Rivers Without Borders

Rivers Without Borders

October 03, 2012 08:00 ET

Chieftain Metals' Tulsequah Chief Mine Proposal Faces Major Obstacles Despite New Chinese Partner

No Feasibility Study; No Long-Term Financing; No First Nation Approval; Permit and Agreements Violations; Water Treatment Plant Shutdown; Alaska Concerns Growing

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 3, 2012) - Despite Chieftain Metals' recent non-binding Memorandum of Understanding (MOU) with a Chinese company, Rivers Without Borders believes the Tulsequah Chief project still faces considerable financial, technical and political obstacles, including unresolved acid mine pollution, violations of agreements and at least one permit, no feasibility study, no major commitments from investors, no First Nation approval and increasing concerns in Alaska. The controversial mine project would be located near the confluence of the Tulsequah and Taku Rivers just upstream of the Alaska/British Columbia border. The Taku is the region's premier salmon river.

"A few million dollars is a weak commitment from the Chinese and a long way from the half a billion needed to develop this mine. The project suffers from numerous technical and financial risks and the company doesn't even have a feasibility study," said Chris Zimmer of Rivers Without Borders. "This seems a desperate attempt to keep the project on life support."

On September 24 Chieftain announced the MOU with China CAMC Engineering Co., Ltd. and its majority-owned subsidiary Procon Holdings Inc. Procon will provide about $10 million to Chieftain in exchange for stock shares, and will own 19.7% of Chieftain.

"This MOU doesn't change the facts that Chieftain has no long-term financing, and the Tulsequah Chief proposal faces numerous challenges including no feasibility study, no First Nation approval, and ongoing acid mine pollution in violation of several agreements and at least one key permit," said Chris Zimmer of Rivers Without Borders.

Chieftain's June 30 financial disclosures state extreme market volatility is "a significant risk for the Corporation…Companies like Chieftain are considered risk assets and …highly speculative. The volatility in the markets and investor sentiment may make it difficult for Chieftain to access the capital markets." Without a positive, credible feasibility study Chieftain will not be able to attract investors. A risk analysis done for Rivers Without Borders in February 2012 found numerous financial risks that will have to be addressed in any feasibility study and noted, "There has not been a feasibility study for the mine with road access since 1995 that indicated the Tulsequah Chief project is economically viable."

A major problem continues to be the acid mine pollution draining into the Tulsequah and Taku Rivers. An important condition of Chieftain's acquisition of the Tulsequah Chief mine from Redfern, the former bankrupt owner, was the assumption of these environmental liabilities. Chieftain began operating a water treatment plant in March 2012, but shut it down in June due to high operational costs and sludge production that outstripped the company's capacity to manage it. The Taku is the region's number one wild salmon producer, and the ongoing pollution has raised concerns from leaders such as Juneau's mayor and legislators, U.S. State and Interior Departments, the Alaska congressional delegation, commercial fishing groups and Governor Sarah Palin for over a decade.

"The closure of the water treatment plant demonstrates Chieftain doesn't have the competency to operate and clean up this mine properly. The company is in violation of the Environmental Management Act, agency cleanup orders, an agreement with the Taku River Tlingit, the mine acquisition agreement and possibly its mine approval Certificate, and may be subject to prosecution or other enforcement action. If they were serious about doing the job right they would use the new funds to immediately halt the acid mine pollution into the Tulsequah River," said Zimmer.

Social licenses are important for mining projects in BC. Statements on the website of the Taku River Tlingit First Nation (TRTFN) and in media releases demonstrate there is no TRTFN approval of the proposed mine or access road. Chieftain previously stated they would not proceed without approval of the TRTFN.

Rivers Without Borders is a project of Tides Center in the U.S. and Tides Canada Initiatives Society in Canada.

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