It Is Time To Commission a Panel of Risk Finance and Underwriti​ng Experts To Review Financial Capacity of British Columbias 10 existing Mine Operators

 

I only just stumbled across this article rightly questioning the wisdom of allowing Imperials other two mines , Huckleberry and Red Chris, both in B.C. to continue until a through  reexamination and “audit” is conducted.
 
I was just about to post what is now so obvious on a statistical actuarial basis that it requires some immediate speaking from the “Responsible Mining” movement.  I will frame it into a more usable “FAQ” form and seek expert peer review from my industries ( banking, insurance, underwriting & risk management)  but the picture on a financial responsibility basis is grim and the B.C. governments existing structure is without pathways and procedures for responding  adequately to that.
At this point Imperial (operator of two of B.C’s 10 currently operating mines and seeking a permit on a third) is caught in its own self constructed trap and is really helpless as a corporation to do anything about it.  It  has reached the edge of the cliff( in my opinion and in the public opinion of market experts).
The call that needs to be made right now from the “responsible mining community is on Imperials financial capacity to meet its obligations and fund its environmental loss exposures and present legal liabilities not just at Mt. Polley but at Huckleberry and at Red Chris which is in permit processing.  That financial capacity “audit” has to also take account of its JV in Nevada.  .
Bowker Associates is constantly combing through potential sources of data looking for documented or at least widely accepted data  to replace assumptions we have had to derive from what is available for our work on “moving the global risk curve” for mines.
Last night I discovered that B.C. has only 10 operating mines…
It is a major red flag  on risk that Imperial in its challenged financial condition hold permits on two of these mines and is seeking a third. regardless of what actually caused the TSF failure ( not that there is much question about what Vick, Zyl an Morgenstern(???) will say).
 It is simply not sound policy to issue permits to companies for anything let alone an endeavor like mining with a documented high public liability  risk profile if the company cannot fund  or otherwise meet its environmental and other public liabilities.
 
Full stop ( as they say in the U.K.). Period (in the U.S.)
 The call can and should be made by the entire “Responsble Mining ” network in the Canada & The U.S. for an  independent qualified actuarial and accounting team of experts  to audit and assess the capacity not just of Imperial but of the owners of all 10 operating mines in B.C. to meet these financial public liabilities and to evaluate the adequacy of The B.C. governments present criteria and standards for making determinations on “financial capacity”. The panel of financial & risk finance experts should  provide specific recommendations to B.C. on improving their “financial capacity ” criteria and specific guidance on how to restructure its requirements for current permit holders..
Failing their taking that up, or perhaps preferably, we responsible mining advocates should hire our own expert panel   and get that out in public view immediately.( It will be tricky to pull this panel together as no expert who understands mining and is currently serving the industry will want to be publicly involved. My work with this information so far suggests the numbers speak loud and clear and about such basic and funadmental risk management and risk finance issuse that they require no mining expertise to assess)
Those audits should take a close look at what the B.C. government allows and what practices these 10 companies have on the creation of shielded LLC’s which funnel revenue up to the parent but protect  the parent against liabilities.(1) The original permit at Mt. Polley was issued in 1992 to Imperial Metals.  Mt. Polley Mining Corporation, the current permit holder was formed in 1996 as a co-venture with Sumitomo and other investors.. A further corporate restructuring in 1998 ( following merger with Princeton) created “Imperials Metal Corporation  “which operates the mine”   “The mine is owned 52.5 per cent by Imperial and 47.5 per cent by SC Minerals Canada Limited, a wholly owned subsidiary of Sumitomo Corporation of Japan.”(1) ,.There is no reference in the BOE inventory on Mt. Polley of any additional B.C. approvals or reviews of these corporate changes.  There is no reference to how the current permit came ot be in the name of “Mt. Polley Mine Corporation”. Further documentation is needed to assess what financial resources are presently available via “Mt. Polley Mine Corporation”, the current permit holder. Are the liabilties shared with the SC Minerals?  What recourse does B.C. MOM have directly to SC Minerals or to “Imperials Metal Corporationl”?  Sumimoto still references “SC Minerals of Amrica” ( no mention of “SC Minerals Canada Ltd.”
A search at InfoMine for “SCMinerals Canada Ltd.” yieilds no results. Imperial Metal Corporation’s 2012 Annual report  shows 100% ownership of Mt. Polley via its wholly owned subsidiary “Mount Polley Mining Corporation”   Does Sc Minerals of Canada Ltd still own 47.5% of Mt. Polley?  Does it have any assets other than the Mt.Polley share.  How ere the liabilities apportioned? Does anyone at BC MOM track or evaluate these corporate changes and their effect of adequate financial capacity?
This is an important and fundamental call on business practices that have so far not been a focus of the main  themes and work of  responsible mining and environmental justice but are so obviously  key now that we look at the reality of Mt. Polley
 
The implied “thought” behind what B.C. and other political jurisdictions interpret as “financial capacity” is that a company can always sell off its other assets, go to credit markets or fund out of cash flow from other operations.  This is flawed thinking and flawed policy as Mt. Polley makes very very clear.  
 
The present course of the public private partnership between the mining industry and its regulators, not just in B.C. but across the board, is reckless and irresponsible and on “financial capacity” gaps alone ( a company’s own assessment of its capacity and the assessment required by regulators) is tantamount to an undeclared and unagreed, unacknowledged unlimited  public subsidy to the mining industry via unfunded and unfundable public liabilities.
The markets have already made the call on Imperial so there is no political risk or liability exposure and no vulnerability to a charge of unqualified” criticism ( who is mining watch and wman or Bowker Associates  to question  or assess a company’s financial capacity):
(1) Imperial announced in its 2002 annual   it was essentially going bare ( unfunded) for its environmental and other operations liabilties.  ( did B.C. make a response to that, notice that, consider that?) There is no evidence or reference in their annual reports since then of any effort to pre fund or even quantify what those liabilites are.  They have merely asserted that they can fund them out of cash flow without any supportive analysis for that claim(  anyone who manages a check book can see such a claim  is a stretch to say the least.  Almost no one can mange catastrophic losses out of cash flow).
(2) a key rating agency publicly challenged that whether Imperial can survive this:“Debt rating agency Moody’s warned on Friday it was concerned the miner may not have the liquidity to absorb the financial impact of the spill. Imperial had $1.5-million in cash versus $464-million in debt, and a working capital deficit of C$21.7-million as of the end of March, according to its financial statements.

“The shutdown of Mount Polley will stretch thin an already tight balance sheet,” Raymond James analyst Adam Low said in a note to clients.”

(3)The markets have made their call. Imperials stock plummeted. The “market” didn’t offer them that $100 million in unsecured debt, the two major investors with the most to lose funded that whole debt and their level of confidence is shown in the very high rate charged ( 6%)
(4) in their pre spill 2013 financial statement Imperial acknowledged that even to meet their production and development goals ( especially at Red Chrs) they had no cash flow and would have to rely on credit markets.
Just pointing to these four established indisputable facts, any citizen with a thinking cap on can legitimately say “hey wait a minute” this sounds like not a good deal for we taxpayers and quite reasonably make the call I am suggesting you make now.
As this article points to indirectly “financial capacity” must involve a full consideration of liabilities.  It is obvious that even without the spill. Imperial does not have the financial capacity to meets its environmental and other liabilities at 4 mines ( Huckleberry & Mt. Polley  in production, Red Chris coming on line in B.C. and ar JV operation in Nevada)
The  B.C. Spill response program is not funded ( nor is it mining specific..same program governs a tiny little oil delivery truck spill to a homeowner and a spill the size of Mt. Polley). The B.C.policy merely asserts, that it is reasonable for the government to seek reimbursement should the responsible party be unwilling or unable to respond..the maximum fines for non compliance are a joke in the context of a major or even average TSF spill
Also what this article is saying about the fundamental relationship between cash flow pressures and safety is really the entire issue in mining.
It is endemic and well documented.
Imperial is the refection if a global cash flow crunch affecting and forcing changes within the entire mining sector
This is endemic but not so much publicized though obvious on examination of any company,  It underscores the urgency if regulatory reform to address financial capacity and other controls on entry.
It turns up again and again in dam review committee reports and it was the main point well made in this excellent piece presented at the 2011 tailings conference.http://www.infomine.com/library/publications/docs/Boswell2011.pdf 
This excellent paper is making the right call.  The industry itself is paying no attention to the operating phase of a TSF and their is no focus on oversight, not just in B.C. but again on an endemic basis.  Have to look up the exact number( AZAM 2010??) but something like 44% of all TSF failures occur during active mining operations.  It is the single largest threat of non remediable, non recoverable permanent environmental loss and yet regulations, not just in B.C. but everywhere fail to focus on the well known well established  causes of TSF failures in their requirements and provisions for oversight
 

At this same conference Dr. A. MacG. Robertson who has all his career called for voluntary self regulation on best practice principles called the May Day industry wide http://www.infomine.com/library/publications/docs/Robertson2011c.pdf

 
 Dr Robertson is the wise man in the industry..I have immense respect for what he tries to do through info Mine and what he has done all his career as a consultant to mining companies.).  He said to his fellow miners as the key note speaker there the risk profile of modern era TSF is rising at the alarming rate of 20 fold per 1/3 century.
 
His reasoning and even his numbers look fine to me. and what it points to is exactly what the article that prompted this post is pointing to except the author doesn’t understand as Dr. Roberson obviously does that it is endemic to the whole industry.  
 
Mt Polley is just the mirror in which we see the face of most of the mining industry today and in which we see the details of a failed co-ventured historic public private partnership between the industry and its regulators..
footnotes
(1)In 1992, Imperial Metals Corp. received a mine development certificate from the B.C. Ministry of Energy, Mines and Petroleum Resources for a 13,700 tonne-per-day open pit mining operation and covers all elements of the mining plan including the open pit, processing plant, water supply, tailings pond and a power transmission line. The mine development recommended by Fluor Daniel Wright Engineers in its feasibility study calls for 13,700 tonnes-per-day based on an initial 10-year mining reserve of 48,983,400 tonnes grading 0.38 per cent copper and 0.54 gram per tonne gold to produce 13,608,000 kilograms of copper per year. Gold production will exceed 3,428,000 grams per year initially and gradually decline to 1,714,000 grams per year in year 10 (George Cross News Letter #199, October 15, 1992).

In 1994, Gibraltar Mines Ltd., under an option agreement with Imperial Metals drilled seven core holes for 1,216 metres. Upon evaluation of the project Gibraltar declined further participation. Following a merger with Bethlehem Resources Corporation in 1995, Imperial completed an in-house feasibility study. Financing was arranged with Sumitomo Corporation through a joint venture with SC Minerals Canada that culminated in the formation of Mount Polley Mining Corporation (MPMC) in April 1996.

“In June 2001, Imperial Metals Corporation announced that mining and milling operations at Mount Polley mine would be suspended in September 2001 due to continued depressed copper and gold prices.”
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About lindsaynewlandbowker

Bowker Associates, Science & Research In The Public Interest, is an independent non profit providing self initiated pro bono analysis on key issues with a potential for massive adverse environmental impact . Bowker Associates has been an internationally recognized and cited voice in analysis of the Samarco failure, its consequence, and the possibilties for recovery. In 2015 Bowker Associates collaborated with globally respected geophysicist David M. Chambers to recompile global authoritative accounts of significant TSF failures in recorded history and to analyze these data in the context of gloal mining economics 1910-2010 ( Risk, Economics and Public Liability of TSF Failures, Bowker/Chambers July 2015) In 2014 Bowker Associates commissioned globally respected geophysicist and hydrogeologist Dr. David Chambers to undertake two technical works: (1) development of technical go no go criteria for vetting mine applications tp://lindsaynewlandbowker.wordpress.com/2014/01/05/a-new-statutory-regulatory-framework-for-responble-sulfide-mining-should-this-mine-be-built/ and (2) a case study of Maine's Bald Mountain, an un mined low grade high risk VMS deposit demonstrating the efficacy and accuracy of two risk assessment tools in vetting mine proposals https://lindsaynewlandbowker.wordpress.com/2014/02/28/mountain-x-would-you-issue-a-permit-to-this-mine/ In Maine, Bowker Associates has deeply engaged and been a public voice in the Searsport DCP LPG Tank, The Cianbro proposal for a Private East West Toll Road, JD Irvings rolling pipeline of Bakken crude to its plant in St. John and review of Phase II plans at The Callahan Superfund site in Brooksville, Maine, and Maine's revisitation of mining in statute and regulation... Our only “client”: is always “the pubic interest”. Our model is to focus on only one or two issues at a time so that we have a substantive command of the relevant field as our foundation for ongoing engagement. Our core work is in envirommental risk management, science and technology as well as bringing any available “best practices” models to the fore. The legal and regulatory history/best models are also a major thrust of our work in building and evaluating public policy. Director/Principal Lindsay Newland Bowker, CPCU, ARM is a recognized expert in Environmental Risk Management., Heavy Construction Risk Management and Marine and Transit Risks and has more than 3 decades of engagement in buiding public policy. Appointed by Governor Mario Cuomo to New York State Banking Board (served 1986-1996); President New York Chapter Chartered Property and Casualty Insurers; Environmental Committee, Risk and Insurance Management Society; Director, Convenor/Co-Chair Bermuda Market Briefing "From Captive to Cats" Hamilton Bermuda. Published Articles of Significance The Risk Economics and Public Liability of Tailings Facility Failures, co-authored with David M. Chambers, July 2015 Beyond. Polarization: Superfund Reform in Perspective, Risk & Insurance Managing Risk For Loss Prevention & Cost Control (Jan. 24, 1997). Lead Hazards and Abatement Technologies in Construction: A Risk Management Approach CPCU Journal 1997 Employee Leasing: Liability in Limbo Risk Management June 1 1997 Environmental Audit Privilege and the Public interest Risk & Insurance Managing Risk For Loss Prevention & Cost Control, April 1997 Asbestos:Holes In Abatement Policies Need To Be Plugged, Lloyd’s Environmental Risk International, May 1993 Editor Published Letters Evironmental Risk Management Beware of Facile Policies Like Fetal Protection Business Insurance 1995(?) High Court Review May Increase Sale of Bank Annuities Business Insurances August 8, 1995 Professional Profiles Protecting the Big Apple’s Core Managing Risk For Loss Prevention & Control December 1996 Major Career Highlights First rigorous analysis showing Relationship Between declining ore grades and TSF Failures of increasing consequence ( July 2015) FIrst Documentation that Gentrification Has Same Impacts as Unassisted Displacement from Urban Renewal Sites Direted Court Ordered EIS of FHA Mortgage Scandal Created Nation's First Homeownership Program for Low Income People (SHIP) Created Earliest Geographic Information Systems Using Defense Technology Developed By IBM Designed and Conducted Parallel Census Count to Show Systematic undercount in minority neighborhoods Documented Bias in ISO Territory Rating Plans for Private Passenger Auto Insurance Using ISO's own Rating Techniques Demonstrated Inherent Bias in Mortgage Policies of Banks With Inner City Branches Demonstrated that NY Telephones Plan for Area Code Split To accommodate anticipated cell phone demand was not efficient and would exhaust in 5 years ( which it did) Undertook First Systematic Evaluation of Child Protective Services Caseload Using Multi Variate Analyic Techniques Developed Child Protective Caseload Management and Tracking System (CANTS) and directed implementation in 4 client states including Illinois, Florida and New York Created and Ran Office of Risk Management for NYC DEP the Nations largest Water & Sewer Authority . Designed, Created and Administered Nation's First Owner Controlled Insurance Program (OCIP)for High Risk Tunneling Education Masters NYU Graduate School of Public Administration BSC New School For Social Research Maine Public Schools Deering High School
This entry was posted in Bowker Associates, Canada Dominance in Mining, CSP2, Financial Capacity Standrds Mines, global cash flow crunch, Imperial Metals, Mining Risk Management, Mining Watch Canada, Mining Watch Maine, Mt. Polley, SC Metals, Sumitomo Corporation, TSF Failures, WMAN and tagged , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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