New Report on AJAX Mine: Hundreds of Millions of Unaccounted Costs, Complaint to B.C. Securities Commission Recommended

Kamloops Area Preservation Association – MiningWatch Canada

(Kamloops/Ottawa) A new report by MiningWatch Canada concludes that the Ajax open pit mine project near Kamloops, BC, “does not make economic sense” and “represents an unconscionable risk to investors, governments and the public.” The watchdog organization recommends that the mine should not be permitted and that an investigation be undertaken by the B.C. Securities Commission for inadequate disclosure of risks and costs.

“After a detailed review of available information, it is our considered opinion that Ajax’s Feasibility Study and Environmental Impact Statement severely underestimate costs and risks of production, use overoptimistic copper prices, and do not cover a number of externalized community and environmental costs,” says Joan Kuyek, cofounder of MiningWatch Canada and principal author of the 30-page analysis.

The report describes the main risks in regards to the financial viability of the mine project:

  • overestimation of long-term prices for copper (15 to 30% above experts’ predictions);
  • serious underestimation of costs by at least $300 million, including as much as $180 million in General and Administrative costs ($10 million/year), $72 million in compensation for the City of Kamloops and First Nations (assuming $2 million/year for each local governments), $63 million in insurance costs ($3.5 million/year), $53 million for environmental reclamation costs, over $10 million for long-term monitoring, and a myriad of other costs that are externalized to Kamloops and B.C. taxpayers;
  • no guaranteed access to land as First Nations have not consented and have recently asserted title;
  • no consideration of costs related to potential class action suit or other litigation if the mine opens (up to hundreds of millions);
  • failure to disclose an increase of KGHM’s discount rate from 8 to 9% for impairment of charges in 2016 (over $60 million impact);
  • insufficient insurance against the consequences of potentially catastrophic spill or accidents;

According to Kuyek, “If it manages to go into production, we believe the owners will have real difficulty meeting their commitments, that the mine will be only intermittently operating and will be at risk of early closure, leaving the public and taxpayers to clean up the mess, and shareholders potentially liable for millions in damages.”

Ugo Lapointe, MiningWatch’s Canada Program Coordinator, comments, “The Ajax mine is not economic in the short and long-term, unless copper prices climb to, and are sustained for a long period, to historically unprecedented levels, which is highly unlikely and unrealistic.”

“Even with higher copper prices, it is doubtful this mine will ever be profitable enough to be able to cover all of the costly social, environmental, and health protective measures that would be necessary due to its close proximity to a city of 90 000 people and to fragile water ecosystems,” adds Lapointe.

The report also highlights a number of social and environmental costs externalized to Kamloops and BC taxpayers and not monetized in Ajax’s studies. These include as much as $524 million in power subsidy ($30 million/year), $216 million or more for air pollution (over $12 million/year), $155 million in loss of property value (using a 5% decrease), $135 million in loss of tourism (using a 5% decrease), and $23 million in municipal taxes (low estimate).

John Schleiermacher from the Kamloops Area Preservation Association (KAPA) concludes: "The poor financial viability of Ajax and the inability of the mine to pay compensation is a real concern to the citizens of Kamloops who are faced with significant health and environmental costs, infrastructure costs for the mine, as well as a likely drop in property value, municipal taxes, and tourism revenue."

The report was commissioned by the Kamloops Area Preservation Association (KAPA) and submitted on 11 April, 2016, to both the British Columbia Environmental Assessment Office (BCEAO) and the Canadian Environmental Assessment Agency (CEAA) as part of the review of KGHM's application for an environmental certificate.

About the Mine

The Ajax mine is co-owned by KGHM (80%), a Polish multinational copper producer with 83 subsidiaries, and Abacus Mining and Exploration Corporation (20%), a Canadian exploration company. The Ajax mine is a large, low-grade copper mine (0.30% copper, 0.19 g/t gold, 0.40 g/t silver) with a high waste-to-ore ratio, which would generate over 440 million tons of tailings and over 1 billion tons of waste rock that would be piled up to 270m high. The mine would have an 18 year mine life, with a plant designed to treat 65,000 tons of ore rocks per day. Concentrates would be trucked on B.C. roads and highways to the Port of Vancouver. The open pit would be 2.7 km long by 1.3 km wide and as much as 550 metres deep. The mine design would encroach into and destroy part of Jacko Lake, known as Pípsell and sacred to the First Nations. The entire mine site abuts the boundaries of the City of Kamloops and is fiercely opposed by a significant proportion of Kamloops residents.

See also “Six Reasons to be Concerned About the AJAX Open Pit Mine” produced by MiningWatch Canada.

For more information:

  • Joan Kuyek, mining analyst and cofounder of MiningWatch Canada, 613-795-5710
  • Ugo Lapointe, Canada Program Coordinator at MiningWatch Canada, 514-708-0134
  • John Schleiermacher, Kamloops Area Preservation Association, 250-374-7431