Doug Ashbury
Northern News Services

NNSL (Jun 03/98) - Depressed gold prices and high production costs have three levels of government considering short-term subsidizies for the city's gold mines.

But any money given to resource companies would have to be used to extend mine life and maintain employment, GNWT cabinet secretary Andrew Gamble said yesterday.

If governments were to approve a subsidy, the money would available for exploration. Once gold's price recovers, the money would be repaid, Gamble said.

Royal Oak Mines' Giant Mine and Miramar Mining Corporation's Con Mine could each get $1.5 million worth of help per year from the GNWT for a maximum of two years, according to a May 21 draft GNWT document obtained by the Yellowknifer.

The subsidy would also be available to Echo Bay Mines' Lupin Mine, which was mothballed in January.

It is hoped federal funding would match the territorial package, Gamble said.

Yellowknife city council is prepared to offer an additional amount estimated at $250,000.

"I would call it a loan," Mayor Dave Lovell said Monday. "We've told the territorial government that the city does not want its own (subsidy) program."

The city will be a part of a GNWT plan, he added.

But Gamble said that before any deals materialize, several hurdles must be dealt with.

Royal Oak is obligated not to take on more debt, Gamble said. Further debt would affect the company's existing debt arrangements. "We are looking for a way to meet conditions without compromising this position," Gamble said.

Royal Oak has borrowed heavily to bring its Kemess mine in British Columbia to production.

"With the strike at Con, we suspended discussions (with Miramar)," Gamble said. About 180 United Steelworkers of America Local 802 members went on strike May 16.

Cabinet looked at both these situations and said that there can be no GNWT commitment until they are resolved, Gamble said.

Details of discussions to subsidize the gold mines are included in the draft document. On May 12, the GNWT Financial Management Board recommended approval of a $3-million special warrant to provide labor subsidies to the city's mines.

The subsidies would be calculated on the basis of $5,000 a year for every full-time job to a maximum of $1.5 million per mine per year.

But the special warrant was rescinded because of the debt hurdle and the strike, Gamble said.

The draft document proposes only Miramar be required to repay the subsidy.

In return for not having to pay the money back, the Department of Indian Affairs and Northern Development, in the draft document, suggests Royal Oak be required to make matching expenditures.

"On the federal side, we are looking at what type of assistance we can provide. We are talking about a variety of options," said Dave Nutter, the federal government's mineral resources director for the NWT. Nutter suggested arrangements could be made for Giant separately from Con.

Gamble said any subsidies must include a repayment provision.

"We have to be even-handed. The details (for each mine) don't have to be identical but the principle must be. One paying (the money back) and one not, that's not on."

Repayment would be triggered by an increase in the price of gold, likely to about $365 US an ounce. Gold was trading Tuesday at $291.

Gamble said if the GNWT gives money to the mines, there would be risk. The bet is that the price of gold will recover. If it does not, it means no repayment.

If gold fails to rebound, subsidies may prolong the life of the mines until one, possibly two, diamond mines are operational, Gamble said.

If Giant and Con shut down, the GNWT estimates a net 1999 revenue loss of $9.3 million.

It would also mean loss of $76 million a year to Yellowknife's economy as well as 419 direct and 394 indirect jobs. NWT Power Corp., owned by the GNWT, would lose $1.4 million in revenue. And by the year 2003, city property and school taxes would fall by $1.7 million.