EARTHWORKS

Northern Dynasty sees consortium of majors developing Pebble as permitting approaches

Mining Weekly | Matthew Hill

February 18, 2012
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TORONTO (miningweekly.com) – The massive, and equally controversial, Pebble project in Alaska will most likely be developed by a consortium of major mining firms, a spokesperson for Northern Dynasty, the 50% owner, said this week.

The TSX-listed company, which has Rio Tinto as a near-19% stake, has been keeping potential investors up to speed with its progress “so that if there is a move by any company to take over Northern Dynasty, it would be a competitive situation”, Sean Magee said in an interview.

Anglo American owns the other 50% of Pebble, which may prove crucial to the company’s copper growth ambitions after it agreed to sell a 24.5% of its Chilean Anglo American Sur assets to Mitsubishi for $5.39-billion last year, in an apparent bid to block State-owned Codelco from lifting its stake in the company on the cheap.

The Pebble Partnership this week released the baseline environmental document for the project, located near Bristol Bay in the most northern US state, comprising of around 27 000 pages – which would stand around 1.5 m tall if stacked together.

The study is the culmination of nearly eight-years of work costing around $150-million, and prepares the way for the environmental permitting process for Pebble to begin on completion of a prefeasibility study later this year.

“It has given us confidence it can be developed in a responsible and environmentally sustainable way,” Magee told Mining Weekly Online.

The study considered environmental factors including seismicity – the state is earthquake prone –, soil geochemistry and water ways.

SALMON CONCERNS

Much of the criticism the project has garnered focuses on the fact that Bristol Bay has one of the largest wild sockeye salmon fisheries in the world, arguing that Pebble’s development would threaten this.

The Pebble partners have consistently maintained their belief that the mine can be built in such a way as to prevent any harm to the fish populations.

Magee said the scientists that compiled the environmental baseline document had also found “a couple” of marine species listed under the US Endangered Species Act, but that these were located around the port site, and that the Anglo and Northern Dynasty would undertake steps to ensure they were protected.

This would include only working on construction at the port facilities during certain times of the year.

Despite the assurances, there has been no shortage of opposition to Pebble, estimated to cost $4.7-billion to construct in an early 2011 preliminary study, with even the New York Times criticising it in a March 2011 editorial.

Days before the Pebble Partnership released its document, non-governmental organisations the Wild Salmon Center and Trout Unlimited released their own report that found there to be “too much at stake ecologically,economically, and culturally to risk development of the Pebble deposit”.

LEGAL CHALLENGE

Late last year, voters in the state’s Lake and Peninsula borough supported a measure that could block developments bigger than one-square mile, effectively preventing development at Pebble.

The Pebble Partnership announced it would challenge the new effort, and was later joined by the State of Alaska, which is fighting the ordinance on constitutional grounds.

The Superior Court of Alaska held a preliminary hearing into the matter in January and the judge brought those two cases together.

Hearings are not likely to start until early next year, Magee said.

DIRTY GOLD, ETHICAL OIL

One of the campaigners against the mine, No Dirty Gold, has painted the project as a potential source of “dirty gold” – where extracting the precious metal harms the environment and communities, and has urged jewellery retailers not to buy it.

The campaign is similar to those taken up against Canada’s oil sands in Alberta, which the country has responded to by calling the world’s second biggest source of the fuel “ethical oil”.

The argument is that Canada’s oil does not support regimes that abuse human rights. Canada has more recently attacked the foreign NGOs and external funders of local NGOs opposing proposed oil-sands pipelines.

Anglo American CEO Cynthia Carroll, speaking to an Alaska audience a year ago, delivered a similar message.

“I do not accept that campaigning environmental groups from outside Alaska with strong vested interests in raising funds through opposing our project have any legitimacy in the debate,” he said, whilst describing Pebble’s potential production as “ethical gold”.

“...the minerals – copper, gold, and molybdenum – produced by Pebble will be among the cleanest, most ethically produced in the industry.”

US ELECTIONS

A key factor in whether Pebble gets environmental approval from the US government could be whether or not Barrack Obama gets re-elected in November.

He failed to green-light the proposed divisive Keystone XL pipeline that would carry bitumen from Alberta to refineries in Texas, much to the chagrin of his GOP opponents, who argue the jobs and energy security the project would bring outweigh the environmental risks.

There could be a similar debate unfolding regarding the Pebble project, given the parallels.

Magee said Vancouver-based Northern Dynasty expects to complete a prefeasibility study on the project by the middle of the year, after which it would review it with Anglo American before announcing the findings towards the end of 2012 or early in 2013.

Only after that would the permitting process begin, expected to last into late 2016.

Assuming the project received the go ahead, first production would arrive only in 2020.

The March 2011 preliminary economic assessment of the project forecast copper equivalent output of 1.15-billion pounds yearly, making it even bigger than the giant Oyu Tolgoi operation Ivanhoe Mines is building in Mongolia, as well as the Bingham Canyon mine in the US, which can be seen from the moon.

Rio Tinto, the world’s third-biggest mining firm, owns the majority of both of those operations.

It is because of its size and potentially huge profits that Pebble has caught the interest of companies such as Rio Tinto and Anglo American.

CONSORTIUM OF MAJORS

“There have been a number of major companies that have had interest in Pebble,” Magee said.

“Our view is it’s very likely that this project will be developed by a consortium of major companies by the time it goes into production. When that occurs and who will be involved, we don’t know.”

He added that Northern Dynasty’s management has been careful to shop the project to other companies such as BHP Billiton and Chinese groups to ensure that those “that may have an ownership interest in this asset are aware of its value”.

Over the past year, the market has cut the implied value of Pebble significantly, if Northern Dynasty’s share price is any measure to go by.

The stock, which was trading at C$19.34 a share 12 months ago, closed on Friday at C$7.25 apiece, giving the company a C$688-million market capitalisation.

While that might make the firm far more attractive to potential suitors, not much is likely to occur until Pebble is closer to clearing the permitting hurdles. And there could be a fierce fight ahead.

“We’ll continue to hit the headlines,” Magee conceded.

But he is also quick to add “the public support for the project is greater than what you’d determine if you were only reading headlines”.

Tagged with: pebble mine, no dirty gold, keystone xl

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