Shares of Imperial Metals (TSX: III; US-OTC: IPMLF) dropped 40% after a dam for the tailings pond at its Mount Polley gold–copper mine in B.C.’s Cariboo region failed, spilling millions of cubic metres of waste water and suspended mine waste into nearby waterways.
The tailings dam breach happened on Aug. 4 and sent an “estimated 10 million cubic metres of water and 4.5 million cubic metres of fine sand into Polley Lake,” B.C.’s Minister of Energy and Mines Bill Bennett said. He added that “Hazeltine Creek flows out of Polley Lake, and the flow may have continued into Quesnel Lake.”
In an Aug. 5 news conference, company president Brian Kynoch said: “I apologize for what happened. If you’d asked me two weeks ago if this could have happened, I would have said it couldn’t.”
The dam was operating within design limits, and Kynoch doesn’t know why it failed. “Until we do an investigation, I’d be just speculating,” he says.
The company notes that the dam’s monitoring instruments gave no warning of a pending breach.
Aerial footage from the area showed the extent of the massive spill. Sludge and murky water gushed down a creek. Debris and logs floated at the water’s surface. One road was washed away.
“The main slurry flow went down Hazeltine Creek where it meets Quesnel Lake. The slurry and a large debris pile appear to be stationary at this point,” the Cariboo Regional District reported. Hazeltine Creek, originally a metre wide, has now swollen in size to 46 metres.
Imperial says the breach has been stabilized, and no fatalities or injuries have been reported.
The company is working with government officials for equipment to collect the debris from Quesnel Lake.
Kynoch says Polley Lake is 1.5 metres above its normal level and that steps are being taken to bring down the water level, adding that no elevation is visible in Quesnel Lake.
Asked about the water’s quality, Kynoch said the tailings are “not acid generating,” but that the suspended solids in the water contained low arsenic and metal content.
Government officials are taking water samples from Quesnel Lake, with results expected out shortly.
As a precaution, the Cariboo regional district has issued a water ban, advising people not to drink or bathe in the water, or let their pets or livestock drink the water.
The waterways affected by the ban include Quesnel Lake, Polley Lake, Hazeltine Creek and Cariboo Creek, as well as the Quesnel and Cariboo River systems up to the Fraser River. It impacts 300 to 400 residents and excludes those in Williams Lake, and other towns along the Fraser River.
Imperial has placed the Mount Polley mine on care and maintenance, putting the jobs of the operation’s 380 employees at stake.
“We need a few more days to see what’s going to happen. But the crews have been asked to stay at home because we’re not operating a mine,” Kynoch told concerned residents at the conference.
The company does not know when operations would resume or how many employees it will dismiss, but Kynoch says Imperial accepts full responsibility for the disaster.
Raymond James analyst Adam Low estimates that the Mount Polley open-pit mine will remain closed for at least the rest of the year to provide “time for investigations, reclamation of the damage and reconstruction of the tailings dam.”
Looking at past mine-waste spills, Low estimates it could cost Imperial US$25 million to repair the dam, and another US$50 million in environmental remediation expenses. Legal costs to defend potential environmental lawsuits would be extra.
Low has reduced his target price to $11.75 from $17.50, but kept his “market perform” rating.
Meanwhile, the B.C. Ministry of Environment says it had warned the company about the mine’s tailings pond levels several times before the breach. Why the miner supposedly ignored these warnings is unclear.
Imperial lost 40% or $6.82 to close the day at $9.98, on more than 2 million shares traded.
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