Taseko Starts Public Hearings for New Prosperity

Base Metals Investing

On July 22 2013, Taseko Mines kicked-off a 30-day public hearing relating to the environmental assessment of the New Prosperity copper-gold mine. Copper Investing News recently spoke with Vice President Corporate Affairs, Brian Battison about the changes that the company has made to New Prosperity and what Taseko hopes to learn from the hearings.

On July 22, Taseko Mines (TSX:TKO, NYSEMKT:TGB) kicked-off a 30-day public hearing relating to the environmental assessment of the New Prosperity copper-gold mine. Many investors are familiar with the story of New Prosperity, which is once again facing review by the Government of Canada following a rejection in 2010.

Copper Investing News (CIN) recently spoke with Brian Battison (BB), Taseko’s Vice President Corporate Affairs, about the changes that the company has made to New Prosperity and what Taseko hopes to learn from the hearings.

CIN: You mention in your press release that New Prosperity is a rare opportunity. Can you elaborate on that? What opportunity does the project present for the province?

BB: This is a rare opportunity in prosperity; it’s a billion dollar investment in British Columbia. It’s going to generate tremendous value and benefit for a whole wide range of people, both financially and nationally.

As the result of New Prosperity being constructed and operated, consumer spending in the province will increase by 9 billion dollars. Residential investment in the province will increase by $786 million, all residential construction investment will increase by over a billion. Machinery and equipment — that’s by others — will increase by $1.3 billion. So that’s the power of mining it in an economic contribution context.

When I say that’s a rare opportunity that’s what I mean. First of all, finding a deposit that’s sufficient to support a large mine is a rare undertaking in itself. But when you’re able to build a project like this, and operate it, that kind of contribution that it makes I think is of rare significance.

CIN: And how about support for the project? Do you have that from the surrounding communities?

BB: There is a significant amount of support for the project. The Williams Lake city council, 100 Mile House, Cornell City Council, the regional district, all have passed resolutions in support of the project and all are hoping that this project will be a part of the future of the region. They’re all going to speak in these hearings in favor of the project.

The local MLA, Donna Barnett, she is a Liberal who ran in 2009. She was just recently re-elected by almost 3,000 votes. She ran almost exclusively on this project as part of the future at Cariboo. And now there’s a real expression of the public’s support for her and for her position on the project. So we know that there’s a lot of people that are hoping that this is going to be successful.

What this project is, is a billion-dollar investment in just the two-year construction period. Then there’s the operating costs, $200 million a year of spending, roughly. The project will generate a lot from a government revenue perspective; it will generate nearly $10 billion worth of additional tax revenues: $4.3 billion for the federal government, and $5.5 billion for the provincial government.

CIN: Oh, wow. Now, it’s well known that New Prosperity received approval from the BC Government. However, it was rejected at the federal level. Why were these two governing bodies of different opinions on the project?

BB: That’s a good question. Both environmental assessments were independent of each other, but both were conducted under the exact same terms of reference and both examined the exact same material — the environmental impact statement that we put forward. They came largely to the same conclusions. 22 out of 24 of the environmental issues were examined, and 22 of those had no significant adverse environmental effects. So says the province and the departments of the federal governments.

Both environmental assessments concluded there was a significant adverse environmental effect: the loss of Fish Lake.

The province made a decision, a justification decision it’s called. They had to gauge if the loss of Fish Lake was justified in the circumstance. And they concluded that it was, because the fish compensation plan that we put forward, the construction of the new lake, in combination with the tremendous value that would be generated by people, or for people, those two things justified the approval. The provincial environmental assessment examines environmental effects. It also governs social and economic effects.

CIN: And at the federal level?

BB: The federal environmental assessment does not do those things. The federal environmental assessment just examines environmental effects. It does not examine economic or social impacts.

What happens in the federal case is, once the environmental assessment concludes, the results of that environmental assessment goes to the Government of Canada. It actually goes to the Minister of Environment, and if there is a finding of a significant adverse effect, of which there was in this case, it goes to the Cabinet for a justification decision.

And then the Cabinet is able, if they choose, to gather any information with respect to other interests for Canada — the social and economic components. And they made a determination that it was not justified in the circumstances. They would not issue the necessary approval to seek the required authorizations for the project to proceed.

Why did they do that? I don’t know. What could draw them to a different conclusion in terms of the justification of the project? Who knows, that’s a Cabinet decision, and there’s Cabinet confidentiality surrounding that decision right? Or information that led to that decision.

CIN: Are you saying that the federal government ignores the social and economic impact components?

BB: It’s not that they ignore them, it just comes at a different stage. It comes after the environmental assessment. The environmental assessment in the federal world can collect information and you’d see that in the panel mandate now. The federal government is able to receive and collect information on the social and economic impacts of the project. The report won’t have that information, but they don’t make recommendations with respect to that information.

It’s just different than the provincial environmental assessment. And the province has the lion’s share of responsibility for mine development.

CIN: So the different governing bodies have different responsibilities so to speak.

BB: Yes, and they should. The three legs of sustainability are environment, social and economic and I think they all go hand in hand. In the environmental assessment process —I just want to make this distinction— under federal legislation it examines only environment.

Resources are provincial assets granted by the Constitution of Canada. It’s their responsibility to manage those resources. The province has the responsibility for wildlife, for industrial environment, for worker health and safety, for engineering and permitting of mines, for the reclamation and closure of mines. All of those are provincial responsibilities. The only reason the federal government is involved is because there are, what are called, federal triggers which trigger their involvement.

One is navigable waters, it’s a federal jurisdiction. Because the deposit would interrupt a small stream, it’s an intermittent stream but nevertheless a stream. That’s considered, or could be considered, navigable waters (defined as waters in which you are able to navigate a canoe).

That’s where a federal environmental assessment is required because of navigation. Furthermore, we will need an explosives license, which is the same kind of license which we have at the Gibraltar mine, and all mines have, but it exposes a federal responsibility. That’s another trigger. And finally, the fishery is a trigger as well. Fishery is described as a commercial, recreational or aboriginal fishery.

CIN: What in that case was Taseko’s original plan for Fish Lake?

BB: So our original plan was to drain Fish Lake because that would then make a flat, because the lake is not very deep, average depth is 12 feet deep. Then on that shallow spot area, put the overburden because the pit is right beside it and place the overburden there to store it and to put the waste rocks there as well.

CIN: And is this common practice among mining companies to do this?

BB: Yeah, the very best way to manage potentially asset generating rock is to deny the rock oxygen. If you bury it, it becomes inert and it’s just rock. There’s no potential for any kind of naturally occurring chemical reaction where you have high sulfide or copper sulfide rock with water and oxygen. For instance, rain and oxygen and the naturally occurring metals in the rock can lower the pH of water. The way to eliminate that is put it under water. And that’s what we’re doing with the tailings facility. So with that amount of rock that’s considered to be potentially acid generating we just keep it under water.

CIN: Now that New Prosperity is up for review again, what has Taseko done differently in this second proposal? How are you addressing the environmental concerns of Fish Lake?

BB: The important point here is that when the federal government made its decision, they said they are not opposed to the mining of the Prosperity deposit. And if Taseko could address the concerns identified in the federal review that they would reconsider it, they would put it through another environmental assessment. And they said this current environmental assessment will examine only those aspects of the project that have changed.

Here’s what has changed:

We are moving a tailings facility 2 kilometers upstream of Fish Lake. In doing that we are adding an additional $300 million to the cost of the project. But by moving the tailings facility there is ample distance between the lake and the tailings pond, you get a sufficient fish habitat and spawning area to support the rainbow trout population in the lake.

That’s a $300 million dollar additional commitment to environmental responsibility. It can also be characterized as a $300 million accommodation of First Nation interests, and that’s an important point because the greatest point of opposition was the impact the project would have on Fish Lake.

By saving Fish Lake and the archaeology that exists in and around the lake and its shores, and the island on the lake —which was considered important to the First Nations— we are accommodating their interests.

CIN: Why are the public hearings important to Taseko? What do you aim to learn from them?

BB: Well any time you get to hear from the public —and we hear from the public a lot — it helps us to address ideas, views, concerns that can come up.

For example, First Nations were concerned about the increase in traffic that the mine would have on the area west of Williams Lake and so we decided that we could and should have a camp up there and that people would commute but not in their cars. We would provide busing for our employees to go back and forth. That would reduce the amount of traffic on the roads and that would be a reflection of how we took a public concern and addressed it in a positive or favorable way.

In a case like New Prosperity where people wanted to be able to fish on Fish Lake during the mine operations, we addressed that. Now they’re able to do that. We have shifted our plans in a way that would allow the public access to that lake if they want to come out and fish at that lake, in particular the First Nations.

The biggest thing about getting input is you describe to them the project and describe to them how you’re thinking in terms of how to build it and operate it and they get information from that and knowledge from that and always from knowledge creates a better understanding of a project and a sort of a care and attention to details. And people go, oh I didn’t know that. Well that’s neat.

CIN: If the company has addressed the issues set forth by the federal government, there’s a good chance in that case that the mine proposal will be approved, correct?

BB: Oh, I strongly believe it. They said if you can address the federal issues identified in the previous panel process, we will review. Well we have addressed them because the concern was Fish Lake. It was a significant adverse environmental effect and could not be justified in the circumstances. Well, Fish Lake is now safe, and that’s an enormous accommodation. That’s a $300 million commitment burden added to this project.

We’re content to do that, and we’re able to do that because of the higher prices of gold and copper. This option was never available to us during the first environmental assessment because the economics did not support the extra $300 million. Now it does, so thankfully, I think for everybody, the project can be built. It can be built, it can be operated, and Fish Lake can be reserved. And you can have both.

CIN: What would be the next step for Taseko/New Prosperity in this case?

BB: We’ll have 30 days of public hearings. We’ve had one of those days, second one is today. Once the 30 days are over then the panel has 70 days to write the report and submit the report to the federal Ministry of Environment. Then the federal ministry and the government of Canada has 120 days in which to make a decision. So those are all maximums, it doesn’t have to take that long, but it can take that long.

CIN: Now just to understand the flip side, in a worst case scenario, the proposal will be rejected. What would happen then? Would Taseko re-evaluate and try again?

BB: What would happen then? This project is just too important to Canada and the province, and certainly the region here for it to not be used one day. We’re hoping that day will be soon but it’s just not going to remain idle.

CIN: How does New Prosperity factor into the Taseko’s overall strategy?

BB: Our aim is to grow our company. Our strategy at the moment is to grow our company through mine development, in British Columbia. I would say our next strategic goal would be to grow our company here in Canada. So we have the New Prosperity project, we have a project called Aley which is up here Williston Lake, north of Mackenzie. That’s a niobium deposit that we’re anticipating to order an environmental assessment soon. We have a 3 million ounce of gold deposit on Haida Gwaii. We have other investments in British Columbia. Not as significant in terms of majority, but we have other potential options here in British Columbia.

So our intention is to grow through construction of new assets and to grow through the acquisition of assets. But New Prosperity is one of the key focuses of our company at the moment and will remain such right through the decision phase of this process.

CIN: Now, my last questions is on the economics of New Prosperity given the lower price of copper? Does it still look good?

BB: The lower copper price has actually held up quite well. It’s over $3.00. So copper prices relative to other metals, other commodities, have held up quite well. The new, very conservative numbers that we use on this project are $2.25 (a pound) for copper and $900 (an ounce) for gold. So we’re well under the current long term price of those commodities and a long ways under the spot price. So it’s still a very robust, economically speaking, project.

That’s why in the last 5 to 6 years, we’ve invested $700 million in Gibraltar. That was a facility we bought in 1999, it was closed at the time. The plan by the previous company was to bulldoze it, it was finished. We bought it, kept it on care and maintenance 5 years and in 2004 reopened it with 238 employees. Since then we’ve invested $700 million and now have 700 people working there. We’ve reduced the cost profile significantly for that facility, it has brand new state of the art equipment. And that mine we will be able to weather, we expect, the low copper cycles that come from time to time. We don’t feel we’ll have to close that mine as was the case in the past where it was kind of a swing producer.

CIN: Well that’s great. Thank you very much for taking the time to talk about the mine with us. We look forward to hearing more from Taseko as the hearings progress.

BB: Thank you.

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