I THINK MINING

Pebble Mine and hence Anglo American may not be a prudent investment at present.  I have been wrong before in predicting the rise and fall of mine share prices, so please do not take the following as investment advice.  See this for what it is: the ruminations of cantankerous old blogger. 

At this link is a report on Pebble Mine and factors to consider in deciding to invest or divest.   The point is simple:  there is so much opposition that any predicted timeline for mine start-up is probably wrong.  And it is doubtful the mine will ever start up. 

Keep in mind this may be an anti-mining tract.  But the real issue we seek to address here is: should you be investing or divesting right now?   The basis of investing in a mining projects is that you seek to increase your net worth, either by way of dividends or increase in property value.  I cannot see how either of these, dividends or property value increase, can conceivably occur for the Pebble Mine any time in the future.  At least not on a time scale of interest to me as an old (by age) investor.  

The simple fact is that I cannot conceive how they are ever going to prove that they can safely dispose of the tailings.  Or that if they can, how they are going to prevent the tailings eventually finding their way to the ocean through the fishing grounds.   

Of course, as at so many mines, you can build and operate catch dams, sediment ponds, new wetlands, water treatment plants, and a slew of things to stop the contaminated mine waters leaving the site.  And you can probably do this for fifty years and more of mining.  So it is conceivable that we can get fifty years of economic benefit from operating the mine as long as we control runoff and discharge. 

But how do you build a tailings impoundment as high as the Hoover Dam to encapsulate acidic tailings and make the dam remain stable forever in the absence of expensive surveillance and maintenance.  The fact is you cannot.  Nature will attack so high a dam.  Earthquakes will come out of nowhere and shake it apart.  Until I see an analysis that proves that a floating earthquake right underneath the dam will not induce deformation and distress,  I remain skeptical. 

Keep in mind I have quantified the impact of a floating earthquake directly beneath the site of the OII Landfill in Los Angeles, so I know it can be done.  But also keep in mind that my job was easy.  Landfills contain so much plastics and wire that they have an incredible tensile capacity; tailings have no tensile strength.  Also the landfill is settling at about one foot per year.  In three hundred years time, the landfill will be below grade.  So I have to rely on custodial maintenance for a mere three-hundred years.   That is peanuts compared to the period the Pebble Mine Tailings will stick up above the ground.

Then there are the inevitable processes of mass wasting, erosion, and geomorphic change.  You can say: who cares about ten thousand years hence; that long ago this area was covered by glaciers, and it could happen again.  I do not wish to base my investment decision on the outcome of a debate on global climate change: the return of the ice age or the transition to Florida heat in Alaska.  It will take longer to sort out that fight than I care to wait for dividends.  But even if the climate change issue is quickly settled, it still seems bad to decide to build a mine on the basis that future climate-change-induced events will blot out the mine, its tailings, the salmon grounds, and all fishermen and hunters too. 

fact is the share price is dropping, and I suspect it will continue to drop.  I sold my faith in this mine a long time ago.  You may wish to consider yours.  One final word from the email that got me going on this posting: