The bad news of the Thanksgiving weekend is the announcement that work is to be suspended on the development of Galore Creek due to rising costs and a soaring Canadian dollar. This is bad news for investors; but by now they should be used to the vagaries of mining projects and the swings of fortune they entail.
In practice this is even worse news for the British Columbia mining industry. Recall that Kemess North was rejected by a review panel primarily on the basis of non-viability even in the face of loud protestations by the miners that it could succeed. Now we have a far better ore deposit “abandoned” for reasons of non-economic viability. This announcement highlights just how slim a margin of profit and credibility holds a promised new mine afloat. How can any miner in BC hereafter, with straight face, proclaim the viability of a great ore body without invoking suspicions of verbal inflation?
At Galore Creek we had a project that was fully supported by the locals, who now look to the world like gullible tourists along for an ephemeral ride of no sustainance. Except at a recent conference I talked to a leader of a downstream First Nation and she said to me, in essence “We do not believe they truly can develop the mine to protect our environment; what happens when they go bust or stop mining for whatever reason?”
Her question is now all too cogent. And her opposition to the mine on the basis of the non-credibility and failure to follow through by the mining industry will undoubtedly be reinforced by this “closure.”
True that it would have taken a hardy fool to predict the spectacular rise of the Canadian dollar; but is the project so sensitive that the rise of recent months is enough to stop it? Or does the answer lie in the arrival of a new consulting company taking a harder look at reality? Or is this just the result of failure of core to confirm what speculators hoped would be there? Somehow the thought that a mine in Alaska offers shareholders a better prospect is frightening, given the current attitude to mining of Alaskans and the absence of recent successes in that state of newly opened mines. Or is this all a natural result of the falling United States dollar? Is it now time to take a fresh look at shares of gold mines in Nevada?
Maybe the truth lies in this snippet:
A dam for storing mine waste, or tailings, accounted for about 45 percent of the capital cost in the latest estimate, up from about 25 percent in an earlier study, Van Nieuwenhuyse said in a phone interview. Building the dam and rerouting a river might have taken 24 months longer than planned, he said. “The problem is related to previous studies done by consultants,” Haytham Hodaly, an analyst at Vancouver-based Salman Partners Inc., said in a telephone interview.
Are they about to sue the previous consultants? One might well make a case for shareholders who have lost value and employees now out of work. Afterall building tailings impoundments in BC is not a black art; there are many and the details are well established. Was this just a case of sloppy consultant management, inexperienced engineers, or truly a change in the dollar that made a tailings dam more expensive? The stories do not add up yet, I am afraid.
Whatever the details of Galore Creek, and they will seep out in the weeks and months ahead, we all are saddened to see this one bright spot of community support and decent engineering come crashing down to confirm the nay-sayers who held up other lesser projects in the face of industry optimism.
