A leading credit rating agency’s financial downgrading of Imperial Metals Corp. is sending alarm signals through B.C. and Alaska groups concerned about the future of mines operated by the company.
Moody’s Investor Service has reassessed Imperial Metals’ “probability of default rating,” with financial analysts stating the company is at imminent risk of not being able to pay its debts. The company’s rating is “judged to be speculative, of poor standing, subject to very high default risk and may be in default on some, but not all, of their long-term debt obligations,” according to the service.
Imperial Metals, based in Vancouver, owns the Mount Polley Mine near Williams Lake — the site of the 2014 tailings pond collapse — and the Red Chris Mine, a large open-pit mine near the border of Alaska which uses the same tailings pond infrastructure as Mount Polley.
Operations at a third site owned by Imperial — the Huckleberry Mine, near Houston B.C. — have been on hold since last year because of low copper prices, according to the company website.
The company has seen its stock price plummet over the last year and recently completed a new debt financing plan after lenders granted a waiver to avoid default, according to Bloomberg News. The major shareholder is oilsands tycoon and Calgary Flames co-owner Murray Edwards, who previously helped arrange $150-million in loans for the company.
When asked about its financial situation, a company representative referred DeSmog Canada to an Imperial Metals annual report.
Communities and Taxpayers Left Holding the Bag for Bankrupt Mines
Alaskan and director of Salmon Beyond Borders said Imperial Metals’ shaky finances underline the need for binding protections for everyone living downstream from mines in transboundary watersheds.
“We know (B.C.) needs much greater financial-bonding legislation, so to find out that this company is in a dire financial position is just super troubling. We know there is no money available to reclaim the Red Chris Mine, so if the company goes bankrupt, it would be very, very troubling,” Hardcastle said in an interview.
“We need a robust financial assurances mechanism in these shared watersheds.”
The 2015 annual report of B.C.’s Chief Inspector of Mines (the most recent year available) shows that, like other mining companies in B.C., Imperial Metal bonds do not cover estimated liabilities.
The total bond for Mount Polley was $23.6 million, but the liability estimate is $35.3 million, for a shortfall of $11.7 million.
And that liability estimate should probably be much higher, said Ugo Lapointe, Canadian coordinator of MiningWatch Canada.
The Huckleberry bond was $37 million and the liability estimate $59 million, for a shortfall of $22 million. Red Chris posted a bond of $12 million with a liability estimate of $18 million, meaning a shortfall of at least $6 million.
So Imperial Metals has $73 million in bonding for a total reclamation estimate of at least $103 million, Lapointe said.
B.C.’s Underfunded Mines Represents Over $1 Billion Taxpayer Liability
Last year, B.C.’s Auditor General Carol Bellringer, who, in a report, slammed the B.C. government for failing to adequately monitor mines, said the fund that is supposed to cover reclamation costs is short more than $1 billion.
Another 2016 report by independent economist Robyn Allan found B.C.’s out-of-date mining regulations allow companies to chronically underfund mine remediation and disaster costs, ultimately leaving the burden to taxpayers. Allan estimates B.C. mines represent an underfunded liability of $1.5 billion.
There are over 84 abandoned contaminated industrial sites in B.C., mostly from mining, that will cost an estimated $508 million to remediate, according to the Crown Contaminated Sites Program. Responsibility for these sites falls to the province because the owners and operators of the projects “no longer exist,” according to the B.C. government.
Between 2014 and 2016 the cost of contaminated sites in B.C. rose 83.4 per cent. The spectre of financially unstable mining companies adds to the growing concern that B.C.’s mining boom along the Alaska border is occurring without regard for long-term cleanup and remediation costs.
Imperial Metals remains responsible for continuing cleanup and remediation around Mount Polley, where 24 million cubic metres of contaminated sludge and mine waste swept into lakes and rivers after the collapse of a 40-metre high tailings dam.
The Red Chris mine, which opened in late 2014 and has a 25-year lifespan, has a tailings impoundment seven times the capacity of Mount Polley.
Locals Fear Repeat of Tulsequah Chief Debacle
But Alaskans can already point to a glaring example of how badly things can go wrong when mine reclamation activities aren’t adequately funded.
The Tulsequah Chief Mine, on the Canadian side of the border, has been leaking acid mine drainage into a tributary of the salmon-rich Taku River for 60 years. After two company bankruptcies and frequent promises to clean up the mess, little has happened.
Chris Zimmer of Rivers Without Borders has a sinking feeling that, if Imperial Metals gets into deep financial problems, Red Chris could be a repeat of the Tulsequah Chief.
“We saw this happen at the Tulsequah Chief where we ended up with an abandoned mine pouring acid mine drainage into the river for 60 years. That was exactly the same process,” he said.
The fears are that either the company could go bankrupt and walk away from the mess at Red Chris or, if they are short of money, they will start cutting corners, Zimmer said.
“The government needs to step in and keep a very good eye on this site and what the company is doing,” he said.
Jacinda Mack, coordinator of First Nations Women Advocating Responsible Mining and a member of the Xat’sull First Nation, is already keeping a wary eye on Imperial Metals’ finances.
“I am very concerned with this new information about Imperial Metals,” Mack told DeSmog Canada.
“Will Imperial Metals walk away from their Mount Polley Mine and abandon their responsibilities to clean up and treat the pollution from the ongoing disaster — such as what happened with owners at the Tulsequah Chief?”
“They haven’t been very forthcoming at all about this financial situation…It is really frustrating when they are ignoring things like the lake colour changing and algal blooms that never happened before,” she said.
There are many questions that need answers, such as why B.C. is not requiring Imperial Metals to pay the full cost of the Mount Polley cleanup, Mack said.
“What is B.C. going to do to ensure Imperial Metals meets health and safety requirements and their commitment to clean up Mount Polley Mine?” Mack asked.
Hardcastle is also pushing for more oversight of the transboundary mines, which are among the largest in North America.
“We need to know how we can prevent these mines from getting so far along before there are more protections in place,” she said
Alaska Politicians Pushing for Input on Transboundary Mines
The concerns are echoed by Alaska’s congressional delegation and a letter sent to U.S. Secretary of State Rex Tillerson, signed by Alaska Governor Bill Walker, Lt. Governor Byron Mallott, Senator Lisa Murkowski, Senator Dan Sullivan and Congressman Don Young, says U.S. economic interests could be threatened by B.C. transboundary mining and “inadequate financial mechanisms to assure long term management of toxic wastes and redress for damages from potential releases.”
The letter emphasizes concerns about the development of large-scale hard rock mine proposals and operations in B.C. “and their potential catastrophic effects on Alaska’s communities and habitats surrounding the transboundary rivers.”
The Alaskan politicians want the State Department to push Canada for more input on transboundary mine proposals, development of a database to track cumulative effects on water quality and a decision on whether the issue should be referred to the International Joint Commission.
Mallott and Alaska tribal representatives met with B.C. officials in early November and are planning to go to Ottawa next year to hold further talks on transboundary watersheds, Mallott said in an emailed statement. He will also go to Washington in January to meet with State Department officials.
Image: Red Chris Mine. Photo: Garth Lez|DeSmog Canada