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Giant accounting task underway

Little or nothing left to go into cleanup coffer

Richard Gleeson
Northern News Services

Yellowknife (Sep 14/01) - The operation of Giant will likely contribute, if anything, only a drop in the ocean of money required to clean up Giant mine.

As part of the Dec. 14, 1999, deal that allowed Giant to continue operating, a portion of the profits will go into a reclamation trust fund to offset the costs of cleaning up the mine.

The deal includes a formula to calculate the contribution from Miramar Giant Mine Ltd., the subsidiary of Miramar Mining Corporation that took over operation of the mine Royal Oak Mines went into receivership.

The trust's share of profits begins at 15 per cent of the first dollar and rises to 35 per cent of annual profits in excess of $3 million, said Robert Lauer, one of the federal officials who brokered the deal.

Lauer and other officials in Ottawa are now pouring over Miramar' financial statements for the first year of operation at Giant.

All indications so far are that the fund will receive little or nothing for the two years Miramar has hauled ore from Giant.

Wants reasonable return

Miramar spokesperson Brian Labadie said the company was fully prepared to walk away from the property if the government did not agree to assume a share of the environmental management costs Miramar footed for the first two years it operated the mine.

"It's a question of making a reasonable return on our effort there," Labadie said, adding he hopes the deal will be signed by the end of the month. Labadie would not specify what a "reasonable return" would be.

Discussing the government's willingness to make the concession, Lauer himself said a cursory look at the company's financial statements indicate Miramar has not made any money from Giant.

The only contributions made to the fund so far are the initial $425,000 Miramar contributed as part of the 1999 agreement and less than $50,000 from the sale of Giant assets.

But environmentalist Kevin O'Reilly expressed some skepticism about Miramar's claim that Giant is a marginal operation.

"If they didn't make any money, why did they continue to operate?" asked O'Reilly. "Common sense would say they wouldn't keep mining there if they didn't make any money."

O'Reilly pointed out there are many ways -- such as using inflated management and consulting fees charged to the subsidiary by the parent company -- to make a profitable operation appear, on paper, to be a money loser.

But Lauer said an annex to the original agreement goes into "excruciating" detail about what costs are allowable.

"We gave a lot of thought in the design of the agreement to ensuring that 'net proceeds' was defined in a way that was straightforward and clear to go through and verify and audit," Lauer said.

Bond question remains

A dispute between the government and the insurance company that guaranteed the $2.1 million reclamation security bond put up by Royal Oak remains unresolved, Lauer said.

The bond was offered up as security for environmental liability at both Colomac and Giant mines.

The estimated cost of the underground portion of the cleanup of Giant mine ranges from $39 million to $409 million.

A Department of Indian Affairs and Northern Development study set the cost of surface cleanup at $16.3 million.

Fifty-five people are employed at the mine.