Substantial progress on an agreement to supply power to the Minto-area copper-gold mine has been announced by Yukon Energy and the Sherwood Copper Corp.

Under the arrangement, Minto Explorations Ltd., Sherwood Copper's wholly-owned subsidiary, would pay Yukon Energy $7.2 million as its share of the estimated $30-million to $40-million cost to extend the transmission line from Carmacks to Stewart Crossing.

Minto Exploration commits to buying at least $24 million of power in the first eight years after it's hooked up, which is scheduled to occur before the end of 2008.

The company would also be responsible for the entire cost of the 28-kilometre spur line running from the North Klondike Highway into the mine site located southeast of Minto Landing, according to the terms of the agreement released late last week.

The cost of the spur line, according to the announcement by Sherwood Copper, is estimated to be $3.8 million.

Yukon Energy will cover the initial capital cost of the spur line, to be repaid by Minto over the life of the eight-year agreement, as is the case with its contribution toward the main extension.

'Getting agreement on the key terms for the power purchase agreement is a major step in allowing us to push ahead with the Carmacks-Stewart -project,' Yukon Energy president David Morrison said in last week's press releasing announcing the deal. 'With the PPA with Minto, there is no possibility of the line being built.'

Mine assets will used as security by Minto, according to the announcements.

Having electricity provided from the Whitehorse-Aishihik-Faro grid will save the open-pit mine between $3 million and $4 million per year.

Yukon Energy is planning to build the main 172-kilometre extension in two phases; the first phase running from Carmacks to Pelly Crossing, and the second phase within a couple of years later from Pelly to Stewart Crossing.

The Crown corporation has applied to the Yukon Environmental and Socioeconomic Board to review the proposal. No hearing dates has been set yet.

Sherwood Copper also announced last week that preparations at the mine site are 50 per cent complete, and Minto Explorations is on target to begin production this coming spring.

'Grid power, provided from Yukon Energy's Whitehorse hydroelectric grid, could significantly reduce the electrical power costs for the Minto project versus onsite diesel generation,' Sherwood Copper president Stephen Quin said in last week's announcement.

'This agreement is a material step forward in the process toward a win-win situation for all stakeholders: the Minto project would benefit Sherwood's shareholders with a lower operating cost and therefore higher profits, thus paying higher taxes and royalties to the Yukon government and, through them, the Selkirk First Nation, while Yukon Energy would gain infrastructure and a stream of revenue by utilizing hydroelectric capacity that is surplus to current customers' needs.'

Under the power arrangement, the company will purchase four mobile diesel generators with a total capacity of 4.4 megawatts at a cost of $2.4 million to provide for its needs until the transmission line and spur line are completed.

Yukon Energy will purchase the diesel generators once the extension is activated. The corporation can either move the generators or leave them at the mine site to provide for peak power needs.

The Yukon Utilities Board held hearings last month into Yukon Energy's 20-year plan. It includes three major capital investments in the next five years, including the $30-million to $40-million cost of bringing the extension to Stewart Crossing. Bringing the extension to Stewart Crossing would link the Whitehorse-Aishihik-Faro grid with the new Mayo-Dawson transmission line.

Yukon Energy maintains all it needs to go ahead with the extension is approval from the utilities board based on the November hearings.

Premier Dennis Fentie, however, has promised to order the board to hold individual hearings for each of the major initiatives outlined in the 20-year plan, including the line extension.

Fentie has said a hearing into the line extension is a means of avoiding the huge cost overrun experienced during the construction of the Mayo-Dawson line under the then-Liberal government of 2000-02. The cost overrun of more than $10 million and still counting remains before the courts, with Yukon Energy and Chant Construction each suing the other.

It's not clear when the order will come down from cabinet. Ministers are on holidays this week.

But the terms of the power purchase agreement need to be completed by the end of January and approved by the utilities board no later than April 30.

As part of the arrangement, Minto Explorations needs to enter into an agreement with the Selkirk First Nation to bring the spur line across settlement lands.