Goldcorp Wants Out of Cleanup Guarantee for Wharf Mine in Black Hills

Did you hear the one about the Canadian mining company trying to exploit the people of South Dakota? Wharf Mining is busy vaporizing mountains in the Black Hills. For that privilege, the state requires Wharf to put up irrevocable letters of credit worth $67.6 million. Apparently maintaining those letters costs Wharf and parent company Goldcorp, the largest gold miner in the world, $400K a year. Wharf and Goldcorp want to cut that cost in half by getting rid of those letters of credit.

To assure us that we won't be stuck with the clean-up costs of a cyanide leak or reclamation after they get tired of digging, Goldcorp would rather just tell us what they are currently worth:

Wharf Resources wants to use its parent company’s net worth as financial assurance against cyanide pollution and post-closure problems at its Black Hills gold mine, company officials told the state Board of Minerals and Environment on Thursday.

...Mike McClelland, from Goldcorp’s corporate center in Toronto, spoke to the board, as did Wharf’s local legal counsel, attorney Max Main. “It will result in significant savings,” Main said.

...Goldcorp is capitalized at $23 billion on the New York Stock Exchange and is the largest gold mining company in the world, according to McClelland.

He said he understands there would be greater risk for state government if there is a switch from letters of credit. He said the company takes a deduction from severance tax for the letter of credit expenses and if the switch is made would pay about $20,000 more annually to the state treasury in additional tax.

...McClelland said Wharf is a small mine within Goldcorp’s international operations. He said the $200,000 of savings is “small potatoes” within a $23 billion company but he needs to look at everything to improve the company’s financial efficiency.

“If it’s something you’re willing to consider we’ll start putting a pencil to paper,” McClelland said [Bob Mercer, "Goldcorp Seeks Break on Financial Assurances at Wharf," Pierre Capital Journal, 2013.08.16].

I can tell Goldcorp where to put that pencil. When it comes to protecting the Black Hills, we must not settle for the figment of a creative accountant's imagination. We need an ironclad guarantee of cash in the bank to fulfill a mining company's obligations. We did Brohm Mining a favor by falling for the net worth trick, and when Brohm went bankrupt, taxpayers got stuck with the costs.

Goldcorp's pitch about $20K more per year in taxes is laughably insulting: it would take 2,650 years for that amount to add up to the $53-million cost of cleaning up Brohm's mess.

Members of the Board of Minerals and Environment who were around for the Brohm debacle were duly skeptical. BME member and Madison neighbor Linda Hilde, bless her heart, shares my opinion on the proper direction of Goldcorp's pencil:

Another board member, Linda Hilde of Madison, said it wasn’t the board’s priority to help the company look for financial savings.

“I can appreciate your stance, but our job is to protect the people of South Dakota, and we have to put that first,” Hilde said. “Always at the top of things is, Are we doing what’s best for the people of South Dakota?” [Mercer, 2013.08.16]

Alas, the BME also includes some stupid corporate shills:

The newest board member, Bob Morris of Belle Fourche, said Wharf is asking whether the board will consider the concept. Morris said the board should see three proposals from Wharf that show how the concept should work. “Then we review that and we can take into consideration the three proposals,” Morris said.

Another newer board member, Doyle Karpen of Jefferson, didn’t reject the concept either. “It’s no until the answer is yes,” Karpen said. “Not say absolutely no, but the door’s still open, is what I’m seeing” [Mercer, 2013.08.16].

Karpen! Did your appointment by the Governor knock all good sense out of your head? You don't have to listen to the merits of a really bad plan. You can save Goldcorp time and money and save South Dakota a B.S.-induced headache by telling Goldcorp they don't get out of putting real money on the table to clean up their messes.

And legislators, you can further spare us a headache by changing the state law that allows Goldcorp to make this absurd, self-serving request in the first place. We should have repealed the net-worth option when Brohm went belly up. We should repeal it now and require every mining company to put up real money to cover the costs of their messes.