Coeur dealt blow in Kensington ruling

Vancouver – Coeur dAlene Mines (CDM-T, CDE-N) was hit with an appeals court ruling that effectively nullified permitting for use of a lake as a tailings facility at its Kensington gold mine under development in southeastern Alaska.

The challenge lodged by the Southeast Alaska Conservation Council (SACC) against Coeur and the U.S. Army Corps of Engineers was held before the U.S. Ninth Circuit Court of Appeals that reversed a previous lower federal court decision in the ruling. The judgement results in vacating of the permits associated with a tailings facility at the Kensington gold mine.

Coeur, which is in the midst of construction at the mine located about 72-km north of Juneau, has been instructed to cease all activity relating to the tailings facility until a final ruling on the disposal plan is reached.

In a prepared statement Coeur’s chairman, president and CEO Dennis Wheeler said, “We are surprised and disappointed in the Court’s announcement and what it might mean for the over 400 Kensington workers and the economy of Southeast Alaska.

Working under its Section 404 Army Corps of Engineers permit obtained in 2005, Wheeler continued, We followed the rules and established process set by the regulatory agencies involved to obtain this permit. As a result, we are simply at a loss to explain the basis for the Court’s decision. Once the Court releases a full explanation of its ruling, the company will consider all options of appeal.”

SACCs successful challenge focused on the permit allowing discharge of 210,000 gallons of slurry (including 1,310 tonnes of mine tailings) per day from the froth-flotation mill into Lower Slate Lake, a 9-ha lake within the Tongass National Forest. The group contended the Army Corps of Engineers permit allowing use of the lake as a tailings disposal site violates the U.S. Environmental Protection Agencys Clean Water Act.

The slurry-tailings discharge is expected to raise the lake bottom by about 15 metres and triple its surface area. There is also the likelihood that most of the aquatic life within it will be killed by the discharge. The group also questions subsequent restoration of the lake citing the potential lasting toxicity effects of the tailings.

Coeur previously initiated dam development on Lower Slate Lake, which saw construction of a temporary coffer dam, but was ordered to cease under an appeal injunction in mid-2006. Under design plans the final dam would be about 30-metres in height and 150-metres long.

Coeur also brought forward concerns on the possible effects of weathering on its temporary dam and sought a motion to remove the injunction but was denied. Subsequently, the Army Corp sought court authorization for construction of a diversion ditch (Western Interceptor Ditch) but was also denied in the latest ruling.

Subject to its permitting litigation, Coeur expects its Kensington mine to begin production in late-2007. The operation is anticipated to produce up to 150,000 oz. gold annually in its initial years. The company recently tabled an increase in its probable reserve base to 1.35 million contained oz. (4 million tonnes at 10.6 grams gold per tonne) plus further indicated and inferred resources of 3.9 million tonnes at 7 grams gold (866,000 contained oz.).

Extending an olive branch Wheeler continued, “The plaintiffs (SACC) expressed the hope of working with Coeur on possible solutions to this issue. Separate and apart from any possible appeal of the Court order, we intend to take them up on that offer.

The ruling could have potential precedence in a number of other proposed mine developments in the U.S., specifically Northern Dynasty Mineralss (NDM-V, NAK-X) large Pebble copper-gold-molybdenum project in southwestern Alaska.

Shares of Coeur were off 4% in March 19th New York trading to close down 17 at US$3.95 apiece. The stock has a 52-week trading range of US$3.90-to-$7.37.