Two weeks ago, we wrote the story about plans to dump 300,000 tonnes of toxic waste into the historic Tasmania mine at Beaconsfield.
Critics of the plan call it reckless, both environmentally and economically; a “quick-fix” by the mine’s management to get up to $3 million of environmental bond money back from the government.
Not only does the rich gold resource remain open at depth but the mine sits in the middle of the town of Beaconsfield and, once the mine floods again , the toxins from the buried tailings are likely to seep into the water table.
In an announcement to the Australian Securities Exchange on Friday, BCD Resources rejected the story, claiming its plans for the disposal of the mine’s tailings constituted “best practice”.
This story is to rebut the BCD rebuttal.
The thrust of the company’s argument is that pumping tailings underground is a regular occurrence in Australia and that, in any case, the tailings aren’t toxic.
The practice of pumping benign tailings underground to backfill mining stopes is indeed common practice in Australia and was used at the Tasmania Mine itself in earlier years.
However, mining sources critical of the plan say tailings have never before been used in Australia to fill up all the non-stope mine openings (such as ventilation shafts, the main access decline, main levels, drives, cross cuts and so on) in an underground mine with the outcome being the “sterilisation” of significant JORC-standard gold resources.
There are still 275,000 ounces of identified resources.
BCD claims that filling up all the mine openings with toxic tailings won’t prevent the mine being reopened. In fact, chief executive, Peter Thompson, says it would be easy to drill back through the tailings in all the openings.
A mining engineer contacted by BusinessDay but wishing to remain anonymous claims Thompson is wrong because the tailings slimes won’t be dry, they will be waterlogged.
If the Tasmania Mine were allowed to fill up slowly with water over time, reopening the mine would be a straightforward case of dewatering all the mine openings from the top down using conventional pumps.
But filling all the mine openings with tailings slimes means that later dewatering with pumps from the top down would be difficult, if not impossible. Mining of the waterlogged tailings then becomes a very expensive and slow process, said the source.
It also becomes very dangerous because of the risk of mudflows, or perhaps more accurately, mud rushes, trapping the miners.
Further, if the toxic tailings could be mined at great expense and risk, where would the mined tailings go? BCD proposes to sell the very tailings dam (TSF2) that could have safely contained all the tailings.
In its ASX release, the company has again declined to discuss the size of the remaining gold resources. It did not dispute our contention (based on its own announcements before it began to play down the size of the resource this year) that remaining resources were at least 275,000 ounces, worth over $420 million in the ground at the current gold price of approximately $1530 per ounce (all figures in this story are in $A).
Costly exercise
Where we concur with BCD is that it is costly and technically challenging to extract the gold at current prices.
BCD says it would take a gold price of over $2000 per ounce to make the mine viable again. However, it has consistently refused to say what gold price would be required to make mining economic again.
At $2000 per ounce, the remaining gold resources, which are open at depth (the deepest intersection grades 32.4 grams per tonne gold), would be worth over $550 million in the ground.
At $3000 per ounce, the remaining gold resources would be worth over $825 million.
The price of bullion has trebled over the last seven years ($500 per ounce to over $1500 per ounce). And further increases are quite plausible as central banks continue to print paper currencies at record rates.
If the gold price rose from $2000 per ounce to $3000 per ounce, the profitability of the remaining gold resources at the Tasmania Mine would increase by over $275 million.
So how can the directors of BCD claim that “the Tasmania Mine has no economically viable future”? The answer is, simply, they can’t. They don’t know what the price of gold will be in coming years.
An undeniable fact is that the remaining gold resources in the Tasmania Mine are potentially very valuable at very feasible future gold prices.
The Directors of BCD came up with the proposal to sterilise the mine in order to obtain a short-term financial benefit, of the order of $2 million to $3 million, related to environmental bonds. The Tasmanian government, via its department, Mineral Resources Tasmania (MRT), and its regulator, the Environmental Protection Agency (EPA), have approved the BCD proposal.
Coincidentally, the state government and BCD are currently fighting over state royalties of $2.6 million that were overpaid by BCD. The case is reportedly going to mediation.
The Directors of BCD (the old Beaconsfield Gold NL) are also Directors of BCO (the old Allstate Explorations NL), which is now a subsidiary of BCD.
BCD owns 48.5 per cent of the Tasmania Mine and BCO owns the balance of 51.5 per cent. BCD owns 89 per cent of BCO. BCO’s only significant asset is its 51.5 per cent share of the Tasmania Mine. BCD owns some copper resources in western Victoria but they may be uneconomic at today’s copper price.
Gold assets made worthless
Hence BCO has a direct interest in over 141,000 ounces of gold resources and BCD has a total direct and indirect interest in over 258,000 ounces of gold resources at the Tasmania Mine. These potentially very valuable gold assets are proposed to be sterilised, effectively made worthless, by the BCD directors.
When a company in Australia proposes to sell or divest its most valuable asset, shareholders get to vote on the proposal, as required under the Corporations Act. In this case, the assets concerned are not being sold or divested by the directors, they are being wilfully destroyed. Should it not follow that BCD and BCO shareholders should be given a vote on the proposal which dissident shareholder Will Matthews and others describe as madness?
If the gold price continues to rise significantly in coming years, as it very likely will, directors may be exposed to a shareholder lawsuit. Their one major protection is that their plans have been endorsed by the department and the EPA.
But these two, lazily, have done no independent evaluation of the proposal to dump the tailings down the Tasmania Mine. Rather, they have simply signed off on the BCD proposal.
BCD directors say they are shutting down the mine because it has reached the end of its life cycle. The life cycle of a great mine like the Tasmania Mine should be determined by long-term industry circumstances not by a short-term grab for a small financial benefit by directors.
The history of this mine is a case study in regulatory failure. Nobody was ever made accountable for the collapse of the mine on Anzac Day in 2006 which killed miner Larry Knight. It was controlled at the time by an accountant from Perth insolvency firm Taylor Woodings.
An investigation by the Australian Securities & Investments Commission (ASIC) into the circumstances surrounding the corporate collapse and associated transactions in 2001- 2003 was mysteriously abandoned and its findings suppressed.
Almost ten years later, and despite orders against it by the Administrative Appeals Tribunal, the regulator continues to refuse to produce documents under Freedom of Information laws.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.