BMC Minerals’ Kudz Ze Kayah polymetallic project in Yukon hangs on judge’s ruling

BMC Minerals’ Kudz Ze Kayah (KZK) zinc-lead-copper project in the Yukon has hit a roadblock on its permitting path amid a legal dispute with the Kaska Nation.

The Vancouver-based BMC, owned by private, U.K.-based firm BMC Ltd., is developing the critical minerals project located 115 km southeast of Ross River.

It is one of the few pre-production critical minerals projects in the Far North to get past the feasibility study stage and into the permitting process.

“We’ve got copper, zinc and silver. And once we get into production, from a very small footprint, from a tiny mine we’re going to be one of the most significant producers of zinc and silver in Canada,” BMC president and CEO Scott Donaldson told The Northern Miner. 

Kudz Ze Kayah, which means ‘caribou country’ in the Kaska language will cost US$376 million to develop, and the open pit operation would have a mine life of nine years. According to a 2020 feasibility study, the mine will produce 7.8 million oz. of silver, 56,500 oz. of gold, 235 million lb. of zinc, 32 million lb. of copper and 56 million lb. of lead in concentrate annually during steady-state operations.

Last June, Kudz Ze Kayah was approved by the federal and territorial governments following an environmental and socio-economic assessment. But weeks later, Kaska, on behalf of the Ross River Dena Council (RRDC) announced a civil lawsuit against the two governments, alleging it wasn’t properly consulted over the mine’s potential adverse environmental impacts, including its impacts on the Finlayson caribou herd.

The RRDC wants the government’s approval reversed and for the decision to be subject to a review panel.

The petition from the council was at the centre of a six-day judicial hearing in Whitehorse that wrapped up on Apr. 18. Lawyers for the Kaska Nation, BMC, the Attorney General of Canada and the Yukon government presented their respective arguments. Yukon Supreme Court Chief Justice Suzanne Duncan reserved her decision on the matter but said she would give one before July.

Kaska conditions ‘ignored’

RRDC chief Dylan Loblaw told The Northern Miner that the community’s support for the project “took a turn” when the regulators and BMC couldn’t meet its conditions for the project.

“The project lies within the caribou corridor,” he said. “It’s a place where the caribou calve and where they rut. It’s a sanctuary for the Finlayson caribou herd. One of the terms and conditions was to shut down operations during calving and rutting season. They couldn’t meet those terms.” 

Loblaw said the community wants the decision advancing the project to be quashed and for the project to be either re-designed or for the company to walk away from the mineral claims. For now, RRDC is awaiting the judge’s decision. 

“We’re looking for an Indigenous, First Nations-led assessment process that captures cumulative effects and adverse impacts to our title, rights and interest and to make it more meaningful and more long-lasting for the nation to benefit from projects like these.”

‘Onus on governments’

Donaldson said that a clear resolution of the issues raised in the review would be the ideal outcome.

“If the judge decides that the government shouldn’t have signed the decision document then the government will have to go back and talk to Kaska a bit more,” he said. “That action is on them. All we can do is maintain our good relationship with Kaska and assist the parties to come together. We’ve already reached out to Kaska to talk about some of the things of mutual interest and some of the things we’ve heard in the courtroom we need to discuss. We’ll approach that with a view to work collaboratively.”

Donaldson noted that the judicial review came after the project had already gone through the environmental and socio-economic assessment process, which started in 2017. The process has seen at least six extensions to accommodate requests over a period that was supposed to be three months long but was extended by 14 months.

But if the judge dismisses the Kaska petition, BMC is looking forward to a final investment decision from its board of directors in late 2024, with construction at KZK targeted for early 2025 and the start of production in late 2026 or early 2027.

The construction and production phases will each create 400 direct jobs, and an additional 400 indirect jobs such as in trucking, rail and ship transport of equipment and ore, Donaldson said.

Indigenous collaboration

Indigenous participation in the project was established as a priority in the socio-economic participation agreement (SEPA) signed with Kaska in 2004, before BMC purchased the project from Teck Resources’ (TSX: TECK.A/TECK.B; NYSE: TECK) in 2015.

“We have an obligation to work towards Kaska having significant jobs on site. As one chief said to me, ‘we don’t want shovel jobs, we want serious jobs where we can make a difference and where we can be part of the decision-making process,’” Donaldson said, adding that over the last eight years more than 70% of the contracts BMC has entered have been with Kaska companies or firms in joint ventures with those companies.

BMC also has a scholarship program with the Kaska Nation that offers funding and support for Kaska students and apprenticeships so that skilled Kaska members can work at the future mine site.

The company is not yet financed for construction and Donaldson said it would start that process when it sees a clearer timeline on permitting and when the judge makes a decision in the Kaska case.

Looking ahead to when he hopes KZK is a producing mine, Donaldson said the project, while relatively
small, will also be an important producer of copper in the wider critical minerals industry.

“I think the combination of being a strong regional employer, a strong employer of First Nations peoples and a strong producer of critical and forward-facing minerals is an important combination,” he said.

John Thompson, spokesperson for Yukon’s Ministry of Energy, Mines and Resources, said that because the case is before the courts, the government won’t discuss any of its particulars, but added the government is committed to continuing consultation with the Kaska First Nations.

“Our government supports responsible mineral resource development in the Yukon,” he said. “The decision bodies for the project issued a decision document. The Yukon government is committed
to meeting its obligations during the regulatory phase for this project, which is currently underway.”

The project mainly consists of the ABM open pit mine, with smaller resources in the Krakatoa open pit and underground mines. ABM hosts probable reserves of 15.7 million tonnes grading 5.8% zinc, 1.7%
lead, 0.9% copper, 138 grams silver per tonne and 1.3 grams gold for contained metal of 135,800
tonnes copper, 265,700 tonnes lead, 915,000 tonnes zinc, 665,800 gold and 69.5 million oz. silver.

Indicated resources come to 18.3 million tonnes grading 6.3% zinc, 1.9% lead, 0.9% copper, 148 grams silver per tonne and 1.4 grams gold; for 1.1 million tonnes zinc, 345,800 tonnes lead, 164,000 tonnes copper, 87.3 million oz. silver and 827,200 oz. gold.

The feasibility study, using metal price assumptions of US$3.50 per lb. copper, US$1.50 per lb. zinc,
US$1.05 per lb. lead, US$1,300 per oz. gold and US$20 per oz. silver estimated Kudz Ze Kayah’s after-tax net present value at US$617 million, based on a 7% discount rate, and its internal rate of return at 45.9%.

Cominco began exploring around the KZK deposit in 1977 and drilling in 1994 revealed copper, lead and zinc mineralization.

The original story stated that the civil lawsuit was filed against BMC and the two governments. The suit was in fact only filed against the governments, not BMC.