Vancouver-based PLACER DOME INC. is facing not one but two legal actions announced this week. I cannot predict the outcomes, but I guarantee they will be drawn out and as messy as the tailings dam failure that sparked the first one.
The first is a lawsuit filed by the Philippine provincial government of Marinduque over two tailings dam failures at the Marcopper mine, one in 1993 and the other in 1996. The mine is now closed, but at the time of the spills Placer Dome had a 39.9% interest, which it has since sold. The balance was owned by the Philippine government, and previously by deposed Philippine dictator Ferdinand Marcos. After the second spill, Placer Dome voluntarily contributed more than US$70 million toward cleanup and a further US$1.5 million to villagers affected by the spill. Remediation efforts have since been taken over by the Philippine government.
The provincial government has filed its lawsuit in Nevada where Placer Dome has considerable assets. It is seeking US$100 million for environmental rehabilitation and compensation for nearby residents.
The second legal action concerns development of the Cerro Casale copper-gold deposit in Chile. Placer Dome, which holds a 51% interest, elected last week not to proceed with the project. In response, partners BEMA GOLD (24%) and ARIZONA STAR (25%) have issued a notice of default, insisting that Placer Dome has reneged on their shareholders' agreement. The larger company has 30 days from the notice to comply with the conditions, after which time Bema and Arizona Star say they will go to arbitration to cover Placer Dome's share of the project.
At stake is a 170,000-tonne/day open pit mine project. Placer Dome's own feasibility study estimates that the deposit contains over 20 million oz of gold and 2.5 billion tonnes of copper. Annual gold production would be nearly a million ounces. Projected total cash costs are US$225/oz of gold, but it will cost US$1.65 billion to develop the mine.
Millions of dollars, maybe tens of millions, will be spent by both Placer Dome and the Marinduque government in the course of the first lawsuit. On one hand, that money could better be spent on cleaning up the Marcopper site. On the other hand, if Placer Dome capitulates, this might lead to many continuing demands for money from this Asian nation.
The intention of Bema and Arizona Star to take their disagreement directly to arbitration is a sensible and much less expensive choice. How civilized, one might even say Canadian, is their decision.