CanZinco heading for showdown with NWB?

CanZinco Ltd., the owner of the Nanisivik Mine, is headed for a possible showdown with the Nunavut Water Board over how much money the company must post as security to ensure a proper environmental clean-up of the Nanisivik mine site.

The water board, in a new water licence issued Oct. 10, says the company must put up a $17.6 million security by tomorrow, Nov. 9.

CanZinco, on the other hand, asserts that only $9.2 million is needed to close the mine and reclaim the site, and that their security deposit should be reduced.

“I think there has to be some further explanation that has to be made to the board with respect to our estimate of closure costs, and hopefully we can make that submission to them in the next little while,” said Bill Heath, manager of the Nanisivik mine.

Heath said, though, that CanZinco won’t have time to prepare that submission by the Nov. 9 payment deadline.

So they’ve asked the water board for another 30 days to come up with a security deposit, a request that the board may decide on by today, Nov. 8.

The company also wants more time to produce a long list of documents that the water board is requiring, including a second environmental assessment, and a human health risk assessement.

“There’s costs associated with them, and there’s scheduling difficulties. Some require outside expertise and outside consultants who may or not be available… There’s an awful lot of information that’s required of us, and 30 days is not a long time,” Heath said.

The high security payment is required under a new get-tough policy issued earlier this year by the Deparment of Indian Affairs and Northern Development.

Called the “Mine Site Reclamation Policy for Nunavut,” it’s aimed at ensuring mine developers put up enough money to clean up mine sites after they close.

It’s partly inspired by the fiasco that beset Yellowknife a few years ago when the former Royal Oak mine closed and its bankrupt owner left no funds to clean up a large stockpile of arsenic that’s now beginning to leak into Great Slave Lake.

On top of that, a recent report by Johanne Gélinas, Canada’s Commissioner of the Environment and Sustainable Development, estimated the cost of cleaning up toxic waste at abandoned mines across northern Canada at about $555 million.

Gélinas, who works under auditor general Sheila Fraser, recommended that Ottawa adopt a “polluter-pays” principle “to all northern mining projects.”

For the Nanisivik mine, CanZinco’s new, seven-year water licence is the main tool that government regulators will use to ensure that CanZinco cleans up the site according to approved plans.

Although DIAND didn’t issue its new policy until after the water board began hearings on CanZinco’s new licence, their tough new approach is reflected in the high security deposit.

Zinc and silver production there ceased at Nanisivik on Sept. 30. About 11 or 12 CanZinco employees are still at the site, performing various “care and maintenance” duties. The bulk of the clean-up work will start next summer.

Heath said it’s CanZinco’s position that the water board may be making some accounting errors in its calculation of mine closure costs.

“Some of our costs simply aren’t in the right column,” Heath said.

But he said the water board has already recognized that CanZinco knows the site better than DIAND’s consultants, and that the company is still hopeful about getting a reduction in the size of its security deposit.

“I think the water board left the door open to us to say here’s why we think our closure costs are the right costs,” Heath said.

“We’re certainly hopeful that we can persuade the water board, maybe not all the way, but certainly that $17.6 million continues to be an overstatement of the proper closure costs for Nanisivik.”

He also pointed out that the company has already spent a lot of money on clean-up expenses, including about $3 million in clean-up supplies that are now on site.

“It may not be in the form and the fashion that is acceptable to DIAND but there’s a fair bit there,” Heath said.

The company has also commissioned a Toronto engineering firm to estimate the value of the assets left at the Nanisivik town site.

“We said, if you were commissioned to go and build a replication of Nanisivik some place in the High Arctic, how much would it cost?” Heath said.

That study is showing that it would likely cost “many tens of millions, approaching $100 million” to build another Nanisivik town site from scratch, Heath said.