Anglo American's Alaska Mine Poses High Risks for Investors
October 29, 2009
Concerns about Pebble mine project raised as legal, political and engineering challenges mount
WASHINGTON, October 29-- A new investor advisory -http://earthworksaction.org/publications.cfm?pubID=436- released today raises significant questions about the risks associated with Anglo American plc's Pebble Mine Project in southwest Alaska. The advisory details the growing list of regulatory, legal, engineering and political challenges facing the London-based mining giant as its struggles to secure permits for the controversial gold-copper mine.
No other mining projects in North America come close to the scale, the complexity and the technological challenges that face the Pebble Mine, said Dr. David Chambers, Ph.D. who runs the Center for Science and Public Participation in Montana. Chambers and Stuart Levit a reclamation specialist with the Center reviewed the report for its technical accuracy.
The Pebble Mine Project in remote southwest Alaska is a 50-50 joint venture between London-based Anglo American and British Columbia-based Northern Dynasty Minerals ltd. known as the Pebble Limited Partnership.
The project's location in the headwaters of Bristol Bay, the world's largest wild sockeye salmon fishery, presents significant difficulties for Anglo American. While the companies have yet to enter the permitting phase, they have already encountered unprecedented opposition in Alaska and from the commercial, sport fishing and jewelry retail industries.
"The risks identified in this report should be of particular interest to lenders," said Jonas Kron, Esq. an analyst with Trillium Asset Management Corporation who reviewed the report. Trillium manages approximately $900 million in assets for institutional and individual clients.
"Financial services companies that are asked to provide financing for the Pebble project would do well to recall the multiple challenges they faced related to mountaintop removal mining in the United States, Kron said. Being associated with a project this controversial and opposed by Alaska Native Tribes and jewelers, is a risky place to be, particularly for financiers who have made environmental and social commitments related to their lending policies and practices."
Lawsuits against the State of Alaska, which has permitting authority, are piling up and early indications are that Anglo American and Northern Dynasty Minerals may face delays on the project. Alaska state legislators are scrutinizing the project and a major push to move new legislation to protect Bristol Bay salmon is imminent. As currently drafted, House Bill 242 -http://www.legis.state.ak.us/PDF/26/Bills/HB0242A.PDF- would create additional hurdles for Anglo American.
A politically powerful coalition opposes the mine because it threatens Bristol Bay salmon. This group includes an overwhelming majority of Bristol Bay residents- http://www.nunamtasurvey.info/- , Alaska Native groups and the commercial and sport fishing industries - which generate $250 million-$320 million annually for Alaska's economy and support tens of thousands of jobs. In addition, 18 leading U.S. and U.K. jewelers with sales of $3.5 billion have pledged not to buy Pebble gold.
Investors are increasingly taking into account environmental and reputational risks, particularly with mining. The Norwegian Pension Fund, one of the world's largest sovereign wealth groups, divested from Rio Tinto and Barrick Gold due to environmental risks associated with specific mine projects.
When taking into account the considerable risks associated with this project, it's hard to imagine a more perfect storm, said Bonnie Gestring, a policy advisor with the D.C.-based conservation nonprofit Earthworks. Building a massive mine in prime salmon-spawning habitat is risky business.
Even as Anglo American continues to move forward with its staged investment of $1.42 billion in the project, its headaches intensify. The company is struggling under mounting debt and wants to pursue a massive capital investment project amid tight credit markets.
In addition to costs associated with political opposition, the report highlights other risks, including:
- Operational Uncertainties: Those include securing contested water rights to billions of gallons of water a year; a 100-mile road and 200 miles of transmission lines that must be built across rugged, undeveloped terrain; a new deepwater port must be built; and a facility capable of providing 600-700 megawatts of power developed.
- Legal and Regulatory Challenges: An estimated 60 permits must be secured. Several lawsuits have already been filed, one of which has already stalled exploration activities
- Technical and Environmental Challenges: Dams will have to be constructed to store an estimated 9 billion tons of mine waste that would have to last forever in one of the world's most seismically active zones. Preliminary plans called for earthen dams over 700 feet high - higher than the world's largest concrete dams.
Researchers Bonnie Gestring with the Washington, D.C.-based conservation group Earthworks, and Steve Herz, an attorney who advises non-profits on international environmental and human rights law, prepared the report. U.S. and U.K. investment analysts at Trillium Asset Management Corporation, and Christian Brothers Investment Services, along with scientists familiar with the project, reviewed the report.
For more information:
For more information, including the full report, please see http://earthworksaction.org/publications.cfm?pubID=436