Could This Be The End for Pebble Partnership?

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By Christopher Hopkins

The Saint Consulting Group

The Pebble Partnership in Alaska is one of the most significant findings of copper, molybdenum and gold ever discovered in North America. It is also one of the most controversial mining proposals ever.

Pebble has already spent hundreds of millions of dollars, without yet fling for any permits. That cost —an estimated $350 million in 2010 — has risen as opponents mount an international campaign to kill the project.

The opposition, much of it centered outside of Alaska, says the huge mining project would endanger headwaters of the Bristol Bay watershed and the world’s most important wild sockeye salmon fishery. The Pebble Partnership, a joint venture of London-based Anglo-American plc and Northern Dynasty Minerals Ltd. of Canada, says the mine is 150 miles from Bristol Bay.

The project involves one of the richest sources of minerals in the world, comprised primarily of:

  • 80.6 billion lbs. of copper
  • 5.6 billion lbs. of molybdenum
  • 107.4 million oz. of gold

Now investors are being advised to stay away from the project, and why not? The opposition is accomplishing its goal, which traditionally is to run up the costs of junior mining companies that exist solely on capital investments. This occurence will now drive up the cost for financing that the partnership can find.

The goal of the opponents is coming to fruition — keep delaying and keep making the mining company spend more money, hoping that it will go away when it runs out of money. The Pebble Project will require 67 state and federal permits before it is allowed to extract any materials from the ground,

To make sure the pessimistic investor advisory on the project received wide notice, the organization Earthworks widely distributed the press release below:

Press Release

Feb. 22, 2012, 8:00 a.m. EST

Anglo American’s Pebble Mine Poses High Risks for Investors

Viability of Pebble mine project questioned by Earthworks report as legal, political, and engineering challenges mount

WASHINGTON, Feb 22, 2012 (BUSINESS WIRE) — An investor advisory released today raises significant questions about the serious risks associated with Anglo American plc’s /quotes/zigman/470624 UK:AAL -0.24% (jse:ANGLO) Pebble mine project in southwest Alaska. The advisory details the growing list of regulatory, legal, engineering, and political challenges facing the London-based mining giant as it struggles to secure permits for the controversial gold-copper mine planned for the headwaters of the Bristol Bay watershed, the world’s biggest wild sockeye salmon fishery.

The Pebble mine is a 50-50 joint venture between London-based Anglo American plc and Canada-based Northern Dynasty Minerals Ltd. known as the Pebble Limited Partnership. The report points to the dramatic drop in share price at Northern Dynasty, whose only project is the Pebble Mine, as evidence of lack of confidence in the project. The company’s share price has dropped from $20/share in February 2011 to less than $10/share in January 2012.

“Local opposition to the Pebble mine project has translated into a barrage of legal, political and regulatory hurdles over the last year,” said Jonas Kron, analyst at Trillium Asset Management Corp. “After scrutinizing the project details, we believe there are significant risks that must be considered.”

While Anglo American and Northern Dynasty have yet to enter the permitting phase, they have already encountered substantial opposition from the commercial and sport fishing industries and the Bristol Bay Native Corporation. Over fifty leading U.S. and U.K. jewelers with sales of $5.5 billion have pledged not to buy gold from Pebble. Recent events could preclude development altogether:

— April 2012: EPA will release results from a scientific assessment of the suitability of large-scale development in the watershed.

— October 2011: a citizen initiative was approved by Lake and Peninsula Borough voters prohibiting permits for large resource extraction activities like Pebble.

— April 2011: nearly 30 investors representing $170 billion in assets and holding 13 million shares in Anglo American urged EPA to conduct a 404c Clean Water Act review of the mine.

Full report at: http://www.earthworksaction.org/library/detail/bb-investorrisk-2012

SOURCE: Earthworks
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Chris Hopkins is senior vice president for aggregates and mining for The Saint Consulting Group, email hopkins@tscg.biz

 

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