teck com/environmental mine viability

Big environmental questions are hanging over Teck Cominco's mine.

Getting the Lead (and Zinc) Out, Politically

By Jack Lifton
14 Feb 2006 at 01:18 PM EST

FARMINGTON HILLS, Mich. (ResourceInvestor.com) -- One mining site in Alaska now produces essentially 100% of the lead/zinc ore still mined in the United States. And, one smelting and refining operator, Canada’s Teck Cominco, Ltd. [TSX:TEK-SVB] in British Columbia, processes all of the Alaskan material.

Teck Cominco’s operation at Trail, B.C., is today the only producer of new lead and zinc from ore in North America outside of Mexico. But it is unlikely that this situation will continue, because Teck Cominco is under serious attack by American environmentalists and a Canadian Indian tribe.

American environmental activists have succeeded in ending the smelting and refining of lead, and the zinc normally associated with lead deposits, found in the contiguous United States. Just as with those of other strategic metals the ample deposits of lead and zinc ores in the United States are no longer being mined, smelted or refined in the United States.

The Big River Zinc Company in Illinois, which up until recently smelted and refined lead/zinc ores from Illinois, Kansas, Oklahoma and Missouri and which has recently been owned and operated by Korea Zinc, is in the process of being sold to a U.K. company called ZincOx Resources [AIM:ZOX], which plans to continue operating only the last stages of the facility to produce zinc and zinc products from secondary (i.e., scrap) sources such as the bag house dust collected from steel mills that manufacture galvanized (zinc coated) steel used mainly in the production of corrosion resistant car and truck bodies.

Korea Zinc has determined that it can no longer get enough feedstock to run the Big River operations in Illinois economically within its global business model. This decision is due in no little part to the decision by EaglePicher [OTCPK:EGLP], once America’s largest producer of lead, to reorganize in the face of massive environmental pressure brought against its 160 year old lead mining operations in Missouri, Kansas and Oklahoma. Eagle Picher in 2005 reinvented itself, through a bankruptcy, as a technology company. One that is no longer in the lead and zinc business except for one of its units, which the company hopes, limited liability, which will continue on as a defendant in environmental lawsuits

Korea zinc determined that in order to operate Big River as an integrated operation it would have had to invest more than $500,000,000 in pollution controls for the lead/zinc ore smelter in order to meet increasingly stricter U.S. EPA and OSHA standards. ZincOx will not process ore, and the recovery and purification of zinc from zinc containing slag and bag house dust is mainly a reduction operation where metal oxides are reduced with carbon or carbon containing gases, so that the ‘waste products’ are water and carbon dioxide.

Big River will probably remain in operation as the largest producer of zinc from secondary (scrap) sources. All new zinc, as well as all new lead, used in the United States from 2006 on will be imported. The balance will be recovered from, mainly domestic, scrap.

For all intents and purposes, the only integrated producer of new lead and zinc in North America, outside of Mexico, is now Teck Cominco, Ltd. of British Columbia, Canada. The Trail, B.C., operations of Teck Cominco produced 300,000 tonnes of lead and 70,000 tonnes of zinc last year. Interestingly enough, a major source of ore for Trail is a mine in Alaska, the “Red Dog Mine” owned by a Teck Cominco, Ltd., subsidiary named Teck Cominco Alaska, Inc., that mechanically concentrates its ore and ships it to Trail for smelting and refining.

The Lawsuit

American environmentalists in a unique application of American law have challenged Teck Cominco’s right to continue operations in Canada based on pollution by Teck Cominco, British Columbia, of the Columbia River into which the company puts what it states that it considers to be waste with immobilized (chemically inert) metallic residues and also into which the company admits it put toxic liquid wastes until recently. The Columbia eventually flows to the sea partly through the American State of Washington and the American environmentalists assert that this is enough “contact” with the United States to give American courts jurisdiction over Teck Cominco, Ltd., a foreign owned corporation operating completely in a foreign country.

This is a lawsuit with dramatic consequences for the American and Canadian mining industries and both the Canadian and American Federal Governments are watching it carefully, because it presents an unavoidable issue of sovereign interference. In addition to this, if that weren’t enough, a Canadian Indian Nation (another “sovereign” entity) has claimed that the company polluted a lake that is tribal territory and the Indians want the lake remediated and the polluting operations stopped until they can be resumed without further pollution.

The issue in this lawsuit has been used, but narrowly drawn, in the past. For example, I, personally, was an expert witness 30 years ago in a suit by the State of Michigan versus the Dow Chemical Company (of Canada), which grew out of a spill of metallic mercury at Dow’s caustic chlorine works on the Thames River in Sarnia, Ontario, Canada. The Thames flowed into the St. Clair River and that river flowed into Lake Sinclair. The water from that Lake then flowed through the Detroit River, Lake Erie, Lake Ontario and finally down the St. Lawrence River to the Atlantic Ocean. My part in the law suit was to explain to the court how mercury was carried both solubly and insolubly into the water flow so that the possibility of mercury from a pool under the Thames River “touching’ Michigan’s shoreline was 100%.

The Michigan judge in the first court in which that suit was brought ruled that the pollution “touched” Michigan, so that his court had jurisdiction of the subject matter. That suit was by Michigan against a Michigan Corporation doing business in and creating American pollution originating in a foreign country. The suit being pursued today in the State of Washington is by an “injured” American party, the environmental lobby, against a foreign owned and operated company that is producing the pollution in another country, but does not otherwise operate in the United States.

If the environmentalists in Washington win, and the Canadian government refuses the enforce the judgment of the American court, then the environmentalists will be able to move to enjoin Teck Cominco, Ltd. from selling its lead and zinc in the United States under any corporate name. If the environmentalists win and the Canadian government allows the American court to enforce the judgment then Teck Cominco, Ltd. may have to shut down. In either case the result would be that the price of lead and zinc would go up, so that every consumer will pay more for products made from lead and zinc, since their would then be no more production of either of these metals from ore in North America other than in Mexico.

Galvanized steel for cars and lead for storage batteries (automobiles must have them) have been increasing in price steadily since the start of the global run on commodity metals. These increase have been due to demand outpacing supply. If Teck Cominco, Ltd’s output is now removed from the supply side of the equation the prices will have another reason to go higher.

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