Sumitomo Canada Limited v Minto Metals Corp.

Executive Summary: Key Legal and Evidentiary Issues

The Court approved a two-part sale involving Minto Metals’ assets to a company owned by Selkirk First Nation following the abandonment of the Minto Mine.
The Receiver’s decision to proceed with the Selkirk First Nation bid, which exceeded the Forced Liquidation Value, was found to be commercially reasonable.
Objections raised by JDS Energy & Mining Inc. regarding fairness and bid treatment were dismissed, as JDS never submitted a formal offer.
The Court authorized an increase in the Receiver’s Charge and Borrowing Charge from $1 million to $2.7 million to fund ongoing receivership activities.
A time-limited sealing order was granted to protect confidential sale details and preserve asset value for creditors.
The Court emphasized the historic nature of a First Nation acquiring a Yukon mine on its own settlement land and the potential for economic and environmental accountability.

Background to the receivership and mine abandonment

Minto Metals Corp. operated a copper-gold-silver mine located near Pelly Crossing on Selkirk First Nation Category A Settlement Land. In May 2023, the company abandoned the site. On June 29, 2023, following a petition by secured creditor Sumitomo Canada Limited, PricewaterhouseCoopers Inc. (PwC) was appointed Receiver over all assets of Minto Metals. The Yukon government undertook emergency care and maintenance and initiated reclamation efforts using the $75 million reclamation bond posted by Minto. However, a projected $19 million shortfall remained.

Initial sales efforts and Selkirk First Nation bid

The Receiver’s initial Sales and Investment Solicitation Process (SISP) did not result in a sale. The Receiver then initiated a Liquidation Plan. Selkirk First Nation submitted a two-part proposal: its wholly owned corporation, 843093 Yukon Inc. (“843”), would purchase the mine’s building infrastructure and equipment, and it would receive exclusive rights to negotiate the purchase of remaining mineral claims, licenses, and contracts.

This bid included a 20% deposit and exceeded the Forced Liquidation Value of the assets included. While some issues—regarding regulatory permits and the reclamation bond—remained unresolved, the Receiver accepted a bifurcated transaction structure to proceed with the asset sale and negotiate separately on the intangible assets.

Stakeholder positions and objections

Most stakeholders, including the Yukon government, Selkirk First Nation, and Capstone Mining Corp., either supported the proposal or took no position. Two creditors raised concerns. JDS Energy & Mining Inc. argued that the Receiver unfairly favored Selkirk First Nation by allowing a two-stage bid. The Court found JDS had opportunities to submit a bid and failed to do so. Selkirk First Nation’s bid evolved over time and was distinguished by firm financial commitment and substantial due diligence.

Capstone supported the first transaction but reserved its right to challenge any future sale of intangible assets, expressing concern about the length and cost of the receivership. The Court deferred judgment on any future transaction.

Court approval and reasoning

Chief Justice Duncan approved the sale and exclusivity agreements. The Court found that the Receiver had acted transparently, prudently, and in the best interests of creditors. The Receiver was granted authorization to complete the first transaction and enter into the exclusivity agreement regarding the second.

The Court emphasized the significance of the proposed transaction, which represented the first time a Yukon First Nation would acquire and potentially operate a mine located on its own settlement land. It highlighted the economic and environmental benefits of such ownership and the hope for a departure from Yukon’s past record of mining-related environmental failures.

Financial authorizations and sealing order

The Receiver requested and was granted an increase in the Receiver’s Charge and Borrowing Charge from $1 million to $2.7 million to fund continuing efforts, including the asset liquidation and potential closing of the second transaction. The Court found the expenses justified given the complex nature of the file and the potential value to creditors.

The Court also granted a time-limited sealing order over the confidential supplemental report that disclosed sale price and financial analysis. Applying the Sherman Estate v. Donovan test, the Court found that disclosure would undermine the Receiver’s ability to obtain value for remaining assets and that the sealing order was justified until 30 days after the related auction.

Conclusion

All orders sought by the Receiver were granted, including:

Approval of the Selkirk First Nation asset purchase agreement;
Approval of the exclusivity agreement;
Approval of the Receiver’s activities;
An increase in the Receiver’s financial charges;
A temporary sealing order.

The Court concluded that the Receiver’s strategy balanced commercial realism with creditor interests and recognized the historic and symbolic significance of Indigenous economic self-determination through First Nation ownership of the Minto Mine.