Pebble Mine And The Big, Bad Mining Wolf

Includes: AAUKY, NAK, RIO
by: Sean Modd

Anyone considering investing in the Pebble Partnership may have second thoughts when they hear the claims being made by critics about the deposit. As a potential investor, to hear that Rio Tinto no longer supports the project raises red flags regarding project feasibility. However, upon investigation one learns to find not only is the Rio Tinto claim false but a whole litany of misconceptions being trumpeted as truth to the general public. This article will address the popular myths being circulated about the project so as investors can make a more informed decision as to whether any investment in the project would be worthwhile or not.

Executive Summary:

  • The Pebble Partnership has yet to finalise plans for how they intend, if at all, to develop the deposit
  • Despite the Pebble Mine still being in the conceptual phase, critics have been telling the general public "details" about the mine.
  • These mine "details" contain assumptions that are being used for maximum impact in drumming up opposition to the deposit.
  • Public opposition toward the project is placing extensive political, legal and commercial pressure on the likelihood of the project making it past the permitting phase.
  • However, until the Pebble Partnership has submitted a mine plan for review any decision made about the project is based on emotion rather than fact.


One would be hard pressed to name another mining project in the Northern Hemisphere as controversial as the proposed Alaskan Pebble Mine. From local fishing groups to Robert Redford to Jewelry retailers the world over, proposals to build a mine in the Bristol Bay area has stirred vehement opposition. Critics contend that it is impossible for a mine to co-exist with such an environmentally pristine environment. The Pebble Partnership made up of Anglo America (OTCPK:AAUKY), Northern Dynasty Minerals (NYSEMKT:NAK) and Rio Tinto (NYSE:RIO), which holds a 20% interest in Northern Dynasty, have committed vast resources to studying whether it is possible for a mine to be built in the Bristol Bay area that could be both economically and environmentally responsible. The Pebble Partnership has committed over $100 million and employed the services of 500 scientists to conduct environmental studies. The results from these studies will have two consequences. First and foremost, they will determine whether a mine is feasible and second the results will determine the design of the mine and the accompanying required infrastructure. From this study, the Pebble Partnership will have a proposal for a mine. The mine proposal will then be subjected to an extensive permitting process. However, before the Pebble Partnership has had the chance to determine the shape, size and type of mine they are planning to propose, critics of the proposed project are circulating information to the general public that contains assumptions about the project, which are being presented as fact "to tell Obama and the EPA to ban Pebble.

The following are the some of the assumptions being made about the Pebble Project:

  1. Pebble Mine will be an open pit mine.
  2. Rio Tinto does not support a Pebble Mine.
  3. A Tailing Dam cannot be safely built in an earthquake prone zone.
  4. Independent Peer Reviewers of the EPA Draft Statement supported the EPA's findings.
  5. The Pebble Mine will turn the Bristol Bay area into an EPA Superfund site.

Before discussing each of the assertions in detail, it is worth stating what appears to be the underlying theme justifying the critics concerns; a belief that unless the public can be rallied together to ban the Pebble Mine then the environment around Bristol Bay is doomed. This concern stems from the popular misconception that mining companies can ride roughshod over public concerns for the environment. Practically speaking, no matter how big a mining company or how valuable a deposit may be, a mine cannot be built until it has been through a rigorous permitting phase. One can cite mega miner Rio Tinto's misfortunes in Mozambique in 2011 as just one example of how the failure to obtain government approval is the death knell for a project. Unable to secure the approval of the Mozambique Government to ship coal along the Zambezi river, Rio Tinto had to shelve plans to develop a mine that was scheduled to produce 20 million tons of coal a year.

To move the Pebble Project from conceptual phase to a producing mine, the Pebble Partnership must obtain each and every one of some sixty-seven federal, state and local permits.The permitting process in the United States is so extensive that it is tied with Papua New Guinea in last place in the time it takes to permit a new mine Failure to obtain just one of the sixty-seven permits would bring the development of the project to a screeching halt. Therefore, unless the Pebble Partnership shows that the deposit can be developed in a manner that does not have an adverse impact on fisheries, bird life, watersheds, air and water quality there will be no Pebble Mine.

While the Pebble Partnership is completing studies to determine if a mine is feasible, critics are circulating materials to the general public that contain assumptions concerning a Pebble Mine being presented as fact to provoke the public into action. Those assumptions shall now be addressed.

1. Pebble Mine will be an "open pit mine"

Asserting as a fact that the Pebble Mine WILL be an open pit mine and excluding the possibility that the Pebble Partnership may opt for an underground mine is misleading the general public. Weighing in on the issue of the mine, Rio Tinto's now former CEO, Tom Albanese, told investors in London:

I'm interested in looking at it from an underground perspective; I have no interest in looking at it from an above ground perspective," continuing "an open pit mine is not the way to go ... in my opinion.

2. Rio Tinto does not support the Pebble Project

In the November/December issue of Audobon magazine, Mr. Albanese's statements mentioned above were taken out of context by the Renewable Resources Coalition. Rather than providing his statement in full, Audobon magazine focuses on his opinion regarding an open pit mine and concludes that Rio Tinto "after studying the dangers has{sic} backed away and now opposes the project"

3. The EPA's Assessment was supported by Independent Peer Reviewers

In addition to claims that once supportive partners of the project are now turning away, claims are also being made that the scientific community "universally believe that Pebble would negatively impact our fisheries." This statement relates to the scientists who were asked by the EPA to review their findings as contained in the Bristol Bay Watershed Assessment. The EPA, pursuant to section 404 C of the Clean Water Act, conducted a study of the potential impact the project may have on the Bristol Bay Watershed. The data that the EPA used to draft the assessment was based on a hypothetical mine scenario. To enhance the credibility of the EPA assessment it was submitted to neutral scientific experts for third party review. A review of the comments that the scientists made about the assessment, indicates anything but a universal belief that "Pebble would negatively impact our fisheries." A sample of some of the responses to the Bristol Bay Watershed Assessment was the following:

"Unfortunately, because of the hypothetical nature of the approach employed, the uncertainty associated with the assessment… the utility of the assessment, is questionable." -- William A. Stubblefield, Senior Research Professor, Department of Molecular and Environmental Toxicology, Oregon State University

"Without a more detailed understanding of the mine plan and associated engineering, as well as additional detailed analysis, it is difficult to determine if the failure probability estimates presented in the Assessment are reasonable." -- David Atkins, hydrologist and expert in mine hydrology and geochemical assessment

"Some of the assumptions appear to be somewhat inconsistent with mines in Alaska. In particular, the descriptions or effects of stream flows from dewatering and water use do not account for recycling process water, bypassing clean water around the project, or treating and discharging collected water." -- Phyllis K. Weber Scannell, environmental consultant and former biologist for the Alaska Department of Fish and Game

One reviewer, Charles Slaughter,called sections of the EPA's draft report "pure hogwash."

4.The tailings dam would fail in an earthquake

Located within the Pacific Ring of Fire, the volatile seismic activity of Alaska is well documented. Naturally, the devastation left by an earthquake would be compounded by a tailings dam failing resulting in significant environmental damage. However, the concerns with building tailing dams in earthquake prone areas is not restricted to Alaska. Both Anglo America and Rio Tinto have extensive experience in constructing and upgrading tailing dams to incorporate seismic stabilization in other active earthquake areas such as Chile and Indonesia.

5.The mine will turn the site into an EPA Superfund site aka the Bingham Canyon Mine

Rio Tinto's massive Bingham Canyon Mine is one of the biggest man-made excavations on Earth and has rendered a large area of local groundwater too polluted for human consumption. Now, the Rio Tinto and Anglo American companies want to build an even bigger mine - the Pebble Mine - at the headwaters of our planet's greatest wild salmon river systems. It's an environmental tragedy waiting to happen.

The Bingham Canyon Mine has been in continuous operation since 1863 and was purchased by Rio Tinto in 1989. Needless to say, mining in the nineteenth and for most of the twentieth century was not regulated by federal, state or local environmental agencies. Consequently, mines such as the Bingham Canyon mine have left environmental challenges for those currently operating or residing in the area. However, these challenges caused by antiquated mining methods and attitudes are being corrected by modern technology developed in response to society's greater environmental awareness and conservation goals.

Since purchasing the mine, Rio Tinto has spent over $1 billion USD on smelter and refinery modernization-reducing some 99.9% of sulfur dioxide, Rio Tinto has conducted seismic stabilization construction and upgrades to its tailings impound. The mining company also has installed two reverse osmosis plants that produce enough water to supply 14,000 people annually. These efforts have resulted in the Bingham Canyon mine removed from the EPA Superfund list

Environmental Challenges

From the little that investors know about the deposit, there are some conclusions that can be made regarding potential environmental impact of developing the deposit. Because of its sheer size and remote location the development of the Pebble Project will be a massive undertaking. Currently the deposit is not located near any road system, thus developing the deposit would require by some estimates 80 miles of road to link the mine to existing road systems. Furthermore, there are plans to build a deepwater port as well as a power plant big enough to "electrify Anchorage". In addition, arrangements for a mill, tailings pond and millions of tons of waste rock must be achieved without harming Bristol Bay. Undeniably, there are some serious environmental concerns arising from this project but the Pebble Partnership should be afforded the opportunity to present how they are going to overcome the environmental challenges.


Such a campaign of misinformation can have a significant impact on the probability of the development of the Pebble Deposit. Consider the significance of the public's opinion towards the project when that opinion has been based on the misinformation mentioned above. How would a member of the general public feel about the mine when what they know about the Pebble Project is that it will be:

... an open pit mine which besides leaving the site looking like a lunar landscape, the surrounding area would be condemned as an EPA Superfund Site. The risks of environmental degradation are only compounded by the fact that a tailings dam is at risk of failing due to the seismic activity within Alaska. The fact that the Pebble Mine would cause extensive environmental degradation is a foregone conclusion as the EPA has already provided an assessment, findings from which a team of neutral scientists agreed. But it is not just environmentalists and scientists who think Pebble is a bad idea, even major Mining Company Rio Tinto has backed away from the project and opposes it.

Public opinion regarding a project can place tremendous political, legal and commercial obstacles in the way of a project. From the political perspective, public opinion plays into the permitting process and effects lobbying of elected officials to block permits or as occurred during the run up to the election ads on Alaskan radio, telling voters not to vote for candidates who support the mine. Beyond the local or even state political landscape, critics lobbied the EPA to conduct an assessment of a mine based on how the EPA assume the Pebble Partnership will build the mine. The findings of the assessment could be looked at as a preview of how the EPA would handle any permit applications for Pebble Mine. Even if a permit is issued, if there is enough public support backing the opposition groups and donating financial resources, the opposition groups will be likely able to mount legal challenges against the issuance of permits.

In the commercial sphere, Tiffany, Zales, and 58 other jewelry retailers have vowed to boycott Pebble gold by signing a "No Pebble Pledge." Anisa Costa, president of the Tiffany & Co. Foundation, offers this: "We strongly believe Bristol Bay to be one of the world's most pristine landscapes, home to a wild and productive salmon fishery which supports the ecosystem and the native communities around it. The proposed Pebble Mine would have a devastating long-term impact. . . . We are proud to sign the Bristol Bay Protection Pledge and urge other U.S. jewelers to do so."

The risk that this campaign poses for the prospect of developing a mine is that the noise from critics is so loud that the ears of the public may have been deafened and left incapable or unwilling to at least listen to the plan that the Pebble Partnership at one stage will present. Any plan, which considering the numerous known obstacles ahead, must comprehensively address and mitigate the numerous environmental concerns. Failure to do so would jeopardize any chance the Pebble Partnership has of obtaining the numerous permits or successfully defending the litigation that is bound to occur from activist groups appealing the issuance of such permits. Undoubtedly the Pebble Partnership is taking into consideration these factors as part of their extensive study and review and may conclude that developing the Pebble Deposit is not worth the risk either from a financial perspective and/or environmental impact perspective.In such an event, no Pebble Deposit would be developed.

In sum, investors considering building a position in one of the companies involved in the Pebble Partnership should not have their decision entirely based upon critic's misconceptions about the project. However, some weight must be given to the level of public opposition influencing the likely outcome of the project being developed. A prudent investor would acknowledge that the significant return on investment investors can expect should the Pebble deposit be developed needs to be weighed against the likelihood of the path to development being long and litigious.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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