Management of surface water and groundwater at mines is one of the least glamorous activities. As I shall show in the three stories I recount below, however, you can make or loose lots of investment money if you fail to consider how well or badly the mine you invest in controls surface water and groundwater.
The first story is current: this week 500 ducks dived into the tailings impoundment at the Syncrude Oil Sands mine in northern Alberta. All but five died. Both the Premier of Alberta and the Prime Minister of Canada have been reported to be tut-tutting, promising and investigation, and making overt threats of fines and jail.
I have not checked the impact of these dead ducks on Syncrude’s stock price or the cost of Canadian oil-sands-derived oil, but I fear impact on profitable investing on these two accounts:
- Oil Sands mines will speed up vast expenditure on removing water from tailings impoundments and on reclaiming said impoundments; and
- New oil sand ventures will be very difficult to permit unless they have a proactive plan to manage surface water.
Syncrude is an operating mine, but consider the impact of water on the share price of a new mine: namely Cigar Lake. Seeking to increase output of uranium, Cameco advanced underground workings and their stock soared. Then the advancing underground workings encountered a zone of fast flowing groundwater; the workings flooded; the miners retreated; and the stock plummeted. By now the physical and financial damage is done. But I still have not seen an evaluation of the cost on future mining of implementing the lessons learnt from this groundwater disaster. I would urge you to try to take this rather unquantifiable factor into account when buying or selling uranium mining shares.
At the other end of the time-scale is that famous old site: the Berkeley Pit in Butte, Montana. The mine owners have long since ceased to earn a profit from that historic mine; but they will continue for ever to pay to control the surface and groundwater that is trying to fill the old open pit. Not that anybody would go investing in that mine, even if it were possible. I do, however, know many other open pits where the mining companies are spending a fortune trying to control flooding of their worked out mine pits. Most are confidential but from what I see in their publically available documents, these perpetual expenses appear nowhere on the balance sheet. Maybe you can buy and sell for a profit before the perpetual expenses hit.
So: do not regard a report of 500 dead ducks with environmental horror or suppressed amusement. Rather as an investor seeking to keep your canes and swallows flying high by seeking out those hidden nuggets of technical information that may come to float or sink your mining investment.