Royal Oak may leave taxpayers on hook
Cleanup at NWT mines likely to top $256-million
By IAN MCKINNON
The Financial Post
Taxpayers may have to cough up $256-million or more to clean up an environmental mess at gold mines in the Northwest Territories owned by financially crippled Royal Oak Mines Inc.
The federal government estimates cleaning up the closed Colomac mine, about 250 kilometres north of Yellowknife, will cost $6-million to $7.5-million. Ensuring that arsenic-laden ores stored at the Giant Mine, near Yellowknife's outskirts, don't leak into groundwater will cost $250-million over 20 years.
But the bill for Giant could be as much as $2-billion, said Andrew Spaulding, a director of Ecology North, an environmental group.
Mr. Spaulding said the figures obtained by the Department of Indian Affairs and Northern Development, which has constitutional responsibility for land and water in the North, are guesses and could be woefully inadequate.
"I think there is no doubt that it is going to be really costly to taxpayers. If you look at the life of the mine and the benefits the mine has given to the North, I think the cost of cleaning it up is going to wipe out any benefits," he said.
The problem at Giant, the site of a strike in 1992 that saw picket-line violence and an explosion that killed nine miners, is 270,000 tonnes of arsenic trioxide, a byproduct of the gold refining process. It has been stored for decades in underground shafts at the sprawling mine. Some groundwater is already being contaminated, but is being kept under control by pumps.
At Colomac, an improperly constructed tailings pond containing cyanide-polluted water could overflow in less than two months as the snow melts. Royal Oak is spending $120,000 in an emergency plan to transfer two million cubic metres of water from the pond into the abandoned main pit. The mine, opened in 1990, was closed in 1997 because of high costs and low gold prices.
Gordon Ware, chairman of the Northwest Territories Water Board, agreed time is critical because the North is having its warmest winter on record. "We don't have the luxury of time because we have to do something quickly," he said.
Mr. Spaulding said Royal Oak has a dismal environmental record, a problem compounded by the federal government's reluctance to enforce its regulations. He said preventing or mitigating damage to the environment and human health in the North will not be cheap.
Dave Nutter, the federal department's director of mineral resources, said Northern Development tries not to be heavy handed when wielding its enforcement powers. "We try to work with a company to find solutions because frequently court actions don't give you the solution you want."
Company spokesman Patrick Howe said Royal Oak takes its environmental practices and responsibilities seriously. However, cost overruns at the $480-million Kemess South gold-copper mine in British Columbia and weak gold prices have hobbled the firm and restricted its actions.
"It's not Royal Oak's decision to not do what is environmentally responsible. It is more the position it found itself in because of circumstances beyond its control."
Ottawa is using Justice Department lawyers plus outside counsel to try to ensure the environmental liabilities of Royal Oak are addressed during its financial restructuring, being prepared now while it is protected by the Companies' Creditors Arrangement Act.
The company is scheduled to file an affidavit later this week on how its liabilities will be handled. In a court document prepared last month, the firm estimated its exposure at $5-million for Colomac and $7.5-million for Giant.
Mr. Nutter said he did not know why Royal Oak's estimates were so different from the price tag of $250-million, prepared by a consultant hired last year by the department.
But he agreed that, if the near-penniless company can't come up with the money, then the federal agency may have to step in and shoulder its constitutional burden.
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