should be and just not safe and also caused direct impact on fish populations. So a few weeks after the catastrophe, dozens of fish were found

dead in a water body close to the mine site. But Medica, the real challenge with this catastrophe is not only what's happening now, but what will potentially happen over the next months and years. For example, the impact on groundwater, because groundwater moves extremely slowly, the full impact may not be known for months or even years. So it's something that has to be unfortunately monitored, tested, and surveyed for months if not years to come. And of course, you mentioned now that the accident happened on First Nations territory, right? So what was their response to this? I mean, they were shocked like everybody else, but I think they quickly turned quite angry about the situation.

And the company wasn't doing itself any favors because relations between the company and the First Nation wasn't great, evidently. They also, the First Nation, were upset at the government because the government is the regulator and felt that maybe the regulation and oversight over the company hadn't been that great in the past couple of years. And so they called for immediate halt to mining on their traditional territory in Yukon. So that includes Eagle Mine, but also includes a silver mine that's in operation. That didn't happen. The premier of Yukon basically said, no, we have to keep on mining and the impact on the jobs would be too

much. But mining at the Eagle mine basically seized when this accident happened. Yeah, absolutely. They had to because, yeah, the first priority is trying to deal with the economic damage. Well, you mentioned the company who owns the mine. So let's talk about them. This company is called Victoria Gold. Nell, tell me about them. Yeah, Victoria Gold, in some ways, is very typical of a lot of companies that exist in Canada. They're pretty small compared to giants like Barrick Gold, which, in terms of the numbers, the peak market value for Victoria Gold was around $1 billion, and Barrick Gold's worth around $50 billion. Victoria Gold only had this one mine, whereas companies like Barrick and Kinross and other majors, as they call them, have sometimes dozens of mines all across the world. But they also weren't absolutely tiny.

There's hundreds if not thousands of penny stocks that are just exploring. So they still had a significant investor base. And when the catastrophe happened, the company's worth around $500 million. About seven weeks later, the value is zero because when it went into receivership, those shareholders got completely wiped out. Okay. So we should talk about then, yeah, what happened is you say they went into receivership, but maybe before we get there, let's just talk about the initial response to this accident. So the company owns this mine, this accident happens. How does Victoria Gold respond to things?

Immediately in the aftermath, Victoria Gold was not really saying much. And this was like part of the challenge with this whole story is the very first press release, they said that I think was really confusing. You couldn't even work out what exactly had happened. Some people were thinking this was a landslide, like an external event. Over time, they did start providing more information and they gave more information about what they were doing. So they said they were working on creating additional storage for the contaminants on the site. They were trying to work out a way to treat the contaminants, although it wasn't clear whether they could actually do that or not.

They were doing a lot of their own testing of cyanide levels and water quality. Yeah, they were sort of in panic mode and emergency mode. And the company maintained that they were doing everything they could at the time to take care of this catastrophe. And the Yukon government, which is the regulator, basically kind of set out a bunch of directives that they had to do, right? So how did that go? Well, really, ultimately, not that well, because Yukon issued a number of directives. The company was unable to follow a lot of the directives, or at least some of the directives, including the construction of a safety berm, which would be a sort of additional protective barrier around the mine in the event that there's another spill. And it would also allow

the installation of wells on site to monitor for contamination. And this was a major sticking point. The government was insistent that the company build this and he wanted construction to start almost right away. And the company dug in its heels and said, no, this is not engineered properly. We can't do this. And this is one of the reasons the company ended up getting put into receivership. And in this context, being put into receivership basically means the company was put in control of a third party, right? So, Niall, in this situation, who was put in charge? Right. Yeah, that's right. So, the Yukon government in its role as the regulator, which is kind of unusual because normally these kinds of proceedings are brought by a major creditor. But as the regulator, Yukon felt that the situation was so dire, so urgent, the company wasn't doing

enough to fix the situation, that they applied for receivership, which is essentially a court order to pass control of the company to another third party. And in this case, receivership was granted by an Ontario court and PricewaterhouseCoopers, which is like this massive consulting accounting firm, essentially takes control. And then PwC or PricewaterhouseCoopers is responsible for the whole operation and employing experts to come in and fix the situation or immediate the situation. We'll be right back. So in terms of the cleanup effort then, Price Waterhouse Coopers is now in charge.

What's been happening there? Yeah, so a couple of things. One thing they're definitely working on is creating extra storage on site for contaminants. And according to the updates, that's going fairly well. They're also dealing with quite a big turnover of staff. So before the catastrophe, there was about 500 people on site. That had dwindled to around 120 or so. So they're managing both existing Victoria Gold staff and then bringing in new

people. There's a big environmental consultancy called Parsons, which is in a way taking over the management of the environmental remediation and working with legacy Victoria Gold employees. Now, there's a lot of focus though on the treatment of the contaminants. And this is something that Victoria Gold struggled with mightily when it was in control. And it's something that still continues to be a major issue for the new owners, essentially, of the site. Does this refer to the storage ponds on site at Victoria Gold. And that's where a lot of the contaminants are being stored. The issue is those ponds are now essentially full as of about a week ago, according to the Yukon government. And that's a major problem because it's outdoors. And so if there's a lot of rain or precipitation, those ponds could overflow.

And they've admitted that that is a risk. So they're working furiously to build additional storage capacity that will take the pressure off. But ultimately, treating those contaminants is still a kind of barrier that they've not been able to crack. And the contaminant that we're talking about in these storage ponds is cyanide, right? So that overflowing is a huge danger. Yeah. I mean, it's ultimately the kind of same potential danger from the original catastrophe. So yes, the danger of more cyanide getting into water bodies and affecting fish populations in the vicinity of the mine. And I think I saw in your reporting that these storage ponds, usually they're only supposed to be like 25% full. So I guess this is a big deal

if they're almost overflowing then. Yeah. So they're only supposed to be around 25% full this time of year, because this is the kind of one of the danger points of the year where I'm told, at least by a former employee of a company that traditionally they get quite a bit of precipitation in October. So you don't want those ponds to be too full. So this time of year, you normally want those ponds to be only around 25% full, according to this employee. He also told me that the spring is another real danger period because that's when the ponds materials, which freeze over the winter when they start to melt, and then there's snow melts and everything else that could come on top of that. So that's another really dangerous time of the year. Yeah. Now, I imagine this cleanup is quite expensive. Who is actually

paying for this? So right now, the Yukon government is paying for everything. And this is a major reason why the company is put into receivership, because the company itself have put out statements to the effect of, we're not sure whether we can ultimately fund this indefinitely. And the UConn government has said it could cost up to $150 million, and that's just an early estimate. And UConn government has given already $50 million or so for the cleanup. The ultimate objective of everything goes really well, Mannequin, is that through receivership, eventually, if they can clean up the environmental mess, that eventually the mine can be restored to sort of how it was before the accident. And then somebody might step in and buy those assets at some point in time

and then not make the creditors whole because that rarely happens. But creditors may get back a significant portion, at least of what they invested in the company. And when this accident happened, I mean, they're in the process of processing gold, right? So what happened to that gold? So the gold essentially is still sitting there, but it's mixed in with cyanide and rock and it's not processed fully yet. But if somebody eventually steps up and buys the assets at some point, then that company can potentially get at that gold, then that company can potentially

get at that gold and sell that gold. And it's probably no gold is extremely valuable. So I don't know exactly how much gold is there, but it's selling currently at $2,600 an ounce. So yeah, it could end up being like a nice little kicker for whoever ends up buying the mine. Do we have any insight into what actually went wrong in the first place now? Like were there safety mechanisms not in place? I guess, yeah, what was going on here that may have caused this? Yeah. So I asked the former CEO of John McConnell, who was fired a few days after the receivership took effect. That's pretty typical, by the way, to be fired in this kind of event. So he said, and this was just his theory,

but he said what seems to have happened is there was just an uncontrolled buildup of fluid cyanide solution, essentially, on the heap leach on this pile of rocks, and it just became completely unstable and crashed down. And in terms of how that happened, he sort of said, I have no idea, which is, some people pointed out to me, well, he should have an idea about that, but he told of said, I have no idea, which is some people pointed out to me,

well, you should have an idea about that. But he told me he didn't have an idea. Have we seen an accident like this before, like with this heap leaching process? Like, is this totally unprecedented? Or has this actually happened before? Well, fortunately, there's actually a really recent example, because in February, SSR Mining had a heap leach failure somewhat similar to what happened in Yukon. Nine people actually died in that accident. This is a gold mine in Turkey, I believe. Yeah, that's right, a gold mine in Turkey.

So Barrick Gold, which is a major Canadian company, has had some issues with heap leach cyanide leaking, but nothing of this scale. Back in the late 80s and early 90s, there was a major heap leach failure at actually a Canadian-run company in Colorado. And the US government, the environmental agency had to step in and clean up the mess. So yeah, it does happen. It's not a foolproof technology by any means. Yeah. I guess I'm just thinking about this because it seems like a really intensive process for extracting this gold. What do we actually use gold for these days, Niall? So I don't know if you're wearing any gold jewelry right now. I can see you wearing some.

I got a gold bit in industry. I think there's a little bit of gold in a smartphone, but it's not as essential as some of the other metals and minerals. I mean, it's kind of this weird thing that mostly we dig it up out of the ground and then we put it back into the ground because people kind of store it in vaults. The US government has massive amounts of gold that they use. It's just used as a safe haven investment. So a lot of the demand is investment demand, oddly enough. And people just kind of get very worked up over gold. It's kind of a mythical thing. And there's lots of these gold bulls in the market who claim that gold is going to go to, I don't know, $50,000, $100,000 an ounce. It's currently around $2,500 an ounce, which actually is at a record

high, but it just seems to have this, always have this mythology around it. People just find it very pretty as well. Just lastly here, Niall, it sounds like the problem with these contaminated storage ponds is still not resolved, right? They're still working on this. I guess, are there just any lessons that we can take away from what happened here to try to not make this happen again? Yeah, I mean, there's a couple of things. I mean, I think that if you're an investor and if you're invested in a company that only has one mine, you've got to be careful because this kind of proves that if something bad goes wrong with your only mine, it can put the company very quickly out of business.

It's also a reminder for me that the mining industry in general is just so risky. There's so many things that these companies have to keep track of. Things like relations with governments, the geology around mining deposits, like they always have a good idea what's in the ground, but they never really know until they start mining it. A lot of it is happening in the environment, in the outdoors. So you're subject to weather and earthquakes, and there's just so many unknowns. So I'm sometimes surprised that there aren't more freak accidents like this in the mining industry because the potential for something to go wrong always seems to be there.

Niall, thank you so much for taking the time to be here. It's great to be here. That's it for today. I'm Mainika Raman-Wilms. Today's episode was edited and mixed by Ali Graham. Our producers are Madeline White, Michal Stein, and Ali Graham. David Crosby edits the show. Adrienne Chung is our senior producer, and Matt Frainer is our managing editor.

Thanks so much for listening, and I'll talk to you soon.