Coeur’s Kensington Kiboshed

Vancouver — Coeur d’Alene Mines (CDM-T, CDE-N) has been hit with an appeals court ruling that effectively revokes permitting for the use of a lake as a tailings facility at its Kensington gold mine, under development in Alaska.

The court challenge was lodged by the Southeast Alaska Conservation Council (SEACC) in the U.S. Ninth Circuit Court of Appeals against Coeur and the U.S. Army Corps of Engineers, which granted the permits. The judgment, which says the court intends to “reverse and vacate” permits associated with the tailings facility, overturned a previous lower federal court decision from August 2006 that dismissed SEACC’s complaint.

Coeur, which is in the middle 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.

“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,” said Coeur chairman, president and CEO Dennis Wheeler in a statement.

“We followed the rules and established process set by the regulatory agencies involved to obtain this permit,” Wheeler continued, referring to a Section 404 Army Corps of Engineers permit the company was granted in 2005. “As a result, we are simply at a loss to explain the basis for the court’s decision.”

He said the company would consider its options for appeal after a full explanation of the court’s decision is released.

Under the 2005 permit, Coeur would be allowed to discharge 210,000 gallons of slurry (including 1,310 tonnes of mine tailings) per day from its froth-flotation mill into the 9-hectare Lower Slate Lake, in the Tongass National Forest. SEACC contended the permit violates the U.S. Environmental Protection Agency’s Clean Water Act.

The slurry-tailings discharge was expected to raise the lake bottom by about 15 metres and triple its surface area. It would also likely kill most of the aquatic life within it. In addition, SEACC questioned Coeur’s plans to restore the lake after the mine is closed, citing the potential lasting toxicity of the tailings.

Coeur previously began dam development on Lower Slate Lake, building a temporary “coffer dam,” but was ordered to stop under an appeal injunction in mid-2006. Under the design plans, the final dam would be about 30 metres in height and 150 metres long.

Coeur also brought forward concerns about the possible effects of weathering on its temporary dam and sought a motion to remove the injunction, which was denied. The ruling also denied approval of a request by the Army Corps of Engineers for construction of a diversion ditch (Western Interceptor Ditch).

The court found that both requests would violate the spirit of the injunction, intended to prevent further environmental degradation of the site.

“Rather than address the dangers it perceived to the integrity of the dam by removing the hastily constructed temporary dam. . . or utilizing other methods to resolve the problem created by the construction of the dam, Coeur Alaska seeks to fashion a remedy that furthers its intention of disposing of tailings in Lower Slate Lake,” said the ruling.

Before the recent setback, Coeur expected the Kensington mine to begin production before the end of this year. The operation is expected 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 ounces (4 million tonnes at 10.6 grams gold per tonne) plus indicated and inferred resources of 3.9 million tonnes at 7 grams gold (866,000 contained ounces).

Extending an olive branch Wheeler said: “The plaintiffs (SEACC) 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 implications for tailings design at a number of other proposed mine developments in the U.S., specifically Northern Dynasty Minerals’ (NDM-V, NAK-X) large Pebble copper-gold-molybdenum project in southwestern Alaska, which has borne significant opposition.

On the ruling, shares of Coeur were off 4% in New York trading to close down US17 at US$3.95 apiece. The stock has a 52-week trading range of US$3.90-US$7.37.