PUBLIC/ENVIRONMENTAL COSTS OF BUENA VISTA DEL COBRE FEEDER DAM FAIILURE FIXED AT $(US)137 MILLION: GRUPO’S BALANCE SHEET UNLIKE IMPERIALS AT MT POLLEY CAN TAKE IT

OOSKA NEWS, a water quality focused global news service has reported that the public/environmental liabilities for the August 6 failure of a feeder dam 25 miles from the U.S. border are now estimated at $137 million.
derrame-en-Buenavista-del-Cobre-830x503
Bowker Associates has been following this failure  and the catastrophic tailings storage facility failure at Mt. Polley in British Columbia since each first occurred.  The original part of the post focused on the implications with reference to Maine’s appalling new mining statute, its legislatively rejected rules and the antiquated uninformed old 1991 rules now continuing in effect. As is the format for all of our posts on specific ongoing  events,  there is an  annotated running file of later developments. For that post Buena Vista Del Cobre has its own tracking with commentary and background on the facility and mine itself.
The key issues at Buena Vista, beyond the dam failure are of continuing interest to us and we will be doing more work on “unpacking” this . Old mine sites around the world are being “reworked” to reprocess old waste piles and extract from pits that were deemed non profitable including unexamined  reuses of old  TSF’s for electrowinning  process slimes. Freeport McMorans portfolio of mineralized assets is dominated by such “reworking” of old infrastructure for electrowinning and the foreign sites of U.S. and Canadian mines are increasingly about reworking and retrofitting old sites and facilities for electro winning.
Electrowinning has made it possible to profitably extract very high  grade copper ( and a few other metals) from very low grade ore using a recirculating sulphuric acid solution holding leached suspensions of metal.  It is a vast vat leaching process with Outotec, designer constructor of the retro fit of the Buena Vista Del Cobre facility,  the industry leader in these electrowinning refits of old mining infrastructure.
As part of a paper  explaining the legal and financial reality of why only extremely large companies can actually pay for the public and environmental liabilities of a TSF failure we had already prepared a comparison between Imperial and Grupo.  Here is an excerpt from that paper.

Debt rating agency Moody’s warned .. 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 $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.”

 Important to note that working capital deficit of $21.7 million is pre TSF failure.  With Mt. Polley out of  the picture for income and costing enormous outlays  for  cleanup and recovery and no significant recourse to bonds and insurance for any part of  failure costs the  working capital deficit is most likely now many times that.

In its 2013 annual report Imperial announced that it could no longer fund operations and development out of cash flow as it had done to that date and would have to go to credit markets.  Post failure It did obtain $100 million in unsecured 5 year debt but at a fairly high rate, 6%, and principally funded by the two existing investors with most at stake. We do not need world class accoutants and rating agency’s to wonder how this $100 million can contribute in any way to funding failure costs.  The working capital deficit alone required all of that.

Imperials stock plummeted immediately after the massive TSF failure which further impairs access to  and cost of capital even on the risk robust mining centered TSX .  Mt Polley has $900 million in assets but $500 million in liabilities so its net worth ( unencumbered assets) is only $400 million.  With $100 million already drawn down just to meet working capital deficit and the price per share still impaired that doesn’t leave much possibility of access to the TSX to fund the Mt. Polley failure and meet Imperials public and environmental liabilities.

By comparison, Grupo Mexico who have expended $150 million so far on clean up of their Buena Vista Del Cobre feeder dam breach which occurred 2 days after the Mt. Polley failure had $2.44 billion cash on hand and only  $5.78 billion in debt ( a ratio (debt to cash) of 2.36 as compared with Imperial/MPMC’s of 309.3.  To meet an uninsured, unfunded  loss of $100 million and not risk impairment of all other operations a company  needs to  have sufficient liquidity and revenues from other operations to be able to absorb the unplanned costs of the failure.  Only the  largest  miners, like Grupo have that.”

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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 Buenavista Del Cobre, dam failue envronmental costs, electrowinning, Electrowinning dam faiures, Grupo Mexico, Imperial Metals, Mt. Polley, polluter pays advocacy and tagged , , , , , , , , , , , . Bookmark the permalink.

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