Tag Archives: Polymet Mining

Mozambique, Michigan, and the SEC Complaint Against Rio Tinto

Chinde_Rusting_boats

Rusting boats at the port of Chinde, where Rio Tinto proposed to barge Riversdale coal via the Zambezi River.

Yesterday, the Securities and Exchange Commission brought a complaint in New York City against Rio Tinto, charging Tom Albanese, the former CEO of Rio Tinto, and Guy Elliott, his Chief Financial Officer, with fraud. According to the complaint, Albanese and Elliott actively misled the Rio Tinto board, audit committee, auditors, and the investing public about their acquisition of the Riversdale coal business in Mozambique in 2011.

The fraud that Albanese and Elliott are accused of perpetrating looks awfully familiar to those who have followed the development of Eagle Mine and the controversy over County Road 595. Having noticed the parallel between Mozambique and Michigan back in 2013, when Tom Albanese was forced to step down, I now have to wonder whether prosecutors will take the company’s representations around the Eagle Mine into account when building their case.

In Mozambique, they told investors, coal would be transported by barge to the Indian Ocean port of Chinde. Although their technical advisors “highlighted the ‘showstopping’ risks” associated with the barging proposals before the acquisition, Albanese and Elliott blundered recklessly ahead. Then eight months later, the Mozambique government denied Rio Tinto a permit to transport the coal by barge down the Zambezi River. Suddenly, the coal business they had acquired for $3.7 billion appeared to be worth a negative $680 million. According to the SEC’s complaint, Albanese and Elliott “concealed and glossed over” the fact that they had no viable haul route for the 30 million tons per year they projected in their business plans, and misled investors as they raised $5.5 billion in US debt offerings.

In that very same period, Rio Tinto was also promoting Eagle Mine to investors and promising economic renewal in the Upper Peninsula, though they had not yet secured a transportation route — a haul route — for Eagle’s sulfide ore. In Michigan, it appears, the company took the same cavalier attitude toward planning and risk that the SEC complaint says got them into trouble in Mozambique.

Way back in 2005, John Cherry, who was then a Kennecott Minerals project manager and is now President and CEO of the Polymet project in Minnesota, characterized Eagle as a “direct ship” operation, “meaning that the rock would not be processed on site, thereby avoiding the storage of highly toxic debris left over, called tailings.” Presumably this is what Michigan DEQ’s Robert McCann had in mind in 2007, when he told The Blade that Kennecott’s permit “would require them to keep the ores underground, put them in covered rail cars, and ship them to Ontario for processing”; the Marquette Monthly told roughly the same story that year, only now there were trucks in the picture: “ore would be transported by truck and rail to a processing site in Ontario.” This seems to have been nothing more than a cover story.

Everything changed in 2008, when Rio Tinto bought the Humboldt Mill. Those permit requirements the DEQ’s McCann touted back in 2005? They were quickly abandoned. Covered rail cars come into the picture only after the ore is crushed, ground into a slurry, floated and rendered into concentrate at Humboldt Mill. A glossy 2010 company publication promoting Eagle Mine includes not a single word about how Rio Tinto and Kennecott plan to travel the 30 kilometers from mine to mill: “Happily, processing of the nickel and copper can take place in Humboldt, around 30 kilometres [sic] away, at a previously abandoned iron ore plant.” By 2011, the company had “considered more than a half dozen transportation routes” from mine to mill, according to a Marquette Mining Journal article by John Pepin published in February of that year, but they still had no viable haul route.

A good prosecutor with a rigorous and thorough discovery process would probably be able to determine whether the evasions and misrepresentations perpetuated on the public over the Eagle Mine haul route also amounted to fraud, or were part of a larger pattern of deliberately misleading statements. It’s clear Rio Tinto never came clean — and perhaps never really had a firm plan — on mine to mill transport at Eagle before it sold the works to Lundin Mining in June of 2013 and decamped. As long as regulators in Michigan continued to be more accommodating than those in Mozambique, the company seems to have been content to let the people of Marquette County fight out the haul route issue among themselves.

Miner’s Almanac

It’s difficult for me to read the grim news of the chemical spill in West Virginia without thinking immediately of my friends in Minnesota. “A 23 year gap in oversight” is now listed among the chief causes of the spill of 4-methylcyclohexane methanol into the Elk River. How, in the wake of this disaster, or in light of any of the other industrial spills and explosions and disasters that seem to be in the news nearly every week, can anyone in Minnesota still seriously entertain the idea that Polymet Mining will maintain water treatment facilities for up to 500 years at its open-pit sulfide mine near Hoyt Lakes?

If Freedom Industries, the Department of Homeland Security and other government entities can’t keep track of one storage tank in West Virginia for less than a quarter century, how are we going to keep track of a toxic site on Lake Superior for five centuries? The whole thing seems so absurd, like a really bad joke, told with a sinister wink and a nod.

As I tried to suggest in a previous post, the debate over Polymet’s 500 year water treatment model projects responsibilities so far out into the future as to render them utterly meaningless, making a farce out of the very idea of oversight or even what in the ugly parlance of the regulator is called “environmental impact.”

But just a couple of weeks ago, in a roundtable on Polymet aired on Twin Cities Public Television’s Almanac program, host Cathy Wurzer dutifully took up her part in the farce, fidgeting with her fancy glasses to indicate that she was being serious and inquiring of her guests whether this “has this been done, this kind of treatment, over this amount of time, has it been done successfully elsewhere?” Really? I half expected someone to remind Wurzer that reverse-osmosis technology wasn’t exactly around in the year 1514. Instead, Kathryn Hoffman, an attorney with the Minnesota Center for Environmental Advocacy, politely answered: “we certainly have no models or examples of successful mitigation over that period of time,” and to her credit she kept a straight face and even managed to cite “over 42 exceedances” of water quality standards at Eagle Mine in Michigan, where water is treated through reverse osmosis – and the mine has not even yet gone into production.

Only later in the program did Becky Rom, of the organization Sustainable Ely, suggest that “it’s not rational to believe” that the facilities Polymet builds today will last “for hundreds of years.” That’s exactly right: it’s completely irrational. In fact, it’s a ridiculous fantasy – or a pathological delusion — to think that Polymet itself will be around fifty or one-hundred or five-hundred years from now, and “always in compliance” as Frank Ongaro, Executive Director of Mining Minnesota declared on the same program.

But that’s only the most egregious falsehood that Polymet and pro-mining groups are asking us to credit.

Pro-mining guests on Almanac were also trying to foist on the public the idea that the mining of copper and nickel at the Polymet site will be no different — – in terms of its potential effects on the land and water — from the mining that has been historically done on Minnesota’s Iron Range. That is patently untrue, but it tugs at the heartstrings and appeals to the nostalgia and pride that the immigrant mining story still inspires: that’s why Polymet has already secured a place for itself in Minnesota mining history on its website, and it’s also why Carly Mellin, who hails from the Iron Range and serves as Assistant Majority Leader of the Minnesota House of Representatives, played the heritage card at the end of the program: “we’ve been mining 132 years on the iron range and we still have an absolutely beautiful region of the state,” she said, in what sounded like a clearly rehearsed closing remark, “and I plan to continue for it to be beautiful after copper-nickel mining.” Lucky for her there was no time for people to press her on what exactly those plans are and how she plans to realize them.

For his part, Frank Ongaro kicked off the entire debate with a misleading statement that cast Polymet’s mining project as a matter of self-sufficiency – a project done in the national interest:

We’re sitting in Minnesota on one of the largest deposits of copper, nickel, platinum metals in the world – metals we’re import-dependent on for everything we use, every day in our life.

Carly Mellin reiterated the point a little while later. There may be some traces here of an earlier argument that proponents of HR 761 tried to advance – claiming that mining near the Boundary Waters was “necessary for U.S. strategic interests.” But here Ongaro is really making a cheaper appeal, to jingoism and state pride, and at first blush, he makes a certain amount of sense. Why import what we have in abundance here? If we have metals or other resources we need, why not use them instead of relying on imported stuff?

The copper and nickel taken out of the Minnesota ground will not stay in Minnesota and be smelted and worked as in the days of yore by hardworking Minnesota craftsmen into sturdy tools and smart technologies that twenty-first Minnesotans can use. Mining copper and nickel on the Iron Range may, in fact, have the unintended effect of exposing the region in new ways to the turbulence of the global commodities marketplace.

Rio Tinto’s play for Michigan copper was never about Michigan; it was part of a bet on continued Chinese growth and urbanization. The price of copper – U.S. copper, Chilean copper, Mongolian copper – rises and falls these days on Chinese demand. Copper and nickel mined on the Iron Range will not make us more self-sufficient or serve the strategic interests of the United States. At best, those minerals may be warehoused here for a while, in New Orleans and in other ports; but they are destined for the international market.

This is the cat Frank Ongaro was desperately trying to keep in the bag when Becky Rom called Polymet “a shell company” for Glencore Xstrata, the Swiss global commodities giant. (With about 35 percent of all shares. Glencore is Polymet’s largest investor.)

Rom: I think you have to understand that Polymet isn’t going to be around at year 20. This is a shell company that’s shielding its major investor —
Ongaro (clapping his hands): That’s not true!
Rom: Glencore, that’s known for corruption, and environmental and labor violations —
Ongaro: Every company that operates in the state of Minnesota –
Rom: and at the end…at the end —
Ongaro: –will have to follow state laws, period.
Rom: –at the end of twenty years when they have done extracting the metals and earning their revenue, all they will have as an asset is a polluted mine site. So…we the taxpayer…will carry…the burden for what is going to be in fact hundreds of years.

Eventually, of course, the truth will out. But with precious little time left in the 90-day public comment period that began on December 14th, it needs to come out now.

Time Out of Mind

I leave tomorrow for Lake Superior. On Thursday the 24th, Ken and I are going to show our film at Michigan Tech, where there’s a conference called Writing Across the Peninsula, and then, on Saturday the 26th, at the DeVos Art Museum in Marquette. I’m going up a little early to do some exploring, traveling north along the western shore of the lake to Palisade Head and then inland (west), through Finland and into the area around Ely, Babbitt and Hoyt Lakes, Minnesota. That’s where Polymet Mining has proposed a huge open pit sulfide mine. It will be my first visit and maybe one of the few chances I get to see the area before the mining begins. After that, it’s never going to be the same. Or at least not in my lifetime — or in the lifetime of anyone alive today.

Polymet recently disclosed in a Preliminary Supplemental Draft Environmental Impact Statement that water runoff from its mine will have to be treated for the next five hundred years — “a minimum of 500 years,” just to meet water quality regulations. The proposal in its current form clearly violates Minnesota Rule 6132.3200, which requires that “the mining area” be “maintenance free” upon closure; but Polymet and its legions of apologists have already found some wiggle room here, arguing that state law allows for “perpetual treatment” as long as enough money is set aside and as long as the company can prove that it’s meeting federal and state water standards. For Polymet, it seems, this is just the start of a negotiation.

The Mining Examiner quotes Frank Ongaro, Executive Director of Mining Minnesota: “There’s no doubt it can be done, that it’s allowed. The concept is sound; the details have to be worked out by the experts.” I honestly don’t know how anyone can say things like this with a straight face. Five-hundred years: the experts just need to work things out. No doubt about it.

When I first heard about the five-hundred year disclosure, I tried to think of a place where mining was done five-hundred years ago: the best I came up with was Cerro Rico in Potosi, Bolivia, where conquistadores set up silver-mining operations in the sixteenth-century. Potosi is now considered one of the most polluted places on earth. Of course, the Spanish crown did not set out the sorts of guarantees that Polymet is willing to set out; but apparently the mining company shares the crown’s illusion that its empire will last forever. Or at least they would like us to think so: they would like us to set aside our doubts and entertain the fantastic idea that they will provide water-treatment facilities for the maintenance of their copper mine for the next five-hundred years.

Mind you, the country’s only been in existence for 237 years, and Minnesota was only admitted to the union in 1858 — 155 years ago. The EPA only started operations in 1970; its workers only just got back on the job yesterday, after being furloughed during the shutdown. Why are we being asked to believe in the perpetuity or even the resilience of the EPA, the Minnesota DNR, or any government institution or form of government? Who can say what’s going to happen fifty years from now, let alone five hundred? Will there be a Minnesota DNR or an EPA in 2063? Will there be a Polymet? Minnesota? How about 2100? 2413? Insofar as history is about holding people to account, this is nothing more than historical fantasy: there’s no guarantee or even promise of accountability when you are talking about five centuries. As Steve Timmer would have it, nobody is going to be around to keep Polymet’s grave clean.

Time out of mind is the phrase this whole proposal conjures for me. The expression comes from English law. “Time out of mind” or “time immemorial” is a time before anyone can remember: a property or holding, a way of passage or a benefit has been enjoyed so long that those who claim it no longer have to prove ownership or their right to it; nobody can remember a time when it wasn’t so. In this case we are being asked to project that far into the future — way past the horizon of what we ordinarily consider the future, way beyond the time anyone can foresee.

Projecting that far into the future, time out of mind, is also a distorting lens. It’s easy when looking that far ahead to overlook what we know will really happen to the area in the near term, just in the course of constructing and operating an open-pit sulfide mine. Mine pollution that lasts for five-hundred years is a huge and terrifying prospect, no doubt, but that dread prospect might also have the weird effect of eclipsing (or normalizing) the more immediate environmental and social consequences of mining and the industrialization mining brings. Water Legacy estimates that the Polymet project will take 6,600 acres of forests out of public ownership, destroy or impair at least 1,500 acres of wetlands and result in 168,000,000 tons of permanent waste rock heaps and 228,000,000 tons of tailings waste. Add to this the haul roads, the mill operations, air and noise pollution, the effects of clear-cutting and deforestation, shifts in population, economic distortion, and so on.

It’s important to pull back, change the lens, and see clearly what’s going to happen, what’s already happening, to the waters and the wilderness areas, the Lake and all life around it, within our lifetime, and what effect our actions now will have for generations to come.

Labor Day, 2013: Will Big Mining Do Better This Time Around?

On Labor Day, I’ll be in New York City, so I won’t be able to see the television broadcast premiere of 1913 Massacre on Twin Cities Public Television. How many will tune in? How will the broadcast cut of the film look and play on TV? Above all, I wonder, what connections will the Labor Day TV audience draw between 1913 and 2013? My comments here run this holiday weekend on MinnPost.

Many people Ken and I met in mining towns around Lake Superior while filming 1913 Massacre urged us to see the positive contributions the mining companies had made to the region. Some insisted that the Woody Guthrie song that had introduced me to the story of the Italian Hall disaster and brought me to Calumet and the Upper Peninsula in the first place had gotten it all wrong. The greedy bosses, company thugs and violent social strife that Woody sang about in “1913 Massacre” did not fit the story they knew. “We all got along just fine,” they protested.

When the mines were running, the towns thrived. The big department stores downtown were open. The churches (and the bars) were packed to capacity. Everybody worked hard and the work was sometimes dangerous, but on Saturday nights, the streets were jammed and the atmosphere festive. The company put a roof over your head then sold you the house at terms you could manage. The copper bosses built libraries, sidewalks and schools, gave land grants for churches, and even furnished luxuries like bathhouses and public swimming pools. The men who ran the mines weren’t just robber barons from Boston; they were public benefactors.

But there were limits to their benevolence. The mining captains regarded the immigrant workers – Finns, Slavs, Italians — as charges placed in their paternal care. They knew what was best for these new arrivals. They discouraged organizing. Faced with strikes on the Iron Range in 1907 or on the Keweenaw in 1913, they adamantly refused to negotiate, brought in scabs to do the work and Waddell and Pinkerton men to deal (often brutally) with the strikers. Even after the tragic events of 1913, Calumet and Hecla Mining Company would not recognize the union for decades.

The Keweenaw miners were on strike again in 1968 when C & H made a calculated business decision to pull out. No more jobs, pensions cut short; the good times were over. They left the waters poisoned and the landscape littered with industrial wreckage and toxic mine tailings.

The companies driving the new mining boom around Lake Superior these days promise to do better. They are dedicated to corporate social responsibility. They practice “sustainable” mining, tout their environmental stewardship and declare their respect for human rights. They have community outreach programs and promise to make substantial, long-term investments in the economic development of the regions where they come to mine. They work closely – some would say too closely – with regulators to create environmental impact statements and plan for responsible closure of their mines. They are eager to gain social license.

For the most part, these big multinationals operate with the support of organized labor and politicians who want to create jobs — and what politician doesn’t want to do that? But the high-paying, highly-technical mining jobs are unlikely to go to local residents; and the new mining is likely to have detrimental effects on local economies, as the economist Thomas M. Power has shown in studies of Michigan and Minnesota. Mining may provide some short-term jobs, but it can also drive away creative professionals and knowledge workers, destroy entrepreneurial culture, diminish quality of life and damage long-term economic vitality.

So promises of good times and plentiful jobs need to be treated with circumspection. Polymet has repeatedly scaled back its job predictions for its huge, open-pit sulfide mining project near Hoyt Lakes, Minnesota, and the company’s own figures suggest that only 90 of the promised 360 jobs – just 25% — will go to local communities. Local is, moreover, a relative term. Mine workers today tend not to live in mining towns; they will commute an hour or more to work. And hiring will always be subject to swings in metals prices, which are now dependent on two new factors: continued Chinese growth (and urbanization) and the entry of big financial firms into metals warehousing and trading.

There are limits to big mining’s benevolence as well. The last time I flew into Marquette airport, a glossy Rio Tinto poster advertised the company’s commitment to “build, operate and close Eagle Mine responsibly.” Nobody had bothered to take the sign down after Rio Tinto had done an about-face and sold Eagle, a few months earlier, to Vancouver-based Lundin Mining for dimes on the dollar. Rio Tinto’s commitments lasted only until it was time to flip their property. Overnight, Eagle Mine had become a “non-core asset” and the surrounding community none of Rio Tinto’s responsibility.

In Wisconsin, Gogebic Taconite has drawn the line between company and community much more starkly, with help from a paramilitary firm called Bulletproof Securities. Black-masked guards, dressed in camouflage and armed with semi-automatic weapons, protect the mining company’s property from trespassers and environmental protesters. Imagine what they might do in the event of a strike.

gogebicguard

Bulletproof Securities patrols Gogebic Taconite’s property in northern Wisconsin.