Mining expert warns New Brunswickers about the company behind the Sisson Mine project

Written by Sophie M. Lavoie and Tracy Glynn on April 30, 2018

The company behind the Sisson Mine project, proposed in the headwaters of the Nashwaak Watershed, is known for starting up low-grade ore mines in areas of community opposition, according to Joan Kuyek. Kuyek is a long-time mining analyst and advocate for mine-affected communities. In late April, she spoke to crowds in Stanley and Fredericton about Hunter Dickinson Inc. (HDI), one of the companies behind the Sisson project.

HDI Northcliff is the company advancing the Sisson open-pit tungsten and molybdenum mine project near Napadogan and Stanley. HDI is the subject of Kuyek’s report, “Behind the Pebble Mine: Hunter Dickinson Inc., the Canadian Mining Company You’ve Never Heard Of.”

Kuyek helped found MiningWatch Canada, and has taught mining law and policy at Queen’s University Law School and community organizing at Carleton University. She began her investigation of HDI on the invitation of communities affected by HDI’s Northern Dynasty Pebble Mine in Alaska.

The Northern Dynasty Pebble Mine is a proposed copper, gold, and molybdenum mine located in Alaska’s Bristol Bay watershed. Bristol Bay is home to one of the world’s largest wild sockeye salmon runs as well as vibrant recreational and commercial fisheries.

Although the Environmental Protection Agency blocked the Pebble Mine from applying for permits from the U.S. government in 2013, after Donald Trump became the U.S. president and Scott Pruitt was appointed head of the Environmental Protection Agency, the Pebble Mine is back on the table.

“A mine is really a huge waste management project,” said Kuyek, who went on to describe the complicated process of metal mining.

Metal mining often involves extracting the desired metallic minerals from ore rock that may also contain toxic compounds such as arsenic and mercury. The metallic minerals are separated from the ore using large amounts of process water laced with dissolved reagents, which can include cyanide or other additives.

Low-grade ore bodies require especially large tailing ponds to contain the massive amounts of waste. The proposed Sisson Mine project is one such low-grade ore body.

The tailings impoundment would have to be maintained forever, which Kuyek noted was something that is likely to be financially unfeasible. “We can’t even keep the pyramids from deteriorating,” she joked.

HDI is a company that specializes in finding low-grade marginal ore deposits and getting a mine to the point of production, Kuyek noted. The company then usually sells the project before the mine enters the production phase. Before production, the company must go through a long process of exploration, permit acquisition, and procurement of a social license to operate.

A social license has become one of the largest obstacles for the resource extraction industry because of community opposition.

Kuyek’s findings exposed that HDI has developed expertise in removing all barriers to investment, including regulatory hurdles, and indigenous and community opposition. The company has gone so far as to file lawsuits against the U.S. Environmental Protection Agency to ensure that its Pebble Mine could move ahead. The company has sued First Nations and environmental groups, which has tied up community resources, while creating a culture of fear.

Other strategies of HDI, according to Kuyek, include the establishment of a public company to sell shares. These shares help the company raise funds to do the work to get the mine off the ground. Along the way, the company externalizes its costs. For example, it might shift costs associated with infrastructure construction, reclamation bonds, and labour to government. Meanwhile, the company tries to get community support by making philanthropic donations, a practice that can divide communities.

According to Kuyek, mining company directors make a lot of money before a mine even gets to production. For example, she notes how HDI Northcliff’s senior management are already making money from the Sisson project. For example, the President and CEO of Northcliff Resources, Christopher Zahovskis, is paid an annual salary of about $300,000, plus a number of stock options and other perks. The chairman, Marchand Snyman, earns $63,000 for Northcliff but is the CFO for a number of other HDI companies, bringing his annual cash compensation to almost $600,000 not including options and other benefits.

HDI also accumulates benefits for its group of companies through contract services, high interest loans, buying shares at low prices and selling them at high prices, and obfuscating the way the company benefits from financial arrangements with subsidiaries, shell companies, and tax havens.

In fact, of the nineteen HDI projects Kuyek identified, only one is an operating mine: the Taseko Gibraltar copper and molybdenum mine in British Columbia. HDI does have other projects, however. One is a proposed in-situ leach copper mine in Florence, Arizona. The town council of Florence is opposed to the mine because it would be located next to the town’s drinking water aquifer. The rest? Four were in receivership, four had suffered serious losses after they were sold or, in some cases, have been shut down. Of HDI’s mines in South Africa, three went bankrupt. In Tibet, HDI’s Xietongmen Copper-Gold Project was fought by local communities and the Free Tibet movement.

HDI not only sues opposition groups, they have also been sued by investors and other groups. In 2012,Credit Suisse, a Swiss multinational investment bank, took Great Basin Gold, an HDI affiliate, to court alleging they had fraudulently estimated the mineral resource. The parties settled out of court in 2017.

According to Kuyek, projects supported by HDI have been “fought ferociously by local communities.” Projects developed by HDI have underfunded reclamation bonds, and, indeed, have needed government subsidies to proceed. In fact in one project, the government subsidy was more than the company’s own investment in the project. In studying the financial statements of HDI affiliates and comparing them to other industry companies, Kuyek found that its combined projects have a higher deficit to earnings ratio than the average of other mining companies.

Focusing on HDI Northcliff Resources, the company proposing the Sisson mine, Kuyek notes the company does not yet have a subsidiary in a tax haven. However, according to Kuyek, the company does not need one, as it has not started production yet. Northcliff has, however, already paid HDI, as well as HDI’s subsidiary service company almost $3 million in 2015 and 2016 for services. These services were mostly for costs associated with legal, administrative, management, and board of directors’ fees.

The Sisson mine would be five times larger in scale than most of the other tungsten mines in the world (not including China) while the ore grade is three to seven times lower. The company behind the Sisson project claims the mine would have a lifespan of about 27 years but the mine is likely to experience shut downs when tungsten and molybdenum prices drop. In all likelihood, metal prices will continue to be volatile.

In its economic feasibility study, HDI Northcliff used extremely high prices for tungsten and molybdenum from a few years ago. Tungsten and molybdenum are the two metallic minerals to be extracted at Sisson. Critics worry that the project relies on optimistic estimates for future prices. Although tungsten prices are up slightly recently, Kuyek points out they will likely go down as soon as China’s tungsten mines come back online, after they clean up pollution problems there.

To illustrate the economic challenges of tungsten mining, Kuyek described two struggling tungsten mines.

The first was the Drakelands tungsten mine in Britain. The Drakelands mine is currently one of the world’s largest producers of tungsten, and yet it is struggling to stay open because of low metal prices. Although Drakelands Mine is operated by Wolf Minerals of Australia, it is also partially owned by Todd Minerals of New Zealand. Todd Minerals is the other company behind the Sisson project. Kuyek described Todd Minerals as “the Irvings of New Zealand.” To help the Drakelands partnership stay afloat, the partnership recently underwent debt restructuring facilitated by a US$14 million bail out from Resource Capital Fund.

The second tungsten mine was the Cantung Mine in the Northwest Territories. That mine went bankrupt in 2015.

Both of these mines have significantly higher grade deposits of tungsten ore than the Sisson Mine project.

Kuyek’s public talks in Stanley and Fredericton came just one week before comments on the mine’s waste plans are due to Environment and Climate Change Canada. The comments are in response to a request by HDI Northcliff to change the status of fish-bearing brooks in the Nashwaak Watershed, so that portions of the brooks could be used by the mining company to dump mine waste. About 250 people filled the Upper Nashwaak Lion’s Club in March to hear from federal government representatives and the Sisson Partnership on the mining company’s mine waste plan. All who spoke at the microphone were opposed to the destruction of their fish-bearing brooks.

“Are we prepared to make Nashwaak a throwaway watershed?”

Lawrence Wuest, an ecologist who lives 15 km from the proposed mine site near Stanley, asked the crowds in Stanley and Fredericton if they were willing to downgrade their watershed from its current pristine status to “a throwaway watershed.”

Wuest has been following the Sisson Mine project since it was first proposed ten years ago. He described how the Expert Review Panel of the project’s New Brunswick Environment Impact Assessment worried the mine would likely experience periodic shut-downs or financial failure during its lifetime, which would pose risks.

Wuest, who is with the Friends of the Nashwaak, is also concerned that the mine’s Financial Security Plan has not yet been provided to the public. The Financial Security Plan is one of the conditions of the Environmental Assessment approval.

According to Wuest, over the past ten years successive governments have, in their haste to move this mine forward, violated a number of laws and regulations, including the Clean Water Act, the Clean Environment Act, and the UN Declaration of the Rights of Indigenous Peoples.

”How can we possibly expect the government to properly regulate the mine when they do not follow laws and regulations before building it?” Wuest asked the audience.

Wuest described the Mount Polley tailings dam disaster that occurred in 2014 in the Caribou region of British Columbia. The Mount Polley tailings dam is a centre-line dam built on glacial till, which are features shared by the proposed Sisson tailings dam.

“If you don’t want the Sisson mine, make sure you tell the government,” Kuyek told attendees at her two public talks.

Sophie M. Lavoie and Tracy Glynn are editorial board members of the NB Media Co-op.

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