WILLIAMS LAKE, BC, Feb. 19, 2013 /CNW/ - Unprofitable low-grade mines
that scare away banks and might normally be unviable are getting
support because private royalty investment companies can still score
strong profits from them - even if no one else makes money, according
to Franco Nevada Chairman Pierre Lassonde.
Mr. Lassonde's recent televised comments on the Business News Network`s
(BNN) "Commodities" show with Andrew Bell have reinforced serious concerns for the
Tsilhqot'in Nation about the economic viability of the proposed New
Prosperity Mine in BC, which would be funded by Franco Nevada if it were allowed to proceed.
Described by mining media in Canada and the US as a gold "legend" and
"guru," Mr. Lassonde told BNN that companies who pursue mines with a
very low 0.5 gram-per-tonne gold cut-off may find it hard to make any
money or generate growth. However, his company - one of the biggest in
North America - still invests in some of them because it can make large
returns through royalties and options.
Mr. Lassonde, who was recently inducted into the Canadian Mining Hall of
Fame, said companies are increasingly turning to Franco Nevada because
they cannot get funding from banks.
"Now for Franco, you know, as far as we're concerned, if an operator
goes down from ... you know, let's say a 1 gram cut-off to a 0.5
cut-off, the operator may not make any money, but the royalty holder
makes money, okay?
"So for us, as long as the operator keeps expanding and keeps putting
(in) capital, we are happy," Mr. Lassonde told BNN's Commodities show
These revelations alarm the Tsilhqot'in Nation because according to the
Franco Nevada website, it has a loan agreement with Taseko Mines Ltd.
(TML) for $350 million of the projected $1.3 billion construction cost
of the proposed New Prosperity mine. This is contingent on TML getting
all permits and full funding, and would be in return for 22% of the
gold the mine produces at a fixed price of US$400 per ounce. Any
difference between this price and the market price of gold would go to
paying off the loan.
According to TML's 2009 updated feasibility study, the mine would
produce just 0.41 gram-per-tonne of gold - almost 20% lower than the
0.5 gram cut-off Mr. Lassonde cited.
Based on Mr. Lassonde's comments - and presuming the deal is designed to
help Franco Nevada maintain the 30% annual return that Mr. Lassonde
highlighted on BNN - it is difficult to see how TML could make money
from this mine based on such a low-grade.
The ore grade for the copper at the site is also very low - only 0.21%
of the ore mined contains the mineral - and prices have dropped in
recent years , which makes it hard to see how TML could make money just
off this, especially given the rising project costs. In fact, mining
giant Barrick Gold has just taken a US $3.1-billion loss on its copper
operations, recorded a US $4.2B write down, and is cancelling or
delaying US $4B in new mines.
"It might make sense for Franco Nevada, but if no one else is going to
make money, why should anyone, including the provincial government
support it,' said Tsilhqot'in Nation Tribal Chair Chief Joe Alphonse.
Franco Nevada can make money on losing mining because its royalties are
based on the value of the gold extract, whereas BC gets no revenue
unless the company makes an actual profit.
Chief Russell Myers Ross of the Yunesit'in First Nation, one of the six
Tsilhqot'in communities, said: "The environmental risks are too high to
begin with. The economic risk, while ultimately the responsibility of
the province, taxpayers and company, calls further into question any
guarantees from the company that the environment and our rights can be
"Why would we - or the province, taxpayers or company investors for that
matter - support a mine that, after paying out on such loans - might
make no money and eventually be abandoned with insufficient funds to
restore the land and lakes."
Meanwhile, the Tsilhqot'in were angered by Mr. Lassonde's view of Canada
and its mining opportunities, which appears to include no recognition
of the country's indigenous peoples. In a keynote speech to the AME BC
Mining Roundup, Mr. Lassonde said: "Ninety percent of [Canada's] population sits within one hundred miles of
the U.S. border, the rest is empty. We should be able to get out there
and make discoveries. For sure there is a lot more out there, but we do
not have the proper tools." He made similar comments on the BNN interview.
"To ignore First Nations and their long history on the land is offensive
and alarming, not just for the Tsilhqot'in," said Chief Marilyn
Baptiste of the Xeni Gwet'in First Nation. "Is it any wonder that
mining in BC, and across Canada, is so confrontational, when we are up
against attitudes that say the land is there for the taking, and that
even very low-grade, high-risk open-pit mines should be pursued as long
as someone somewhere can make money."
Grand Chief Stewart Phillip, President of the Union of B.C. Indian
Chiefs said: "Even with the recent Yukon Court victory on free entry
claim staking and leave to appeal being granted to the Tsilhqot'in
Title case by the Supreme Court of Canada, the mining industry or the
provincial government does not want to discuss the fundamentally
essential legislation, regulation and policy reforms that respect and
uphold our inherent, constitutionally-enshrined, judicially recognized
Indigenous Title, Rights and Treaty Rights.
"Industry and government must end their frontier-style, gold rush
attitudes and discuss the need for critical reformation of the mining
permitting process which is absolutely essential to guarantee any
economic certainty in the mining industry in B.C.," said Grand Chief
Chief Alphonse added: "Surely it is in the interest of government, and
mining companies and all British Columbians and Canadians to work on
changes that encourage cooperation and generate real benefits for all,
instead of sustaining a system that fosters massive, risky mines that
cause great harm, provide benefits to none but a select few, and create
confrontation and conflict."
SOURCE: Tsilhqot'in National Government
For further information:
Chief Joe Alphonse: O: 250-394-4212. C: 250-305-8282.
Chief Marilyn Baptiste: O: 250-394-7023 C: 250-267-1401
Grand Chief Stewart Phillip: 250-490-5314