Imperial Plunges After British Columbia Mine Waste Spill

Imperial Metals Corp. dropped the most since it began trading in 2002 after the waste storage facility burst at its copper and gold mine in north-central British Columbia, releasing millions of gallons of material and prompting bans on water use in the area.

Imperial fell 39 percent to C$10.19 at the close in Toronto, erasing two years of gains in the Vancouver-based company’s biggest one-day decline.

The storage facility at the Mount Polley mine was breached early yesterday morning, Imperial said in a statement. The breach released water and tailings, the materials left over after processing ore to extract valuable metals.

An estimated 10 million cubic meters (2.64 billion U.S. gallons) of water and 4.5 million cubic meters of fine sand were released, British Columbia Minister of Energy and Mines Bill Bennett said in a statement.

People were told not to drink or use water from local lakes and river systems, the Cariboo Regional District said on its Facebook page. The water-use ban affects about 200 to 300 people in a sparsely populated rural area, Cariboo Regional District Chairman Al Richmond said.

“I’ve never seen anything quite like this in British Columbia and certainly in our region,” he said today in a phone interview. “We’re very concerned about it, but our main concern right now is first of all people and the water.”

Operations Stopped

The breach has been stabilized, though the cause is still unknown, Imperial said today.

Most of the waste flowed into a nearby creek, which expanded in width to 150 feet (46 meters), from about four feet, the Cariboo Regional District said yesterday on its website. The slurry and a large pile of debris seemed to be stationary, it said. A road was also washed out.

“It’s our responsibility to put this right and we will work diligently to do so,” Imperial President Brian Kynoch said today at a news conference broadcast on the BC 1 television channel from Likely, British Columbia, about 400 kilometers (248 miles) northeast of Vancouver. “Our first priority was, and continues to be, the health and safety of our employees and our neighbors.”

Operations have been stopped at the Mount Polley mine and it’s not clear when they’ll resume, the company said. The tailings are alkaline with an average ph of 8.5 and aren’t acid generating, it said.

The B.C. Ministry of Environment took water samples yesterday and said it will seek to expedite the results, Richmond said. People are also being told not to use the water for livestock, he said.

“We would wait for the samples that were taken yesterday with the Ministry of Environment to come back with those numbers for us,” Richmond said. “At this time we don’t know exactly what the chemical makeup is, what’s actually in the river.”

Lead, Arsenic

Imperial disposed of materials including lead, arsenic and mercury in tailings on site at Mount Polley, according to preliminary data on Environment Canada’s website.

The tailings dam operated within design limits and specifications and monitoring instruments and onsite workers had no indication of an impending breach, Imperial said today. No deaths or injuries had been reported, the company said.

In February, larger Canadian metals producer Teck Resources Ltd. reported a spill of sodium hydroxide into a sewer feeding the Columbia river.

The Imperial news is “extremely negative,” said Aleksandra Bukacheva, a Toronto-based analyst at BMO Capital Markets, who downgraded the shares to the equivalent of sell.

“The uncertainty surrounding the extent and timelines of cleanup, costs and operations suspension at Mt. Polley will remain a significant overhang on the company’s shares,” she said in a note today. “Additionally, this unfortunate development is likely to trigger increased regulatory scrutiny and increase capital costs across all bulk tonnage copper and gold development projects in British Columbia.”

Red Chris

Murray Edwards, chairman of Calgary-based Canadian Natural Resources Ltd., owns 36 percent of the company’s shares and has been its largest holder since 1994, Imperial said on its website.

The Mount Polley mine was expected to produce 44 million pounds of copper, 47,000 ounces of gold and 120,000 ounces of silver this year, according to Imperial’s website. The company also operates a gold mine in Nevada and is building a new mine, Red Chris, in northwest British Columbia that is scheduled to start commissioning during the third quarter, according to the website.

BMO had expected Mount Polley to account for 83 percent of Imperial’s earnings this year, and just 8 percent in 2015 as output from Red Chris increased to dominate the company’s earnings and cash flow.

‘Public Interest’

Now startup of the new mine may be delayed as a result of the Mount Polley accident, said Raymond Goldie, a Toronto-based analyst at Salman Partners Inc.

“I’m sure that there would be a lot of public interest in delaying Red Chris until they’re sure that Red Chris’s tailings dam does not have whatever the flaw was that related to Mount Polley,” he said by phone today. “There likely will be a year’s delay in the development of Red Chris.”

The fallout from past spills, including Boliden AB’s tailings dam failure in Spain in 1998, suggest an investigation into the cause of the breach may take about eight months, Goldie said.

The accident may also make it more difficult for companies seeking approval for new mine projects in British Columbia, depending on what the cause of the breach is found to be, Goldie said.

“This is not going to make it any easier,” he said.

Before it's here, it's on the Bloomberg Terminal.