The Yukon town of Dawson City is withdrawing its legal action against a gold miner who wants to work on his claims within town limits.

The town still stands behind its decision this week to reject Darrell Carey's application for a municipal development permit for his Slinky placer mine, located on Dome Road within the town's boundaries.

But days after Dawson City had filed a court injunction with the Yukon Supreme Court, demanding that Carey's work be stopped, Mayor Peter Jenkins said the town is dropping the injunction for now.

"That action is being withdrawn and the City of Dawson is considering other options," Jenkins told CBC News on Wednesday.

Jenkins said the town is currently seeking legal advice and it may still petition the court over the mining operation.

Late last week, the Yukon Water Board granted Carey a water permit for the Slinky property. However, he still needs the municipal development permit before work can begin.

Sparked public debate

The controversy over the Slinky mine has sparked a public debate in Yukon on whether any mining should be allowed within community boundaries.

"I'll be honest with you: I've been desperately trying to get as much information as I possibly can about this," said Coun. Wayne Potoroka, who voted against giving Carey the development permit earlier this week.

"It's a very complicated situation and it's one that might affect other municipalities."

Jenkins first threatened the court injunction in April, after Dawson City officials handed Carey a stop-work order for cutting down some trees on the property without proper authorization.

The town said Carey ignored the stop-work order, and council voted to proceed with a court injunction.

Jenkins said his main concern is with the safety and maintenance of Dome Road. He argues that the Slinky property has encroached on a public road.

"It certainly is not a road that one would want to spend a lot of time on, given the proximity to the edge and given the berm on that side of the road," Jenkins said.

In legal documents filed with the Yukon Supreme Court, the town alleged that Carey's work has created unsafe conditions and undermined the stability of Dome Road, making it no longer safe for public travel.