Crown Butte swaps New World for federal assets

After lengthy negotiations with the U.S. government, Crown Butte Resources (CBL-T) has agreed in principle to a land exchange that would block further development of the US$100-million New World gold project in southern Montana.

In the past year, the New World project had come under intense scrutiny over perceived threats to Yellowstone National Park, some 5 km distant.

Environmental groups claimed that in the event of a tailings spill (which they say is likely in view of the area’s high level of seismic activity), the ecosystem of the park would be seriously harmed, as would the waters of the Clarks Fork river system north of the park.

The agreement calls for Crown Butte to exchange its interest in the New World for property from the U.S. government valued at US$65 million. Since 1987, Crown Butte has spent US$37 million on exploration and site preparation at New World.

The deal requires the government to offer compensatory assets to Crown Butte as expeditiously as possible.

The agreement also includes a provision under which Crown Butte will voluntarily complete its cleanup of the New World site, which has been mined at various times since the 1880s. After liquidating the assets it receives from the U.S. government, Crown Butte will place US$22.5 million in an interest-bearing escrow account to fund the reclamation of New World.

The agreement also results in the settlement of an outstanding citizen lawsuit brought under provisions of the Clean Water Act with respect to discharges occurring prior to the 1950s.

While he supports the agreement, Crown Butte President Joseph Baylis remains firm in his belief that the New World mine could have been operated safely and responsibly, and that pressure brought on the project represented an undermining of the National Environmental Policy Act (NEPA) and environmental impact statement processes.

Nevertheless, said Baylis, “after much consideration, we made a decision based on theunique circumstances surrounding the New World proposal and the economic realities confronting further development.”

He went on to say that “the agreement was made through a series of intense, `good faith’ discussions with the [Clinton] administration and conservationists.

“We believe the exchange agreement is a workable compromise that serves both our shareholders and others . . . interested in the New World project.” The agreement is subject to shareholder approval. Battle Mountain Gold (BMG-N), which owns 60% of Crown Butte, has voiced its support for the deal, as has Noranda (NOR-T), which owns roughly 28% of Battle Mountain Gold.

Depending on the nature of the assets chosen, congressional approval may also be required.

The deal is also conditional upon Crown Butte making “an arrangement” with Margaret Rebe, owner of a portion of the New World project lands. “She has certain rights and issues that we’ll have to address for this to go forward,” Baylis said. He declined to be specific regarding Rebe ‘s role in the transaction.

David Rovig, one of the founders of Crown Butte, was one of four Crown Butte directors to resign from the board after the company scrapped the New World project. (The others were Walter Nash, Craig Thomas and Jack King.) Rovig told The Northern Miner that his resignation was a direct result of the company’s decision. The agreement “was not a deal at all” he said, characterizing it as more of a capitulation. He blamed election-year politics for Clinton’s actions.

Rovig questioned the likelihood of Crown Butte successfully liquidating whatever assets with which the U.S. government provides it, suggesting it will be a “fire sale” scenario that would force Crown Butte to sell the assets for less than their true market value. Baylis, however, disagrees, noting that the assets chosen by the government must be acceptable to Crown Butte, or there is no deal.

“We’ll take into account our ability to find a buyer for the assets,” he said. “We think we’re adequately protected under the agreement.”