Imperial Metals Mount Polley disaster could cost $500 million, but bonds only a fraction of this amount
Analysts say cleanup costs for Imperial Metals' Mount Polley tailings disaster could cost anywhere from $50 million to $500 million, but the security bonds available today to help cover that are now a fraction of that.
Documents from the Ministry of Energy and Mines on July 25, 2013 suggest that Mount Polley Mining Corporation (owned by Imperial Metals) was expected to pay security bonds of $38 million by 2023, and that it had deposited $14.5 million as of March 2014.
The Ministry said clean up is expected to be paid for by the company. But when the Vancouver Observer asked what would happen in the event that Imperial Metals went bankrupt, a media representative from the Ministry wrote in an email:
"The Ministry of Energy and Mines holds $14.5 million in security bonding for the Mount Polley mine in the event that the company defaults on its responsibilities."
The province’s Environmental Management Act contains spill response provisions built on the Polluter Pay Principle, meaning that those responsible for spills are also the ones responsible for cleaning them up. It's a policy meant to protect taxpayers from having to pay for incidents such as the Mount Polley tailings spill.
Screenshot from Ministry of Mines document
But in the event that Imperial Metals is unable to afford the cleanup -- the company's shares are now trading at $9.07, down almost 50 per cent from its value before the disaster -- who would ultimately be left to pay the bills? Mount Polley, according to the company's financial reports, was the most productive mine and the biggest source of cash flow for the company. The Mount Polley mine is now closed for the foreseeable future.
This scenario is less likely to happen in the case of Mount Polley, as Imperial Metals is now trying to raise $100 million in convertible debentures to help pay for the damage -- and for its newest mine. N. Murray Edwards, the oil and gas billionaire who owns 36 per cent of Imperial Metals' shares, has already committed to buy $40 million of that through his company, Edco Capital.
But critics have warned in the past that the amount of funds available through security bonds is far less than the mining industry's liabilities. A report in 2001 by West Coast Environmental Law warned that the liabilities of BC mines far outweighed the total amount available in reclamation bonds. The report estimated BC mine reclamation liabilities at the time to be around $400 million, but the total available in bonds was less than half that amount, at just $172 million.
Imperial Metals has been reached for comment, but did not respond prior to publication.