Teck goes ahead with Aqqaluk (May 21, 2010)

Vancouver – After months of uncertainty, Teck Resources (TCK.B-T, TCK-N) has announced it is proceeding with the development of the Aqqaluk deposit at its Red Dog zinc mine in northwestern Alaska.

The new deposit is essential for Teck to maintain production levels at Red Dog as the Main deposit is running out after being mined for over 20 years. Aqqaluk, sitting next to the Main deposit, holds 51.6 million reserve tons grading 16.7% zinc and 4.4% lead that could extend the life of the mine for another 20 years.

The expansion, however, was thrown into doubt when several Alaskan environmental groups, citizens and two villages appealed the 2010 water discharge permit issued for the mine, officially known as the National Pollutant Discharge Elimination System (NPDES) permit.

The 2010 permit had relaxed the limits on total dissolved solids (TDS) and some metal concentrations allowed in the water discharge compared with the last permit issued in 1998.

Since the appeal, Teck has been in discussions with the United States Environmental Protection Agency (EPA) to clarify what one senior VP at Teck described as an “extremely complex legal situation.”

The company has now clarified that it has the necessary permits in place to develop the Aqqaluk deposit and will be proceeding on schedule. Teck also believes that there is a “viable plan in place to resolve the 2010 permit appeal and will continue to work with regulators moving forward.”

The news came as a May deadline loomed for the company to start stripping the Aqqaluk deposit. Had the company not proceeded on time it would have faced a possible reduction or even shut-down of operations at Red Dog later this year as the Main deposit becomes uneconomical.

The announcement was welcomed by the NANA regional corporation, owned by the Iñupiat people of Alaska. Teck leases the mine and concentrator properties from NANA and has a partnership with it at Red Dog that substantially benefits the more than 11,400 native shareholders.

While Teck has determined that it has the necessary permits, it will be subject to the stricter 1998 permit levels for some specific criteria dealing with discharge until the appeal is resolved. The company, however, will not be able to meet those levels. Instead it will be releasing water that meets interim discharge limits contained in a 2008 court settlement agreement, which were set by a supplemental environmental impact statement conducted by the EPA. Teck maintains that its water discharge will be “protective of water quality and the environment.”

In an April conference call Peter Rozee, senior VP of commercial affairs for Teck, explained that the permitted TDS levels are unachievable because of the volume of water that has to be discharged in a short amount of time.

“Something like 1.5 billion gallons of water has to be discharged in a short window measuring 100 days or so….there is just nothing commercially feasible to deal with that volume of water being discharged during that short period,” said Rozee.

In the same conference call Teck president Don Lindsay presented the case as a regulatory issue. The appeal is partially based on the question of whether the Alaska Department of Environmental Conservation had the proper procedures in place to relax the water discharge levels.

Teck has long been public about the fact that it cannot meet the TDS levels set by the 1998 discharge permit, but Lindsay has expressed his confidence in the water quality.

“It’s very important that people are aware that before there was a mine there, there were no fish in Red Dog Creek because of the natural occurring grade of mineralization in the region. Since there has been a mine and we treat the water, there are now fish that live and spawn in Red Dog Creek. And so we have an extremely high degree of confidence in the quality of the water,” said Lindsay.