A small gold mine on an uninhabited island on B.C.’s north coast has some big problems.
Just seven months after its Tel mine was declared to be in commercial production, Banks Island Gold Ltd. (TSX-V:BOZ) has been forced to shut it down, putting 100 people out of work and leaving investors with shares that fell more than 70% in value over the course of one week.
There is some question whether the mine can reopen, as the company had been struggling with a $14 million deficit before the mine was shut down and says it will need to seek “immediate financing” in order to restart.
The mine was ordered shut down for unauthorized discharges of effluent from its mine site that resulted from flooding. An inspection by the Ministry of Energy and Mines also found a number of permit violations, including the processing of ore from an unpermitted mine site.
The company is facing potential legal action from the Gitxaala Nation, which says the Banks Island Gold mine is an example of project splitting and scoping – a tactic used to get industrial projects approved without having to go through a rigorous Environmental Assessment Office (EAO) review.
“They basically made this mining outfit just big enough so that it didn’t require a full [environmental assessment],” Gitxaala Chief Clarence Innis told Business in Vancouver.
“In my experience, in this industry, this is a classic move,” said James Witzke, environmental assessment manager for the Gitxaala Nation. “You call it project splitting.”
Banks Island Gold has one operating mine on Banks Island – the Tel mine – and three other potential mine sites: the Bob, Kim and Discovery, where it has been conducting bulk sampling (the mining of ore to test for mineralization).
Unlike most mines in B.C., the company does not store mine waste in a tailings pond. It puts the processed ore back underground, although Al Hoffman, chief inspector of mines, said it wasn’t being done properly.
The company was found to be trucking tailings that were supposed to go underground at the Tel mine and trucking it to the Bob site, where it was dumped into a “glory hole” – a depression created when the workings from an old underground mine break through the surface.
Heavy rain and a failed sump pump resulted in flooding that spilled a “relatively small” amount of water and tailings into local waterways on June 25.
“Again, this was contrary to their permit,” Hoffman said.
Since the mine site is near fish-bearing streams flowing to tidewater, the Gitxaala are worried about heavy-metal contamination because they harvest seaweed and shellfish on Banks Island.
It was only when a whistleblower who works at the mine informed government officals about the spill that a site inspection occurred and a number of permit violations discovered.
On July 9, provincial authorities conducted a site visit, issued a pollution abatement order and ordered a cleanup.
On July 15, the Energy and Mines Ministry ordered the operations shut down. The company did not issue a press release about the shutdown order until July 24. Moreover, it appears not to have complied with it.
In a subsequent press release on July 28, the company said it was continuing to process ore. On August 4, it put out another press release stating that, on July 31, the operation had been shut down – two weeks after the shutdown order was made.
Environmental group Pacific Wild took aerial photos with a drone of the tailings pond breach. B.C.'s chief inspector of mines said the spill was relatively small, but called the mining company's non-compliance with provincial regulations "very unusual." | Photo and labels: Pacific Wild
The company also disputed media claims about a potentially toxic spill, stating that water sampling showed no adverse effect on fish.
“Toxicity testing of the water spilled at Bob indicated 100% survival of rainbow trout and Daphnia magna,” the company stated in its press release.
The Gitxaala are skeptical, however, and are hiring their own environmental consulting firm to conduct an independent review. Witzke said he has questions about where and when the sampling was done.
“Given their track record and what we’ve seen in the past, we have absolutely zero confidence in how they’ve collected this sample,” he said.
Banks Island CEO Benjamin Mossman did not return calls to BIV.
Hoffman confirmed that the company had been processing ore from mine sites that are not permitted.
Only the Tel is a permitted mine, so the company is not supposed to be processing ore from bulk sampling, he said.
“They were producing from the Discovery mine and trucking it to the Tel mine, where the processing plant is,” Hoffman said. “They were only permitted to process Tel ore, so they were out of compliance with their permit.
“This level of confusion and non-compliance is very unusual,” Hoffman added.
According to Energy and Mines, the company will need to submit a new plan to amend its Mines Act permit to explain how they plan to manage its tailings.
Asked whether he thinks the problem with Banks Island was a lack of oversight on the government’s part or simply a company not following the rules that are in place, Witzke said it is a bit of both.
Had the mine been subject to a full environmental assessment (EA) process, some of the problems might have been avoided, he said.
“We said right from the get-go this needs to have a more [thorough] environmental assessment completed on it,” Witzke said.
Ian McAllister, who shot surveillance video and photos of the Banks Island mine for his Pacific Wild environmental organization, agrees the project should have had a full environmental review.
“I can only imagine that the fisheries value alone would have ensured that that mine and the tailings disposal that they have put together there would never have been allowed,” he said.
Under the wire
The Banks Island mining project appears to have just barely squeaked under the wire without tripping a full assessment.
For a mineral mine, a full EA is triggered if the mine would produce 75,000 tonnes or more of ore per year. That’s how much the company said the mine would produce, once fully developed, according to a company technical report.
But when it made its application to government agencies, it based its mining plan on an annual production of 73,000 tonnes per year – just 2,000 tonnes short of the EA trigger.
The project was approved through a project-specific mine review committee, which is far less rigid than a full EA process.
Banks Lake Creek, leading from the Banks Island Gold mining operations. The Gitxaala Nation fears that fish-bearing streams may have been contaminated by a spill from an underground tailings dump | Pacific Wild
“There’s certainly more scrutiny with an environmental assessment process,” said Tara Ammerlaan, program manager for the Fair Mining Collaborative. “There’s a public comment period, there’s just a lot more that goes on.”
As Banks Island has several discovery and prospect sites on Banks Island, the Gitxaala fear that the company could incrementally build a mining operation that, considered in its full potential, should have been subject to a full environmental assessment.
By breaking a large industrial project down into smaller chunks and developing them incrementally, companies can avoid triggering a full EA. One example of this was the Komie North mine– a quarry that would mine sand for use in hydraulic fracturing.
The company, Canadian Silica Industries, has six licences for potential quarries but limited its application to just one, which, at 240,000 tonnes of sand, did not trigger a full EA.
In a recent court decision, the BC Supreme Court sided with the Fort Nelson First Nation, which argued that it should have been subject to a full environmental assessment.
The court took issue with the fact that the 240,000 tonnes per year cited by the company was only the sand that would have value for sale to the fracking industry and did not take into account the huge volume of waste gravel that would have to be mined as well.
The Environmental Assessment Office’s decision was overturned by judicial review. The BCSupreme Court ruled on July 7 that the EAO’s interpretation for a production threshold was “unreasonable.”
It also ruled that, in failing to require an EA, the government had a duty to consult the Fort Nelson First Nation. The court ordered the EAO to reconsider the application.