CONTACT: Chris Zimmer, Rivers Without Borders, (907) 586-2166, [email protected]

Uncertain ore deposit, low rate of return, high metals price predictions, project very sensitive to changes, lack of markets for the metals, First Nation opposed

(JUNEAU) Despite Chieftain Metals' claims of “robust” results from a new feasibility study, the Tulsequah Chief mine proposal continues to face significant risks, uncertainties, delays and opposition. A Technical Report summarizing the results of the feasibility study, released on January 25, notes a number of major uncertainties, risks and assumptions.

“I can’t see how Chieftain can conclude this project is viable given the low internal rate of return, the lack of proven mineral reserves, uncertainties about how much metal can be recovered from the ore, a lack of smelters that can process concentrates containing significant impurities, and the project’s sensitivity to changes in prices and costs,” said Chris Zimmer of Rivers Without Borders. “Most mine proposals at this stage have at least some proven reserves and higher return rates. Given the optimistic nature of the feasibility study in general, this is a recipe for another bankruptcy.”

The Technical Report is based on several optimistic predictions, including high long-term prices for metals and a timely agreement with the Taku River Tlingit First Nation. It also leaves out some key information.

“Given the importance of community support and social license in B.C., it is odd that the Technical Report makes no mention of the formal opposition to the project the Taku River Tlingit First Nation announced in November,” said Zimmer.

There has not been a feasibility study for the mine proposal with road access since 1995 that indicated the Tulsequah Chief project is economically viable. Two studies started since then were stopped when they did not show favorable results. The latest partial feasibility study, in 2008, indicated capital costs of over $500 million. Previous attempts to re-open the Tulsequah Chief by Redcorp ended in bankruptcy in 2009, resulting in losses to secured creditors of approximately $100 million and to investors of nearly $190 million.

In February 2012, Rivers Without Borders released a report documenting the flaws, uncertainties and risks in Chieftain’s June 2011 Preliminary Economic Analysis for the project. Rivers Without Borders will soon release a detailed analysis of the new Technical Report. An initial review reveals the following risks, uncertainties and missing information:

• Mineral resources are only “inferred” or “indicated,” not the more certain “measured.” The mineral reserve is designated as “probable,” not the more certain status of “proven;”
• The probable mineral reserves have been calculated based on high sustained metal prices;
• The low internal rate of return means the project is extremely sensitive to increased costs or lower metals prices;
• There is no mention of the implications of the recent announcement that the Taku River Tlingit First Nation opposes the proposed project;
• There is no mention that Chieftain is in violation of the Letter of Understanding it signed with the Taku River Tlingit or that the Impacts, Mitigations and Mutual Benefits Agreement talks between Chieftain and the Taku River Tlingit have failed to reach any agreement and have apparently broken down;
• Tests have yet to be completed to establish the best way to extract metals from the ore;
• There are no contracts with smelters yet. Arsenic in the ore makes it unmarketable in China;
• Potential liabilities from earthquakes and avalanches are underestimated; and
• Reclamation and closure costs do not include any costs for long-term water treatment, if needed.

“There is little margin for error here; if metal prices don’t go up enough or costs go up or smelters won’t take the concentrates, for example, then the project could be in real jeopardy,” said Zimmer. “Chieftain thought that the Interim Water Treatment Plant operating costs would be about $1 million per year, but actual costs were four times that, which calls into question the credibility of other estimates.”

The controversial proposed Tulsequah Chief mine is located on a major tributary of the Taku River in northwest British Columbia, near the Alaska border. The Taku is the region’s number one salmon river. Alaskans continue to raise numerous concerns about the Tulsequah Chief project related to impacts on salmon and salmon habitat.

Rivers Without Borders is a project of Tides Center.