Kensington tailings on hold

The U.S. Ninth Circuit Court of Appeals in San Francisco has issued a temporary injunction halting construction activities on the tailings dam portion of Coeur d’Alene Mines‘ (CDM-T, CDE-N) Kensington gold mine, near Juneau Alaska.

The Southeast Alaska Conservation Council (SEACC) and the Sierra Club sought the temporary injunction. It will remain in place while the court reviews the plaintiff’s appeal of an earlier court ruling that upheld tailings permits previously issued by the U.S. Army Corps of Engineers.

The injunction does not affect construction of the mine or mill facility.

“While we are disappointed with the temporary injunction, we continue to believe we will prevail on the merits,” said Coeur CEO Dennis Wheeler in a prepared statement.

Wheeler added that the project permits have already withstood several administrative and legal challenges, and the company would continue to vigorously defend them.

Earlier this month, the U.S. District Court for the State of Alaska dismissed the plaintiff’s suit challenging the company’s permit allowing it to dispose of tailings into Lower Slate Lake.

Coeur plans to spend some US$100 million at Kensington this year. Kensington is slated to begin producing around 100,000 oz. of gold per year in 2007; cash costs are pegged at around US$250 per oz.

At the end of 2005, Kensington had probable reserves totalling 4.2 million tons running 0.25 oz. per ton, for 1.05 million contained ounces. Indicated resources came to 617,000 tons at 0.44 oz. per ton, with another 2.5 million tonnes of inferred material running 0.23 oz. gold.

SEACC is worried that the disposal of 4.5 million tons of mine tailings into the lake will “essentially kill all fish in the lake and make it uninhabitable for aquatic life.” The group is also skeptical of Coeur’s plan to restore the lake once operations cease in about 10 years.

The environmental groups are also concerned that allowing Coeur to dispose of its tailings in the freshwater lake sets a precedent for Northern Dynasty Minerals‘ (NDM-V, NAK-X) embattled Pebble project.

Coeur says that throughout its development, Kensington has been subject to more than 900 environmental studies, and has received more than 25 permits from federal, state and local agencies.

Most recently, the U.S. Bureau of Land Management (BLM) awarded Kensington its 2006 Hardrock Mineral Community Outreach and Economic Security Award to recognize the company’s responsible development of the project.

Shares in Coeur were off 3 pennies at US$5.33 in late-morning trading in New York following the news on Aug. 25. The shares trade in a 52-week range of US$3.40 to US$7.37.