The Mine Next Door Part 2: The Price of the Ajax Mine

Part 2 of the series The Mine Next Door, an in-depth look at the proposed Ajax mine near Kamloops, British Columbia. Read Part 1 of this series: KGHM Open-Pit Mine Proposal Within Kamloops City Limits.

Despite concerns about public and environmental health, some Kamloops residents still support the KGHM Ajax open-pit mine proposal due to optimism about jobs and economic returns through federal and provincial taxes.

The perspective of the supporters isn't new. Resource exploration is common in the area. However, open-pit mines are a relatively recent development in B.C. According to the Ministry of Energy and Mines, which is responsible for the Core Review of the project, "Throughout the [last] century following the Fraser River Gold Rush, most mining activities in British Columbia took place underground. But in the early 1960s, the feasibility of open-pit production increased tremendously, and as a result, several huge copper mines opened, including Highland Valley Copper—the largest open-pit operation in all of North America." 

However, many Kamloopians are hoping that the future of Kamloops will head in a different direction. Today the city is known for a great many things besides resources. Since Kamloops  is “Canada’s Tournament Capital,” a growing university town with the Thompson Rivers University, where the largest employer is the Royal Inlands Hospital (RIH), the economics of the Ajax project may not be as simple as they seem.

Most Kamloopians are comfortable with a certain amount of mining activity and resource exploration so long as it doesn't put priorities like health and livability in jeopardy. What makes the Ajax project problematic is it’s potential to threaten other industries, drive down property values and distort the healthy-city image that the title, “Canada’s Tournament Capital,” implies.

Kamloops has been picking up speed as a highly desirable place for young families and professionals to start a life and career. Business opportunities are plentiful and the RIH is actively recruiting medical and administrative professionals. Prospective Kamloopians could be dissuaded from re-locating to a mining town.

Surrounding the southwest side of the city with an open-pit mine and adjacent tailings facilities, could bring about the destructive re-branding of Kamloops from Canada's Tournament Capital to mining town. 

Part of the role of Tournament Capital includes hosting events such as the Western Canada Summer Games (WCSG). When Kamloops hosted this hugely profitable event, the City enjoyed an estimated $9,000,000 according to KAPA. The City hosts other large events such as the recent B.C, Senior Games and the upcoming curling Briar, all of which add large sums to the Kamloops economy. 

According to the economic development company Venture Kamloops, "Rocky Mountaineer Vacations injects over $15 million into the local economy during the summer season, and Kamloops is a stopover point for bus tour companies travelling between the Lower Mainland and Rocky Mountains. Kamloops also caters to the business travel market with state-of-the-art meeting and conference facilities. Several major hotel chains have moved to Kamloops in recent years, and the $20 million expansion of the Kamloops Airport is now complete." [view:in_this_series=block_1]

In all, tourism adds $165,000,000 annually to the local economy according the research of two faculty member in the tourism department of TRU. 

In a recent interview with DeSmog, KGHM, a Polish mining firm, said they did not believe the open-pit mine would affect the city's brand. “We do not anticipate the Kamloops Tournament Capital brand will be affected. Visiting athletes come for the city’s tremendous facilities.”

According to the Kamloops Area Preservation Association (KAPA) there is more at stake than there is to gain. “Homes in Aberdeen, Pineview Valley, South Sahali, Knutsford and in Mt. Dufferin [will be reduced by] 5% to 25% for a total of between $135,000,000 to $675,000,000 based on average current home values of $300,000. These residents will not be in the mood to spend much at local businesses after their assessment notices arrive.”

KGHM claims that the project will offer about 1000 temporary construction jobs during the building phase and “500 full-time positions ranging from technical, to mining services, health and safety, and administrative.” Former City Councilor, Chair of the Economic Development committee and member of the City Planning Commission, Dianne Kerr says, ”the [jobs]" represent less than 1% of the Kamloops workforce. Not all of those jobs will go to local residents. With the recent federal decisions enabling foreign workers to be hired at reduced wage rates, the number of jobs for local people will be even more questionable.”  

Since 2008, the market for copper hasn’t been as promising as it has been in years past and prices continue to fall. KGHM International—one of the largest copper mining companies in the world—has been making headlines lately for bad financial projections and financial losses due to the falling prices of silver and copper.

According to a recent write-up in Reuters, the company “disappointed on Wednesday (AUG 14, 2013) with a lower-than-expected net profit in the second quarter as it suffered from falling copper and silver prices.

The state-controlled miner showed a stand-alone bottom line almost 60 percent lower year-on-year at 666 million zlotys ($210.1 million). Analysts polled by Reuters expected the profit at 761 million. This pegs the company's first-half net profit at 1.73 billion zlotys, a little over a half of its full-year guidance of 3.2 billion.”

The AJAX mine project is a low-grade copper-gold deposit, which means there is not a great deal of copper, but there will be a lot of waste to manage. The combination of a low-grade mine and falling copper prices may imply that though the company may promise full-time employment for the 23-year life of the mine, the economics may not support it. 

The company predicts that the mine will have an “annual production of 109 million pounds of copper and 99,000 ounces of gold.” The facilities will have a 60,000 tone-per-day (TPD) processing capacity. When asked about the nature of a low-grade mine in terms of economics, the they assured DeSmog that "KGHMI has experience in successfully managing low grade deposits to meet financial goals in accordance with our Zero Harm philosophy."

KGHM expects to make a contribution of “$550 million dollars in Federal and Provincial taxes, $210 million in British Columbia Mining Act Tax, and $110 million in Municipal tax. Additionally, all levels of government are expected to benefit from increased indirect taxation associated with the project arising from income, property, and consumer taxation from business and employees working for, or servicing, the Ajax Project.”

The researchers at KAPA wonder if the company isn’t being somewhat misleading. According to their breakdown Ajax will "result in a total profit of over $9 billion dollars that will leave the Kamloops area, [going] mostly to Poland and some to Victoria to fund projects such as bridges, roads and stadium roofs in the golden triangle” and Kamloopians may be forced to subsidize the project by building roads and offering energy cost incentives.  

“This is not a good deal for Kamloops,” said Dianne Kerr. “The costs to our City are just too great, both in human and environmental terms. What is truly sad is that those costs will go un-quantified because the assessment process does not require a high level socio-economic study."

*image via Wikipedia and KAPA