The Yukon government knew the Minto Mine was preparing to breach its water licence last spring by milling ore from a new deposit, according to an inspector's memo.

The document says staff from the Department of Energy, Mines and Resources (EMR) met with staff from the mine site and Capstone Mining to discuss the new authorization the department was about to issue under Capstone's Quartz Mining Licence.

Capstone was told while the authorization under the quartz licence approved milling of ore from the new area, the existing Water Use Licence did not.

The memo notes Capstone was told by inspection staff if it went ahead with milling the ore before receiving an amendment to its water licence, it would be operating in contravention of its licence.

After they were cautioned about the potential breach of its water licence, company officials told inspection staff the Minto Mine would be milling the new ore once the mine received authorization under its Quartz Mining Licence.

Inspection staff told Capstone officials that EMR would have to respond with some sort of enforcement action, but couldn't say what that would be until after the contravention, and after meeting with the government's legal department.

The enforcement action materialized in the form of a letter to Capstone noting the infraction. The letter also suggested the company ensure all water used to mill ore from the new deposit be stored on site until an amendment to the water licence was received.

Capstone spokeswoman Cindy Burnett said last week when the company proceeded to mill in contravention of it water licence, it was after full discussions with EMR officials.

There was nothing covert about the decision to proceed, she insisted.

Burnett said the Minto Mine did ensure all water used in the milling process was stored on site.

EMR spokesman Jessie Devost said last week there are times when non-compliance of a water licence is allowed to continue, depending on the circumstances.

In the case of the Minto Mine, the company had filed its application for the amendment to its water licence in September 2011, and was working co-operatively through the process with the Yukon Water Board, he said.

Devost said all the water was being stored on site. EMR inspectors have continued to monitor the situation, and there has been no threat of harm to the environment, he added.

Government officials, he added, felt that under the circumstances, allowing the non-compliance to continue while the company worked to secure a licence amendment was appropriate, particularly with there being no threat of any negative impact.

The water board approved the required amendment late last month, following a three-day public hearing last July, when the board learned of the non-compliance, according to its decision on the application.

The board noted in the Sept. 21 decision that its responsibility ends with the licensing process.

Enforcing conditions set out in the licence is the job of the Yukon government, the board points out in the decision.

The amended water licence was forwarded on Sept. 24 to Premier Darrell Pasloski for his signature.

It has not yet been returned to the water board, and the mine continues to mill ore from the new deposit.

The intentional contravention of the Minto Mine's water licence comes as the government remains under pressure to keep its water inspection staff under the jurisdiction of Environment Yukon.

Legislation was passed last spring by the Yukon Party majority, which will move the water inspectors to EMR beginning April 1, 2013.

Water inspectors for the Minto Mine, however, have been under EMR since the mine went into production.

The government maintains it makes sense to have all the inspectors under one roof.

Others say having water inspectors under the thumb of the department responsible for promoting mining is like having the fox guard the hen house.

A letter sent last week to the premier by aboriginal chiefs from across the Yukon says water inspection staff must not fall under EMR's responsibility.

The letter says, in part: "We understand that the Yukon government wants to establish integrated resource management.

"However, the protection of waters and natural resources of the Yukon cannot be subordinate to the objectives of mining development and interests of mining proponents....

"The decision to transfer responsibility for mine inspections, enforcement and security under the Waters Act from the Department of Environment to EMR does not provide assurances to Yukon First Nations that the environment oversight is a priority for the Yukon government.”