The Daily News
LONGVIEW, Wash. (AP) - During the last 30 years, mining interests have tried and failed to kick-start mining efforts on 900 acres just outside the boundary of the Mount St. Helens National Volcanic Monument. Ultimately, they all ran into the same problem: It just didn't pay to mine on Goat Mountain.
In fact, in a little-noticed 1993 legal decision, the U.S. Bureau of Land Management denied a prospecting company, Vanderbilt Gold Corp., permission to explore the claim after an agency review found mineral concentrations too low to be profitable. The BLM review concluded that a mine in that area would lose nearly $200 million over its life.
Now, a Canadian prospecting company, Ascot Resources Ltd., says record-high copper prices could help it make good on the same claims when it resumes test drilling for copper, gold, silver and molybdenum this summer. Ascot hopes its core samples will show the deposits are richer than previous studies show.
Ascot's chances for success, however, may be overwhelmingly low. A Daily News investigation found:
_To be profitable, any copper mine in that area likely would have to be an open-pit operation, even though Ascot has been coy about what type of mine would be developed. Open-pit mining especially would meet with strong environmental objections.
_Ascot must prove the mineral deposits are far richer than previous exploration has shown to make a mine profitable and to obtain federal permits to proceed beyond mere exploration.
_Even at today's record prices for copper, mineral values are volatile and could undercut attempts to mine an area of already marginal value.
Ascot Chief Executive Officer Robert Evans is matter-of-fact about his company's slim chances of success. In a phone interview Tuesday, he said his company's test drilling this summer must show mineral deposits on the company's Goat Mountain claims to be about twice as large as previous estimates to make mining worthwhile.
After a minor gold rush fizzled out by the mid-1930s, few people took any interest in exploring the Mount St. Helens area for minerals until Duval Corp. acquired two claims there in 1969.
Duval, which specialized in building low-grade open-pit copper mines around the Southwest, explored the Goat Mountain area throughout the 1970s, ultimately drilling 150 test holes. After Mount St. Helens erupted in 1980, Duval ceased all exploration, but acquired two new adjoining claims.
All of Duval's claims were excluded from the 110,000-acre Mount St. Helens National Volcanic Monument, which Congress created in 1982. That decision was partly political, but the federal government also did not want to buy out Duval's claims.
Nevertheless, by that point Duval had been acquired by Penzoil, which abandoned the mining effort and gave up its claims.
Based on its drilling, Duval estimated mineral deposits on its four claims were worth about $20 billion (in today's dollars). That number sounds impressive, but the concentrations were estimated to be so low that a ton of excavated rock (an amount that would fit into a shipping box for an office chair) would contain only about 7.2 pounds of copper, 2.2 pounds of molybdenum, 0.007 ounces of gold, and 0.046 ounces silver.
David Armstrong, head of the mining department at Montana Tech, a notable school of mineralogy in Butte, Mont., reviewed the Duval data for The Daily News and called the mineral concentrations "really low-grade." To be worth developing, a mine there would have to be an open-pit operation and the deposits would have to be richer or the mine much bigger, he said.
"If it's low-grade, it will have to be open pit. It costs significantly more to go underground," Armstrong said.
Ascot has widely used Duval's estimates to build support and raise money for its effort. But Evans _ the Ascot CEO _ admits a mine couldn't work unless subsequent exploration proves the deposits are richer.
He said Duval's research showed "there could be a potentially significant resource there." However, mining the claims would not be economically viable unless Ascot finds Duval underestimated the mineral deposits, Evans acknowledged. "We're hoping to increase both the size and the grade of it" through further exploration.
The results from 10 test holes Ascot drilled in 2010 provided "very good encouragement," Evans said.
No one in the federal government seems to know where Duval's core samples and records went, said Portland-based BLM Geologist Eric Hoffman. What is available, he said, is "badly fragmented, generally lost, unavailable, or not sufficient" and said it does not meet modern prospecting standards.
"They didn't really carry out as complete a program as would be required today in order to get a sufficient suite of info," Hoffman said.
Nevertheless, BLM used results of Duval's exploration to deny Vanderbilt Gold a prospecting permit for the area during the early 1990s. A 1993 BLM document describes the claims as "suitable for mining as an open-pit." BLM officials argued that Duval's findings presented clear evidence the deposit was a dud unless copper prices rose about 30 percent. Even then, after evaluating long-term price outlooks, the BLM doubted that a mine there could "generate a competitive rate of return."
A Vanderbilt consultant also acknowledged the limits of the claim, writing to the BLM: "These results show the existing data do not indicate the existence of a workable resource on the property. ... It is essential to discover heretofore unidentified resources, before any prospect of a workable property is possible."
Why, you might ask, is the federal government allowing Ascot to do test drilling when it denied Vanderbilt's application for an exploration permit two decades ago? The answer is a two-edged sword for Ascot.
Federal mining law has changed to encourage mineral exploration. At the same time, for Ascot to move past the exploration stage and develop a mine, it also must meet a higher standard of proof the mine would be profitable, taking all costs of extracting, processing, transporting and marketing into account. The purpose is to prevent a mine from opening but then failing due to changing market conditions and other factors.
"This a higher standard," Hoffman explained. "Now that Ascot comes along, they're going to have to be held to a higher standard. ... They are really starting at square 1A."
Even if Ascot can do that, Armstrong, the Montana Tech professor, said a mine still would be a gamble. While copper prices hover around a favorable $3.60 per pound, they are notoriously volatile _ in the past five years, they briefly shot up to almost $5 and nose-dived to nearly $1.
"That's our real dilemma," Armstrong said, "What's the price going to be in the future? We can't control the price. Right now there's very little inflation, but who knows? It's a crap shoot."
Information from: The Daily News, http://www.tdn.com
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