A leading credit rating agency’s financial downgrading of Imperial Metals Corp. is sending alarm signals through B.C. and Alaska groups concerned about the future of mines operated by the company.

Moody’s Investor Service has reassessed Imperial Metals’ “probability of default rating,” with financial analysts stating the company is at imminent risk of not being able to pay its debts. The company’s rating is “judged to be speculative, of poor standing, subject to very high default risk and may be in default on some, but not all, of their long-term debt obligations,” according to the service.

Imperial Metals, based in Vancouver, owns the Mount Polley Mine near Williams Lake — the site of the 2014 tailings pond collapse — and the Red Chris Mine, a large open-pit mine near the border of Alaska which uses the same tailings pond infrastructure as Mount Polley.

Operations at a third site owned by Imperial — the Huckleberry Mine, near Houston B.C. — have been on hold since last year because of low copper prices, according to the company website.

The company has seen its stock price plummet over the last year and recently completed a new debt financing plan after lenders granted a waiver to avoid default, according to Bloomberg News. The major shareholder is oilsands tycoon and Calgary Flames co-owner Murray Edwards, who previously helped arrange $150-million in loans for the company.

When asked about its financial situation, a company representative referred DeSmog Canada to an Imperial Metals annual report.

Communities and Taxpayers Left Holding the Bag for Bankrupt Mines

Alaskan and director of Salmon Beyond Borders said Imperial Metals’ shaky finances underline the need for binding protections for everyone living downstream from mines in transboundary watersheds.

“We know (B.C.) needs much greater financial-bonding legislation, so to find out that this company is in a dire financial position is just super troubling. We know there is no money available to reclaim the Red Chris Mine, so if the company goes bankrupt, it would be very, very troubling,” Hardcastle said in an interview.

“We need a robust financial assurances mechanism in these shared watersheds.”

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The 2015 annual report of B.C.’s Chief Inspector of Mines (the most recent year available) shows that, like other mining companies in B.C., Imperial Metal bonds do not cover estimated liabilities.

The total bond for Mount Polley was $23.6 million, but the liability estimate is $35.3 million, for a shortfall of $11.7 million.

And that liability estimate should probably be much higher, said Ugo Lapointe, Canadian coordinator of MiningWatch Canada.

The Huckleberry bond was $37 million and the liability estimate $59 million, for a shortfall of $22 million. Red Chris posted a bond of $12 million with a liability estimate of $18 million, meaning a shortfall of at least $6 million.

So Imperial Metals has $73 million in bonding for a total reclamation estimate of at least $103 million, Lapointe said.

B.C.’s Underfunded Mines Represents Over $1 Billion Taxpayer Liability

Last year, B.C.’s Auditor General Carol Bellringer, who, in a report, slammed the B.C. government for failing to adequately monitor mines, said the fund that is supposed to cover reclamation costs is short more than $1 billion.

Another 2016 report by independent economist Robyn Allan found B.C.’s out-of-date mining regulations allow companies to chronically underfund mine remediation and disaster costs, ultimately leaving the burden to taxpayers. Allan estimates B.C. mines represent an underfunded liability of $1.5 billion.

There are over 84 abandoned contaminated industrial sites in B.C., mostly from mining, that will cost an estimated $508 million to remediate, according to the Crown Contaminated Sites Program. Responsibility for these sites falls to the province because the owners and operators of the projects “no longer exist,” according to the B.C. government.

Between 2014 and 2016 the cost of contaminated sites in B.C. rose 83.4 per cent. The spectre of financially unstable mining companies adds to the growing concern that B.C.’s mining boom along the Alaska border is occurring without regard for long-term cleanup and remediation costs.

Imperial Metals remains responsible for continuing cleanup and remediation around Mount Polley, where 24 million cubic metres of contaminated sludge and mine waste swept into lakes and rivers after the collapse of a 40-metre high tailings dam.

The Red Chris mine, which opened in late 2014 and has a 25-year lifespan, has a tailings impoundment seven times the capacity of Mount Polley.

Locals Fear Repeat of Tulsequah Chief Debacle

But Alaskans can already point to a glaring example of how badly things can go wrong when mine reclamation activities aren’t adequately funded.

The Tulsequah Chief Mine, on the Canadian side of the border, has been leaking acid mine drainage into a tributary of the salmon-rich Taku River for 60 years. After two company bankruptcies and frequent promises to clean up the mess, little has happened.

Chris Zimmer of Rivers Without Borders has a sinking feeling that, if Imperial Metals gets into deep financial problems, Red Chris could be a repeat of the Tulsequah Chief.

“We saw this happen at the Tulsequah Chief where we ended up with an abandoned mine pouring acid mine drainage into the river for 60 years. That was exactly the same process,” he said.

The fears are that either the company could go bankrupt and walk away from the mess at Red Chris or, if they are short of money, they will start cutting corners, Zimmer said.

“The government needs to step in and keep a very good eye on this site and what the company is doing,” he said.

Jacinda Mack, coordinator of First Nations Women Advocating Responsible Mining and a member of the Xat’sull First Nation, is already keeping a wary eye on Imperial Metals’ finances.

“I am very concerned with this new information about Imperial Metals,” Mack told DeSmog Canada.

“Will Imperial Metals walk away from their Mount Polley Mine and abandon their responsibilities to clean up and treat the pollution from the ongoing disaster — such as what happened with owners at the Tulsequah Chief?”

“They haven’t been very forthcoming at all about this financial situation…It is really frustrating when they are ignoring things like the lake colour changing and algal blooms that never happened before,” she said.

There are many questions that need answers, such as why B.C. is not requiring Imperial Metals to pay the full cost of the Mount Polley cleanup, Mack said.

“What is B.C. going to do to ensure Imperial Metals meets health and safety requirements and their commitment to clean up Mount Polley Mine?” Mack asked.

Hardcastle is also pushing for more oversight of the transboundary mines, which are among the largest in North America.

“We need to know how we can prevent these mines from getting so far along before there are more protections in place,” she said

Alaska Politicians Pushing for Input on Transboundary Mines

The concerns are echoed by Alaska’s congressional delegation and a letter sent to U.S. Secretary of State Rex Tillerson, signed by Alaska Governor Bill Walker, Lt. Governor Byron Mallott, Senator Lisa Murkowski, Senator Dan Sullivan and Congressman Don Young, says U.S. economic interests could be threatened by B.C. transboundary mining and “inadequate financial mechanisms to assure long term management of toxic wastes and redress for damages from potential releases.”

The letter emphasizes concerns about the development of large-scale hard rock mine proposals and operations in B.C. “and their potential catastrophic effects on Alaska’s communities and habitats surrounding the transboundary rivers.”

The Alaskan politicians want the State Department to push Canada for more input on transboundary mine proposals, development of a database to track cumulative effects on water quality and a decision on whether the issue should be referred to the International Joint Commission.

Mallott and Alaska tribal representatives met with B.C. officials in early November and are planning to go to Ottawa next year to hold further talks on transboundary watersheds, Mallott said in an emailed statement. He will also go to Washington in January to meet with State Department officials.

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British Columbia’s environmental review process simply isn’t strong enough to protect Alaskan communities and rivers from the province’s mining boom, Jill Weitz, American campaigner with Salmon Beyond Borders, recently told a panel reviewing Canada’s environmental assessment process.

Weitz, who works to protect Alaska’s wild salmon runs, traveled to Prince Rupert to tell a trio of experts appointed by the federal government how a more robust federal environmental assessment process could help address transboundary concerns arising in the wake of B.C.’s major push for new mines.

The federally appointed panel is currently reviewing the environmental assessment process managed by the Canadian Environmental Assessment Agency which is responsible for reviewing major development projects including pipelines, oil and gas development and mines. Changes made under the previous federal government excluded major mines in British Columbia from the federal environmental assessment process — a legislative change Weitz and others say left Alaska in an uncomfortable position.

The transboundary region traversing the border of northwest B.C. and southeast Alaska is home to three major salmon rivers, the Taku, Stikine and Unuk. The rivers flow into Alaska from an area in B.C. that is home to 10 new mines either proposed or already under construction.

Weitz said one of those mines, the controversial KSM mine, is the largest open pit mine in North America.

Despite living directly downstream from the mine, Alaskans were frustratingly prevented from meaningful participation in the project’s environmental review, Weitz told DeSmog Canada.

“The project would be located 22 miles upstream from the Alaska border,” she said. “The environmental assessment process determined there would be no significant environmental impacts.”

Weitz said this assessment was made despite the fact that the term ‘environmental impacts’ was not precisely defined and there was a problematic lack of the basic information needed to measure those impacts going forward.

“Not only is the B.C. process flawed in terms of identifying whether KSM would have significant environmental impacts but the baseline data needed to say that — it doesn’t exist.”

Weitz said Salmon Beyond Borders began campaigning on the issues of transboundary watersheds and the KSM mine after Alaskans from many different backgrounds start voicing their concern about the project.

A 2014 tailings pond collapse at the Mount Polley mine raised serious concerns about B.C.’s mine management and permitting process.

Many Alaskans representing fishing, tourism and indigenous groups voiced fears that something similar to the Mount Polley disaster, which left the pristine Quesnel Lake watershed contaminated with 24 million cubic metres of mining waste, could happen in U.S. waters.

The KSM tailings pond is projected to entail a massive 239-metre tailings dam, perched above the Bell Irving/Nass watershed in B.C. near the Sulpherets Creek, which runs into the Unuk River.

“We continue to push on the notion that there needs to be further transboundary watershed management in a shared way,” Weitz said.

In her presentation to the environmental assessment review panel, Weitz made the case that legislative changes made under the former Harper government that narrowed the purview of the Canadian Environmental Assessment Act increased the threat felt by southeast Alaskans.

Projects that have immediate implications for transboundary watersheds should automatically trigger federal environmental assessments, Weitz argued, saying the provincial process in B.C. is not comprehensive enough and does not consider cumulative impacts of industrialization in the region — a top concern for many scientists and conservation groups.

Weitz said although B.C. invited the participation of Alaskans in the KSM mine assessment, she felt like their input was ultimately ignored.

Provincial approval of the KSM mine in 2014 angered many Alaskans. Fifteen federally registered native tribes, as well as a number of non-governmental organizations, made formal requests for a joint provincial-federal review of the project’s approval.

That request was denied.

“There is no equity in this process,” Weitz said.

Nikki Skuce, who also presented to the panel on behalf of the Northern Confluence initiative out of Smithers, B.C., said even British Columbians feel the provincial review system is inadequate.

“Some of us here in the northwest have participated in some really faulty review processes,” Skuce told DeSmog Canada.

“In some cases it’s clear the decision on the project is made even before the process begins so these processes feel very tokenistic and often rely entirely on information from industry.”

Skuce said a serious review of Canada’s environmental assessment process should take into consideration how domestic projects can affect cross-border communities.

“For folks in southeast Alaska, if we’re going to consider impacting a water or airshed upstream, there should be a federal review where there is greater opportunity for those downstream or down-air communities.”

Skuce said Canada’s federal review process should honour international commitments, like Canada’s pledge to engage in a bilateral process to manage transboundary waters.

Skuce says improvements to the federal environmental assessment process could help restore public trust in the review system.

“This process should prioritize indigenous rights that Canada has promised to honour under the United Nations Declaration on the Rights of Indigenous Peoples,” Skuce said.

She added an emphasis on independent science is key to restoring trust in the process.

“We need to delineate the project proponent promoter from the project regulator,” she said.

“Right now you have the regulator cheerleading for the project. That needs to be taken out, separated out to help regain public trust.”

Skuce said she is feeling optimistic about the review of the federal environmental assessment process. The panel has worked hard to engage meaningfully with presenters, she said.

“With so many mining projects proposed in the northwest and given the potential transboundary impacts we need federal engagement,” she said.

“This is a good opportunity to look in-depth at cumulative impacts of development and at our bilateral agreement obligations with Alaska.”

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Alaska’s fishing industry and lifestyle are under threat from mines on the B.C. side of the border and a non-binding cooperation agreement between B.C. and Alaska, signed last week, does not provide sufficient protection, the Alaska State House Fisheries Committee was told this week.

The committee held a public hearing because of persistent concerns from fishermen, business owners, municipal and Tribal leaders about the proliferation of B.C. mines near the headwaters of salmon-bearing rivers such as the Taku, Unuk and Stikine, which start in B.C. and flow through Southeast Alaska to the ocean.

About 10 mines are in the planning, exploration, construction or production stages in the area close to the border.

“I believe legislators received the message loud and clear that this is a very urgent situation and much, much more needs to be done immediately, beyond the B.C./Alaska Statement of Cooperation,” said Heather Hardcastle of Salmon Beyond Borders.

The agreement between B.C. and Alaska establishes a bilateral working group and provides for Alaska to have input into environmental assessments and permitting for mines. It also formalizes requirements for B.C. to notify Alaska if there is a spill or accident that could affect Alaskan waters.

But the agreement falls short as there are no enforceable measures to protect the water and fisheries and no requirement for bonds to provide financial compensation in case of an accident, speakers told the committee.

“Alaska should require some kind of compensation for catastrophic accidents,” said Dave Chambers, geophysicist and president of the Center for Science in Public Participation.

Mining companies are under pressure to increase production because of falling metal prices and rising costs and that is leading to an increasing number of tailings dam failures, Chambers said.

Requirements for a surety would put pressure on operators to do a better job, Chambers said.

Earlier this year, B.C. Auditor General Carol Bellringer, in a scathing report that criticized B.C.’s weak mining liability regime, estimated that there was a $1-billion shortfall in financial assurance policies, which are supposed to ensure mining companies pay for both catastrophic events and mine site reclamation.

Bellringer’s report was followed by an even more blistering assessment by economist Robyn Allan, who, in a report commissioned by the Union of B.C. Indian Chiefs, concluded there is more than $1.5-billion in unfunded liability.

“A regime to ensure mine owners have sufficient financial resources to pay for environmental damage and third-party losses from unintended mine accidents is non-existent,” Allan wrote.

A common theme at the Fisheries Committee hearing was a push for state leaders to formally request the involvement of the U.S. and Canadian federal governments.

“In order to have binding commitments that protect habitat, by encouraging the highest standards of environmental protection, elevation to the International Joint Commission through the Boundary Waters Treaty seems to be a necessary action,” said Chip Treinen, United Fishermen of Alaska board member.

So far, B.C.’s Energy and Mines Minister Bill Bennett and U.S. Secretary of State John Kerry have shown little interest in referring the issue to the International Joint Commission, the body established to deal with boundary water disputes.

Last week Bennett said that “We’ve proven with this agreement and all the work we’ve done over the last three years there’s no need for the International Joint Commission” and that neither B.C. nor Alaska want to get their respective federal governments involved in an issue they can manage themselves.

At the hearing, Hardcastle said Bennett is “flat-out wrong” in his assumptions.

“The State Legislature and the State of Alaska need to formally counter Bennett’s statement and be explicit with the U.S. federal government that this is an international matter in which the State of Alaska does want and need the critical involvement of the federal government,” she said.

Bennett and Energy and Mines Ministry spokespeople did not respond to questions Friday from DeSmog Canada.

Bev Sellars, chairwoman of First Nations Women Advocating Responsible Mining and Chief of the Xat’sull First Nation in Soda Creek, B.C., warned Alaska’s legislators not to put all their trust in the B.C. government, pointing to a bad track record, and urged them to ask the International Joint Commission to become involved.

“Try to get a solid country-to-country agreement on paper,” she said.

“I haven’t eaten fish from the Fraser River in years — that is a loss of our culture. When I hear about B.C. mines I worry about your culture too,” she said.

The spectre of the 2014 Mount Polley disaster, when the tailings dam collapsed spilling 24-million cubic metres of waste and sludge into nearby lakes and rivers, weighs heavily on Alaskans.

“We’re terrified that that’s what is going to happen here and that we’re going to share their fate,” said Richard Peterson, president of the Central Council of Tlingit and Haida Indian Tribes of Alaska.

“We couldn’t sustain our traditional way of life. We couldn’t sustain our economic way of life if that happened.”

A recent study by the McDowell Group concluded that the Taku, Stikine and Unuk rivers account for U.S. $48-million in annual economic activity and the value of the three watersheds is just under $1-billion over a 30-year timeframe.

Chambers said he questions B.C.’s mine safety enforcement.

“Presently the B.C. government is not putting safety before economics as recommended by the Mount Polley Expert Panel, Chambers said.

“Moreover, B.C. is not implementing other key recommendations of the Mount Polley Expert Panel — a body appointed by the province to determine what went wrong at Mount Polley and how to avoid similar tailings dam failures in the future.”

The hearing was chaired by Rep. Louise Stutes, who said the committee is likely to hold more hearings to assess the possible effects of the mines.

In an interview with the Cordova Times, shortly before the public hearing, Stutes said: “The United States and Canadian federal governments need prodding to secure enforceable protections and financial assurances for our transboundary rivers.”

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Cleanup of the troubled Tulsequah Chief mine in northwest B.C., which has leaked acidic water into nearby streams and rivers for more than six decades, is again in limbo following an announcement by the owner, Toronto-based Chieftain Metals Inc., that the company is in receivership.

Chieftain, in a statement, said the accounting firm Grant Thornton “was appointed through court order as the receiver of all the assets, undertakings and properties of Chieftain.” The majority of company directors have resigned.

The court order came after a demand by West Face Capitol for repayment of a $26-million loan.

Chieftain’s properties include 65 mineral claims, but the company’s principal focus was development of the Tulsequah Chief, which it bought in 2010. At that time, Chieftain accepted responsibility for the long overdue environmental cleanup, but an interim water treatment plant operated for only six months and was closed in 2012 because of costs and technical issues.

The mine is situated beside the Tulsequah River, the largest tributary to the Taku, one of Alaska’s most important salmon rivers, and the continuing acid mine drainage has infuriated Southeast Alaskans who point to the pollution as a major reason not to trust B.C.’s rules and oversight of mines being developed along the B.C./Alaska border.

Chris Zimmer of Rivers Without Borders said the Tulsequah Chief is a poster child for downstream concerns at a time of growing demands from Southeast Alaskans for Alaska and the U.S. State Department to work together to obtain guarantees that B.C.’s mining development won’t harm water quality, fisheries or livelihoods downstream in Alaska.

“If B.C. can’t ensure that the Tulsequah Chief is cleaned up, why should Alaskans have any trust that much larger mines like KSM won’t pollute our waters?” asked Zimmer, who is demanding that the B.C. government step in and clean up the site, rather than relying on mining companies to clean up the site.

The KSM mine, about 35 kilometres from the Alaska border, which will tap into one of the largest gold and copper deposits in the world, is one of about a dozen B.C. mines in the transboundary areas in various stages of application, planning and development.

Last year, Energy and Mines Minister Bill Bennett flew over the Tulsequah Chief mine site and promised that the mess would be cleaned up. However, he then appeared to backtrack, saying scientists did not believe the acid mine drainage was causing any environmental harm.

That is a claim disputed by many of the Southeast Alaskan organizations, tribes and politicians anxiously watching the proliferation of B.C. mines near salmon rivers flowing into Southeast Alaska and there are growing demands for the U.S. federal government to step in and refer the issue of transboundary mines to the International Joint Commission.

“The size of the watersheds and valuable fisheries at risk and the growing evidence that neither B.C. nor its mining industry can be trusted, clearly shows Alaska cannot go it alone with B.C.,” Zimmer said.

“We need the help of the U.S. federal government and the authority of the Boundary Waters Treaty to ensure that B.C. and its mining industry pay for the true costs of mining rather than risking fisheries and water quality downstream,” he said.

The Tulsequah Chief was closed by Cominco in 1957 without any cleanup or reclamation of the site. It was bought by Redfern Corp. in 1992, but numerous government warnings and reclamation orders were ignored and Redfern filed for bankruptcy in 2009.

“Since the mining companies have been unable to halt the acid mine drainage, it’s time for B.C. to honour the promises made by Minister Bill Bennett last August and clean up this mess,” Zimmer said.

Energy and Mines Ministry spokesmen could not be contacted by time of publication.

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