New uncertainty is looming over the proposal to recover iron-ore from 10 million tonnes of old tailings at the former Whitehorse Copper mine.

Chuck Eaton of Eagle Whitehorse says the world price for magnetite has fallen by about 40 per cent from $134 US per metric tonne last January to a low two weeks ago of $82 or $83 per tonne.

Even if the Yukon government does provide the company with permission to pump water out the Pit Lake on site, the fallen price for iron-ore would still have to be given serious consideration before making a decision to move forward, Eaton told the Star last week.

“That makes it very, very difficult to continue with the project,” Eaton said of the price.

“We are scratching our head to see how it looks, but it is not looking good.”

If the company did proceed, he said, it would take about six or seven months to build the plant required for the operation.

Market analysts were predicting a drop in the price for magnetite but most thought it would stabilize between $110 and $120, Eaton explained.

He said only a couple of the more bullish analysts were forecasting $80 to $85 for the price of iron ore.

“But they thought it would be in a couple of years time.”

One of the problems, Eaton said, is the slowdown in the Chinese economy, which is affecting demand.

Everybody thought with the supply of magnetite outgrowing the demand, the high-cost producers – mostly Chinese – would drop away, he said.

Eaton said the Chinese central government has stepped in to support the high-cost producers because it would rather pay the support costs than have to sustain the loss of jobs.

So, currently there is some uncertainty attached to the project proposal, regardless of the issue related to water use, he explained.

“When you make a capital investment, you have to be in a position to get your money back, and with the price here today, we are having a hard time seeing that.”

Eaton is proposing to re-process the 10 million tonnes of tailings to capture an estimated 1.8 million tonnes of magnetite. The proposal is to truck the iron-ore to Skagway for shipment overseas.

Eagle Whitehorse received approval from the Yukon Water Board following a public hearing.

The Yukon government provided its approval after a positive recommendation from the Yukon Environmental and Socio-economic Assessment Board.

Eaton secured a lease to the old mine in 2010.

The lease area was expanded by the government in late 2012 over top of three existing mineral claims, which include the Pit Lake. The project, however, ran into legal problems earlier this year.

H. Coyne and Sons successfully challenged the expanded lease over their mineral claims, arguing the government had failed to properly consult them, as was the government’s responsibility.

Justice Leigh Gower of the Yukon Supreme Court ruled last March the government had failed to properly consult H. Coyne and Sons on the lease expansion over their claims, which includes the Pit Lake. The judge quashed the lease expansion.

Eaton said what he needs now is permission from the Yukon government to run a pipe across the ground and into Pit Lake so he can draw the water he’d need to process the tailings.

“They have said they are consulting with the company,” he said.

He added it’s frustrating how somebody with a beef can prevent a project from happening, tying up the economic benefits and jobs that would flow to Yukoners.

Government spokesman Colin McDowell of the lands branch said last week he expects they’ll have a reply for Eaton within a week, though his branch still needs the input of the Departments of Energy, Mines and Resources (EMR) and Justice.

Eaton still requires a development permit with the city, needs to finalize his mining plan with EMR and also requires an amendment to his water licence, McDowell noted.

Under the proposal, the operation would run eight or nine months a year requiring a full-time seasonal staff of 20 to 25, not counting the trucking contract.

It’s expected it would take six or seven years to reprocess all the tailings.

Eaton has emphasized the project will be a huge benefit to the community.

Not only would it generate economic benefits, but once the company is done, the mine site would be greatly improved, and entirely suitable for light industrial lots, compared to the unusable state that it’s in now.

Whitehorse Copper closed in the fall of 1982, along with the United Keno Hill silver mine at Elsa and the Faro lead-zinc mine, though production would resume for a time at the latter two mines.