MAC: Mines and Communities

Anglo American pulls out of Pebble copper project

Published by MAC on 2013-09-18
Source: Reuters,

Anglo American pulls out of Pebble copper project

by Clara Fereira-Marques and Julie Gordon


16 September 2013

London - Mining group Anglo American has pulled out of the Pebble copper-gold project in Alaska, less than two months after pledging to halve a $17 billion pipeline of potential mines and bring down the cost of keeping future options open.

The decision, announced on Monday, leaves junior exploration company Northern Dynasty to push ahead alone with the plan to develop one of the largest copper-gold deposits in the world - but also a hugely environmentally challenging project that has already been studied for almost three decades.

Anglo's decision is unlikely to come as a shock to investors, but confirms new chief executive Mark Cutifani's ambition of tackling lagging returns and what he called in July a "constipated" pipeline of future mines.

He promised then to cut spending and slash costs like the annual $950 million spent keeping afloat early stage projects like Pebble. That number alone will come down by a third, the company said at that time.

Anglo, like many others in the industry, has been heavily criticised for its execution of complex projects to build mines from scratch - so-called "greenfield" projects. Its Minas Rio iron ore mine and port in Brazil has been hit by repeated delays and cost overruns.

Pebble, some 200 miles (320 km) southwest of Anchorage, could be similarly challenging.

It is one of the largest new discoveries of recent decades, during which fewer and fewer potential new mines have been uncovered. It could also be one of the world's largest open-pit copper-gold mines, and defenders argue it would be a much-needed economic boon for the region.

But it has faced strong opposition from environmentalists and some local residents.

In an April report, the U.S. Environmental Protection Agency (EPA) said a large scale open-pit mine in Alaska's unspoiled Bristol Bay region would destroy up to 90 miles (145 km) of salmon and trout spawning streams, harm thousands of acres of wetlands that support fish and subject local waters to chemical spills and releases of untreated wastewater.

The Pebble Partnership - the 50:50 joint venture between Anglo and Northern Dynasty - said then that it had not yet submitted its development plan to regulators. It called the EPA's report - based on a project similar to Pebble - a pre-emptive attempt to veto the project and argued it should be allowed to go through the proper regulatory process.

Northern Dynasty, a member of Hunter Dickinson mining group, has been working on Pebble since 2001. The project has a measured and indicated resource of 55 billion pounds of copper, 67 million ounces of gold and 3.3 billion pounds of molybdenum.

The Pebble Partnership was set up in 2007. As of June, according to Northern Dynasty, Anglo American Pebble, a subsidiary of the global mining group, had funded $541 million of spending.

Anglo said it would record a $300 million impairment on a post-tax basis after pulling out.

Shares of Vancouver-based Northern Dynasty have lost more than half their value so far this year. The stock traded down more than a third at the open to touch its lowest point since mid 2003. Anglo was up 1 percent, in line with the sector.

Anglo abandons Pebble: Let Alaska now decide for itself

Jack Caldwell

17 September 2013

Anglo American has abandoned the Pebble Mine Project in Alaska. That much was news to me this morning as I boarded a flight to a mine in a wet climate and sensitive place. By the time we had done the day's business on this mine and I got to the computer, the blogs and news services were choking with the news. Very little in the way of comment though, so the way is still open for me to say something.

I stopped blogging about Pebble a long while ago - it was more or less like those stories that go on and on, yet never go anywhere. Like the Israel vs Palestine conflict. Or Iran and nuclear weapons. Or Cuba, North Korea, and other unsavory places.

Recall that Cynthia Carroll, former head of Anglo, once said they would pull out of the mine if there was no local support. So it was only a matter of time before Anglo pulled out, for there is no local support. Anglo just had to find a time and reason for pulling out without living up to Carroll's promise.

Now they have pulled out citing risk and the need to make money instead of spending it on losing projects that may never come to be any time ever down the pipeline.

It is a perfectly sensible decision by Anglo, albeit an expensive one. Just how long can you throw money at so controversial a project with such strong opposition? How much would it cost to get the EPA off your back and the Republicans in Washington on your bandwagon? Seen from London, it must have looked like an eternity and an infinite sum to boot.

Somebody will say it, so I might as well: just goes to show how concerted opposition to a mine can derail it. For it is hard to see how the remaining owners can do it alone. This pull-out by Anglo is a seminal event, make no mistake about that. It represents a milestone for the mining opposition, and a swagger-away by a mining company, that has no precedent that I can think of.

Whether this victory will embolden mining opponents to Taseko Prosperity Mine, to Pascua Lama, and those other controversial projects remains to be seen. I cannot but think that what they will say they have achieved, will make them more vigorous, not less so.

And what Anglo has done will echo in boardrooms of mining companies, who will be a lot more careful about which mines they buy, buy into, or undertake to start up. The heady days of get into everything that appears to move, are clearly over. Now we can expect a lot more care, conservatism, and cynicism to prevail. And probably for the better. I would like to hear what mines Anglo isgoing to promote with all the talent that is no longer engaged in Pebble, technical and political.

Dynasty has made courageous statements. Maybe they can keep their share price up. No matter. The much more interesting play will be to see if they can get another partner. I once wrote that once the Chinese enter as partners things will heat up to boiling point. I cannot conceive the next partner will be BHP or Vale. But maybe Glencore or those other South Africans of energy and vigour will underestimate the tenacity of the Alaskans and jump in.

Or maybe now it just is time for Alaskans to speak-to exert the independence they brag about. Maybe it is time for them to tell Canadians and ex-South Africans dressed as Brits or Chinese to go away, stay away, and let us Alaskans do what we choose to do. Maybe it is time for Alaskans to tell Washington DC to piss off; to tell senators from Alabama to go silent; to act so that the EPA does not have to come protect the 99 percent. We wish Alaska well in the debate as to how they are going to act as the state they claim to be.

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